G.R. No. 73886 January 31, 1989 JOHN C. QUIRANTE and DANTE CRUZ, petitioners, vs.

THE HONORABLE INTERMEDIATE APPELLATE COURT, MANUEL C. CASASOLA, and ESTRELLITA C. CASASOLA, respondents. REGALADO, J.: This appeal by certiorari seeks to set aside the judgment of the former Intermediate Appellate Court promulgated on November 2 6, 1985 in AC-G.R. No. SP-03640, which found the petition for certiorari therein meritorious, thus: Firstly, there is still pending in the Supreme Court a petition which may or may not ultimately result in the granting to the Isasola (sic) family of the total amount of damages given by the respondent Judge. Hence the award of damages confirmed in the two assailed Orders may be premature. Secondly, assuming that the grant of damages to the family is eventually ratified, the alleged confirmation of attorney's fees will not and should not adversely affect the non-signatories thereto. WHEREFORE, in view of the grave abuse of discretion (amounting to lack of jurisdiction) committed by the respondent Judge, We hereby SET ASIDE his questioned orders of March 20, 1984 and May 25, 1984. The restraining order previously issued is made permanent. The challenged decision of respondent court succinctly sets out the factual origin of this case as follows: ... Dr. Indalecio Casasola (father of respondents) had a contract with a building contractor named Norman GUERRERO. The Philippine American General Insurance Co. Inc. (PHILAMGEN, for short) acted as bondsman for GUERRERO. In view of GUERRERO'S failure to perform his part of the contract within the period specified, Dr. Indalecio Casasola, thru his counsel, Atty. John Quirante, sued both GUERRERO and PHILAMGEN before the Court of first Instance of Manila, now the Regional Trial Court (RTC) of Manila for damages, with PHILAMGEN filing a cross-claim against GUERRERO for indemnification. The RTC rendered a decision dated October 16, 1981. ... In said decision, the trial court ruled in favor of the plaintiff by rescinding the contract; ordering GUERRERO and PHILAMGEN to pay the plaintiff actual damages in the amount of P129,430.00, moral damages in the amount of P50,000.00, exemplary damages in the amount of P40,000.00 and attorney's fees in the amount of P30,000.00; ordering Guerrero alone to pay liquidated damages of P300.00 a day from December 15, 1978 to July 16, 1979; and ordering PHILAMGEN to pay the plaintiff the amount of the surety bond equivalent to P120,000.00. A motion for reconsideration filed by PHILAMGEN was denied by the trial court on November 4, 1982. Not satisfied with the decision of the trial court, PHILAMGEN filed a notice of appeal but the same was not given due course because it was allegedly filed out of time. The trial court thereafter issued a writ of execution. A petition was filed in AC-G.R. No. 00202 with the Intermediate Appellate Court for the quashal of the writ of execution and to compel the trial court to give due course to the appeal. The petition was dismissed on May 4, 1983 so the case was elevated to this Court in G.R. No. 64334. In the meantime, on November 16, 1981, Dr. Casasola died leaving his widow and several children as survivors. On June 18, 1983, herein petitioner Quirante filed a motion in the trial court for the confirmation of his attorney's fees. According to him, there was an oral agreement between him and the late Dr. Casasola with regard to his attorney's fees, which agreement was allegedly confirmed in writing by the widow, Asuncion Vda. de Casasola, and the two daughters of the deceased, namely Mely C. Garcia and Virginia C. Nazareno. Petitioner avers that pursuant to said agreement, the attorney's fees would be computed as follows: A. In case of recovery of the P120,000.00 surety bond, the attorney's fees of the undersigned counsel (Atty. Quirante) shall be P30,000.00. B. In case the Honorable Court awards damages in excess of the P120,000.00 bond, it shall be divided equally between the Heirs of I. Casasola, Atty. John C. Quirante and Atty. Dante Cruz. The trial court granted the motion for confirmation in an order dated March 20, 1984, despite an opposition thereto. It also denied 11 the motion for reconsideration of the order of confirmation in its second order dated May 25, 1984. These are the two orders which are assailed in this case. Well settled is the rule that counsel's claim for attorney's fees may be asserted either in the very action in which the services in question have been rendered, or in a separate action. If the first alternative is chosen, the Court may pass upon said claim, even if its amount were less than the minimum prescribed by law for the jurisdiction of said court, upon the theory that the right to recover attorney's fees is but an incident of the case in which the services of counsel have been rendered ." It also rests on the assumption that the court trying the case is to a certain degree already familiar with the nature and extent of the lawyer's services. The rule against multiplicity of suits will in effect be subserved.

What is being claimed here as attorney's fees by petitioners is, however, different from attorney's fees as an item of damages provided for under Article 2208 of the Civil Code, wherein the award is made in favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who may enforce the judgment for attorney's fees by execution. Here, the petitioner's claims are based on an alleged contract for professional services, with them as the creditors and the private respondents as the debtors. In filing the motion for confirmation of attorney's fees, petitioners chose to assert their claims in the same action. This is also a proper remedy under our jurisprudence. Nevertheless, we agree with the respondent court that the confirmation of attorney's fees is premature. As it correctly pointed out, the petition for review on certiorari filed by PHILAMGEN in this Court (G.R. No. 64834) "may or may not ultimately result in the granting to the Isasola (sic) family of the total amount of damages" awarded by the trial court. This especially true in the light of subsequent developments in G.R. No. 64334. In a decision promulgated on May 21, 1987, the Court rendered judgment setting aside the decision of May 4, 1983 of the Intermediate Appellate Court in AC-G.R. No. 00202 and ordering the respondent Regional Trial Court of Manila to certify the appeal of PHILAMGEN from said trial court's decision in Civil Case No. 122920 to the Court of Appeal. Said decision of the Court became final and executory on June 25, 1987. Since the main case from which the petitioner's claims for their fees may arise has not yet become final, the determination of the propriety of said fees and the amount thereof should be held in abeyance. This procedure gains added validity in the light of the rule that the remedy for recovering attorney's fees as an incident of the main action may be availed of only when something is due to the client. Thus, it was ruled that: ... an attorney's fee cannot be determined until after the main litigation has been decided and the subject of recovery is at the disposition of the court. The issue over attorney's fee only arises when something has been recovered from which the fee is to be paid. It is further observed that the supposed contract alleged by petitioners as the basis for their fees provides that the recovery of the amounts claimed is subject to certain contingencies. It is subject to the condition that the fee shall be P30,000.00 in case of recovery of the P120,000.00 surety bond, plus an additional amount in case the award is in excess of said P120,000.00 bond, on the sharing basis hereinbefore stated. With regard to the effect of the alleged confirmation of the attorney's fees by some of the heirs of the deceased. We are of the considered view that the orderly administration of justice dictates that such issue be likewise determined by the court a quo inasmuch as it also necessarily involves the same contingencies in determining the propriety and assessing the extent of recovery of attorney's fees by both petitioners herein. The court below will be in a better position, after the entire case shall have been adjudicated, inclusive of any liability of PHILAMGEN and the respective participations of the heirs of Dr. Casasola in the award, to determine with evidentiary support such matters like the basis for the entitlement in the fees of petitioner Dante Cruz and as to whether the agreement allegedly entered into with the late Dr. Casasola would be binding on all his heirs, as contended by petitioner Quirante. We, therefore, take exception to and reject that portion of the decision of the respondent court which holds that the alleged confirmation to attorney's fees should not adversely affect the non-signatories thereto, since it is also premised on the eventual grant of damages to the Casasola family, hence the same objection of prematurity obtains and such a holding may be preemptive of factual and evidentiary matters that may be presented for consideration by the trial court. WHEREFORE, with the foregoing observation, the decision of the respondent court subject of the present recourse is hereby AFFIRMED. SO ORDERED.

G.R. No. 128721 March 9, 1999 CRISMINA GARMENTS, INC., petitioner, vs. COURT OF APPEALS and NORMA SIAPNO, respondent. PANGANIBAN, J.: Interest shall be computed in accordance with the stipulation of the parties. In the absence of such agreement, the rate shall be twelve percent (12%) per annum when the obligation arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be six percent (6%). The Case On May 5, 1997, Crismina Garments, Inc. filed a Petition for Review on Certiorari assailing the December 28, 1995 Decision 3 and March 17, 1997 Resolution of the Court of Appeals in CA-GR CV No. 28973. On September 24, 1997, this Court issued a 4 minute Resolution denying the petition "for its failure to show any reversible error on the part of the Court of Appeals."
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Petitioner then filed a Motion for Reconsideration, arguing that the interest rate should be computed at 6 percent per annum as provided under Article 2209 of the Civil Code, not 12 percent per annum as prescribed under Circular No. 416 of the Central 6 Bank of the Philippines. Acting on the Motion, the Court reinstated the Petition, but only with respect to the issue of which 7 interest rate should be applied. The Facts As the facts of the case are no longer disputed, we are reproducing hereunder the findings of the appellate court: During the period from February 1979 to April 1979, the [herein petitioner], which was engaged in the export of girls' denim pants, contracted the services of the [respondent], the sole proprietress of the D'Wilmar Garments, for the sewing of 20,762 pieces of assorted girls['] denims supplied by the [petitioner] under Purchase Orders Nos. 1404, dated February 15, 1979, 0430 dated February 1, 1979, 1453 dated April 30, 1979. The [petitioner] was obliged to pay the [respondent], for her services, in the total amount of P76,410.00. The [respondent] sew[ed] the materials and delivered the same to the [petitioner] which acknowledged the same per Delivery Receipt Nos. 0030 dated February 9, 1979; 0032, dated February 15, 1979; 0033 dated February 21, 1979; 0034, dated February 24, 1979; 0036, dated February 20, 1979; 0038, dated March 11, 1979[;] 0039, dated March 24, 1979; 0040 dated March 27, 1979; 0041, dated March 29, 1979; 0044, dated Marc[h] 25, 1979; 0101 dated May 18, 1979[;] 0037, dated March 10, 1979 and 0042 dated March 10, 1979, in good order condition. At first, the [respondent] was told that the sewing of some of the pants w[as] defective. She offered to take delivery of the defective pants. However, she was later told by [petitioner]'s representative that the goods were already good. She was told to just return for her check of P76,410.00. However, the [petitioner] failed to pay her the aforesaid amount. This prompted her to hire the services of counsel who, on November 12, 1979, wrote a letter to the [petitioner] demanding payment of the aforesaid amount within ten (10) days from receipt thereof. On February 7, 1990, the [petitioner]'s [v]ice-[p]resident-[c]omptroller, wrote a letter to [respondent]'s counsel, averring, inter alia, that the pairs of jeans sewn by her, numbering 6,164 pairs, were defective and that she was liable to the [petitioner] for the amount of P49,925.51 which was the value of the damaged pairs of denim pants and demanded refund of the aforesaid amount. On January 8, 1981, the [respondent] filed her complaint against the [petitioner] with the [trial court] for the collection of the principal amount of P76,410.00. . . . xxx xxx xxx After due proceedings, the [trial court] rendered judgment, on February 28, 1989, in favor of the [respondent] against the [petitioner], the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter to pay the former: (1) The sum of P76,140.00 with interest thereon at 12% per annum, to be counted from the filing of this complaint on January 8, 1981, until fully paid; (2) The sum of P5,000 as attorney[']s fees; and (3) The costs of this suit; (4) Defendant's counterclaim is hereby dismissed.
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The Court of Appeals (CA) affirmed the trial court's ruling, except for the award of attorney's fees which was deleted. 10 Subsequently, the CA denied the Motion for Reconsideration. Hence, this recourse to this Court
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Sole Issue In light of the Court's Resolution dated April 27, 1998, petitioner submits for our consideration this sole issue: Whether or not it is proper to impose interest at the rate of twelve percent (12%) per annum for an obligation 12 that does not involve a loan or forbearance of money in the absence of stipulation of the parties. This Court's Ruling We sustain petitioner's contention that the interest rate should be computed at six percent (6%) per annum. Sole Issue: Interest Rate The controversy revolves around petitioner's payment of the price beyond the period prescribed in a contract for a piece of work. Article 1589 on the Civil Code provides that "[t]he vendee [herein petitioner] shall owe interest for the period between the delivery of the thing and the payment of the price . . . should he be in default from the time of judicial or extrajudicial demand for the payment of the price." The only issue now is the applicable rate of interest for the late payment. Because the case before us is "an action for the enforcement of an obligation for payment of money arising from a contract for a 13 piece of work," petitioner submits that the interest rate should be six percent (6%), pursuant to Article 2209 of the Civil Code, which states: If the obligation consists in the payment of money and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum." (Emphasis supplied.) On the other hand, private respondent maintains that the interest rate should be twelve percent (12 %) per annum, in accordance with Central Bank (CB) Circular No. 416, which reads: By virtue of the authority granted to it under Section 1 of Act No. 2655, as amended, otherwise known as the "Usury Law", the Monetary Board, in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve per cent (12%) per annum." (Emphasis supplied.) She argues that the circular applies, since "the money sought to be recovered by her is in the form of forbearance."
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We agree with the petitioner. In Reformina v. Tomol Jr., this Court stressed that the interest rate under CB Circular No. 416 applies to (1) loans; (2) forbearance of money, goods or credits; or (3) a judgment involving a loan or forbearance of money, 16 goods or credits. Cases beyond the scope of the said circular are governed by Article 2209 of the Civil Code, which considers 17 interest a form of indemnity for the delay in the performance of an obligation. In Eastern Shipping Lines, Inc. v. Court of Appeals, interest rates:
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the Court gave the following guidelines for the application of the proper

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be . . . the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to forbearance of 19 credit.

In Keng Hua Paper Products Co., Inc. v. CA, we also ruled that the monetary award shall earn interest at twelve percent (12%) per annum from the date of finality of the judgment until its satisfaction, regardless of whether or not the case involves a 21 loan of forbearance of money. The interim period is deemed to be equivalent to a forbearance of a credit. Because the amount due in this case arose from a contract for a piece of work, not from a loan or forbearance of money, the legal interest of six percent (6%) per annum should be applied. Furthermore, since the amount of the demand could be established with certainty when the Complaint was filed, the six percent (6%) interest should be computed from the filing of the said Complaint. But after the judgment becomes final and exuecutory until the obligation is satisfied, the interest should be reckoned at twelve percent (%12) per year. Private respondent maintains that the twelve percent (12%) interest should be imposed, because the obligation arose from a forbearance of 22 23 money. This is erroneous. In Eastern Shipping, the Court observed that a "forbearance" in the context of the usury law is a "contractual obligation of lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay a loan or debt then due and payable." Using this standard, the obligation in this case was obviously not a forbearance of money, goods or credit. WHEREFORE, the appealed Decision is MODIFIED. The rate of interest shall be six percent (6%) per annum, computed from the time of the filing of the Complaint in the trial court until the finality of the judgment. If the adjudged principal and the interest (or any part thereof) remain unpaid thereafter, the interest rate shall be twelve percent (12%) per annum computed from the time the judgment becomes final and executory until it is fully satisfied. No pronouncement as to costs. SO ORDERED.

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G.R. No. L-39380 April 14, 1978

LUALHATI L. LINA, petitioner, vs. The Honorable AMANTE P. PURISIMA in his capacity as Presiding Judge of the Court of First Instance of Manila, PHILIPPINE VETERANS BANK, and ESTEBAN CABANOS, respondents. BARREDO, J.: Petition for certiorari and mandamus to annul the two successive orders of dismissal, for supposed lack of jurisdiction, of petitioner's complaint in Special Civil Action No. 94986 of the Court of First Instance of Manila issued by respondent judge and to command said respondent to try and decide the said case on the merits. The first order of dismissal in question dated August 14, 1974 is as follows: Petition in this case is for the writ of mandamus to compel respondents 'to restore petitioner to the position she was excluded from' in the Philippine Veterans Bank. While the petition avers that respondent Esteban Cabanos, as President of the Bank, 'in grave abuse of discretion and authority forcibly excluded petitioner from the position without valid cause, nor basis in law, it also states that the removal of petitioner was 'upon recommendation of Branch Manager, Julio Tamondong, "..."which recommendation and action of respondent Esteban Cabanos was later approved by the Board of Directors of the said Bank. The petition likewise avers that petitioner has appealed to the Office of the President, but the latter denied the same. The allegation in the petition that respondent Cabanos committed "grave abuse of discretion and authority" in dismissing petitioner from her office is a legal conclusion, not a statement of the ultimate facts giving rise to the cause of action being asserted. Why petitioner's removal from office by Cabanos was in grave abuse of discretion is not averred. Neither is it shown in the petition why petitioner entitled to the office from which she was removed to reinstatement in other words. It is equally noticeable that while annexed to the petition is the letter of Assistant Executive Secretary Ronaldo B. Zamora to Atty. Pantaleon Z. Salcedo informing him of the denial of petitioner's request for reconsideration as contained in the therewith enclosed copy of the 2nd endorsement of said office, the petition before the Court does not include said enclosure as an annex, nor copied therein, which should show why the said request for reconsideration was denied, one of the ultimate facts which must necessarily be looked into should the petition be given due course. For that matter, neither is the letter or notice of petitioner's removal from office included in the petition. Considering an the foregoing observations, the Court does not find the petition to be sufficient in form and substance to justify the process of requiring respondents to answer the petition pursuant to Section 6 of Rule 65 of the Rules of Court. Wherefore, the petition is hereby dismissed. In an attempt to cure the suppose defects pointed out in the foregoing order, petitioner filed an amended petition, which, however, met the same fate as the original one. The Second order of dismissal dated September 3, 1974 runs thus: Before the Court is petitioner's motion to admit amended petition, with the amended petition already attached,, filed obviously for the purpose of correcting defects in the original petition which was earlier dismissed by the Court upon the ground that it found the same not to be sufficient in form and substance. Documents not annexed to the original petition which were pointed out in the order dismissing the original petition are now annexed to the amended petition. And the nature of their contents explain why they were conveniently suppressed in the original petition. It now appears from the annexes of the amended petition that petitioner was dismissed by respondent president of the Philippine Veterans Bank pursuant to Letters of Instruction No. 14 and No. 19-A, for being notoriously undesirable. (Annex "H"). This being the case, petitioner had a right to appeal from her dismissal, and the venue of the appeal is the Office of the President. She did appeal. (Annex "G"). But the appeal was denied. (Annex "H"- letter from the Office of the President). The aforesaid letter from the Office of the President in effect affirmed the position taken by respondent Cabanos in dismissing petitioner pursuant to Letter of Instruction No. 14-A. Since the removal of petitioner is pursuant to a Letter of Instruction issued by the President pursuant to Proclamation No. 1081, the validity or legality of said act is beyond the power of the courts to review, much less modify or reverse, whether by means of the writ of certiorari and/or mandamus, or any other court process. This is one of the express hesitations upon the power of Courts imposed by General Order No.3 issued by the President on September 22, 1972. Said general order provides:

xxx xxx xxx I do hereby further order that the Judiciary shall continue to function in accordance with its present organization and personnel, and shall try and decide in accordance with existing laws all criminal and civil cases, except the following cases: 1. Those involving the validity, legality, or constitutionality of any decree, order or act issued, promulgated or performed by me or by my duly designated representative pursuant to Proclamation No. 1081, dated Sept. 21, 1972. 2. Those involving the validity, legality or constitutionality of any rules, orders or acts issued, promulgated or performed by public servants pursuant to decrees, orders, rules and regulations issued and promulgated by me or by my duly designated representative pursuant to Proclamation No. 1081, dated Sept. 21, 1972. Foregoing considered, the amended petition is hereby dismissed upon the grounds already stated in the order dated August 14, 1974, and upon the more important ground that the relief prayed for therein is for the present beyond the power of the Court to extend. Considering that petitioner filed an amended complaint purporting to comply with the tenor of the first order of dismissal in question, it is unnecessary for Us to make any ruling as to the propriety of His Honor's action of dismissing the original complaint. Anent the second order, it is at once obvious that petitioner's right to redress against the same is beyond dispute. Respondent court's invocation of General Order No. 3 of September 21, 1972 is nothing short of an unwarranted abdication of judicial authority, which no judge duly imbued with the implications of the paramount principle of independence of the judiciary should ever think of doing. It is unfortunate indeed that respondent judge is apparently unaware that it is a matter of highly significant 1 historical fact that this Court has always deemed General Order No. 3 including its amendment by General Orders No. 3-a as practically inoperative even in the light of Proclamation 1081 of September 21, 1972 and Proclamation 1104 of January 17, 1973 placing the whole Philippines under martial law. While the members of the Court are not agreed on whether or not particular instances of attack against the validity of certain Presidential Decrees raise political questions which the judiciary would not interfere with, there is unanimity among Us in the view that it is for the Court rather than the Executive to determine whether or not We may take cognizance of any given case involving the validity of acts of the Executive Department purportedly under the authority of the martial law proclamations. In this regard, to the credit of President Marcos, it has been noted by the Court that the President has publicly acknowledged as one of the distinctive cardinal features of the prevailing martial law regime that the constitutional authority, prerogatives and jurisdiction of the Supreme Court, as they have ever existed in normal times, remain integrally unimpaired despite the proclamation of martial law. In plainer terms, it has been repeatedly announced by the President, even to international or foreign audiences, that our martial law government is subject, as by constitutional mandate it should always be, to the authority and jurisdiction of the Supreme Court. And undoubtedly, in appropriate cases, such pronouncements can apply to the judiciary as a whole. Accordingly, We do not hesitate to reject the reasoning advanced by respondent court as a constitutionally-uncalled- for submissiveness to the Executive, certainly unworthy of the judicial office. We hold that the legal premise of the impugned order is absolutely erroneous from the point of view of sacred constitutional principles. Such an order does not deserve to be given sanction by this Court as being in keeping with the role of the courts in this momentous era of our national existence as a democratic republic committed to hold inviolate the independence of the judiciary at all times, so long as the constitution continues to be in force. Now, strictly speaking and observing the usual procedural rules, what has just been said should suffice to dispose of this case. In other words, in the light of Our view that respondent court committed a grave error in declaring itself jurisdictionally impotent in the premises, ordinarily, what remains for Us to do is only to direct that petitioner's case be tried and decided by respondent judge on the merits. But this is the Supreme Court whose power and duty to do substantial justice in every case before it are inherent, plenary and imperative, hence extensive to all instances where it appears that final resolution of the controversy before it is feasible without denying any of the parties involved full opportunity to be heard. Stated differently, if in any case elevated to this Court for the correction of any supposed procedural error of any lower court, it should be found that indeed there has been a mistake, and it further appears that all the facts needed for a complete determination of the whole controversy are already before the Court undisputed or uncontroverted by the parties, the Supreme Court may at its option, whenever it feels the best interests of justice would be thereby subserved, dispense with the usual procedure of remanding the case to the court of origin for its own judgment, and instead, the Supreme Court may already resolve the pertinent determinative issues and render the final judgment on the merits. The obvious reason for such an extension in the exercise of the Court's pervasive power is that any other procedure would amount to an unnecessary rigmarole which can only augment the expenses, efforts and anxieties of the parties and uselessly delay the administration of justice, no other result for all concerned being anyway perceptible. Such is the situation in the case at bar. Although no trial was held in the court below, the pleadings before Us portray all the vital issues between the parties. The facts alleged by both of them are mutually uncontroverted and, on the other hand, the legal issues are properly joined. Respondents have from all appearances unquestioningly submitted all matters controversy for resolution of this Court. In fact, in their "Manifestation and Comment" dated November 12, 1975 respondents state their position in this respect unequivocally thus: That they join with the petitioner in her Motion With Leave for Early Resolution dated September 20, 1976, consistent with herein respondents submittal that the instant case be resolved by this Honorable Tribunal' without further remanding the case to the court of origin' as manifested in their Reply dated July 14, 1975. Accordingly, We shall now proceed to determined petitioner's prayer for mandamus on its merits.

In this connection, it may be stated that on May 22, 1975, subsequent to the hearing of this case, respondents filed a manifestation to the effect that on May 12, 1975, the following Administrative Order No. 6, Series of 1975, had been issued: ADMINISTRATIVE ORDER NO. 6 SERIES OF 1975 SUBJECT: Reinstatement to the Service of LUALHATI L. LINA In line with the policy of management to promote industrial peace, Administrative Order No. 75 dated October 16, 1972, is set aside, and Miss LUALHATI L. LINA is hereby reinstated to her former position as Bookkeeper in the Bank, effective upon assumption to duty, with entitlement to the pay and allowances appurtenant thereto. This order of reinstatement is without prejudice to the outcome of the proceedings pending before the Supreme Court. (SGD.) ESTEBAN B. CABANOS That manifestation reads in full as follows: COME NOW the respondents PHILIPPINE VETERANS BANK and ESTEBAN B. CABANOS in his capacity as President of the Bank, thru the undersigned counsel and to this Honorable Court most respectfully manifest: l. That the principal issue in this case is the questioned ruling and/or order of the lower court presided by the respondent Judge Amante P. Purisima to the effect that the relief prayed for by the petitioner for mandamus and damages is beyond the power of the court to extend; 2. That respondents, without necessarily admitting the correctness of the position taken by the petitioner, have issued Administrative Order No. 6 dated May 12, 1975, reinstating petitioner to her former position as bookkeeper, effective upon assumption of office, without prejudice to the result of the proceedings pending before the Honorable Supreme Court, a certified xerox copy of which is hereto attached as Annex 'A'; 3. That respondents in addition to reinstatement, will pay all back salaries and other emoluments due her from October 17, 1972; 4. That the respondents in addition to reinstatement and payment of back wages and other emoluments are willing to reimburse the petitioner the actual expenses incurred by her in connection with this case; 5. That the reinstatement of the petitioner is in line with the policy of Management to eliminate all possible irritants between labor and management, to reassure labor of the fairness of management, in order to promote industrial peace. WHEREFORE, it is most respectfully prayed that the manifestation be duly considered in whatever resolution this Honorable Court may deem just and proper in the premises. Notwithstanding her receipt of the above communications, petitioner has not returned to her work. Instead, she flied the following "Comments and Manifestation" on June 19, 1975: PETITIONER, by counsel pursuant to and in compliance with the Court's resolution dated May 29, 1975, and received by counsel on June 9, 1975, now comes before this Honorable Tribunal to submit these comments and manifestations and respectfully avers that 1. Petitioner concurs with the manifestation of respondents to the effect that she be restored to the position she was excluded from 'effective upon assumption of office without prejudice to the result of the proceedings pending before the Honorable Supreme Court'; the payment of her back salaries and other emoluments she is entitled to and the reimbursement of her expenses actually incurred in connection with the case at bar-, provided that her claim for damages, actual moral and exemplary shag stand unaffected by her concurrence to respondents' manifestation and shall remain subject to the resolution of this most Honorable Tribunal 2. The above entitled case arose out of the dismissal by the lower court of the petition for mandamus with damages filed by your petitioner, docketed as Special Civil Action No. 94986 upon the only ground that the relief prayed for in the said petition is 'beyond the power of the court to extend.' 3. The petition in the Lower Court sought two specific purposes. These purposes are: (1) the restoration of petitioner to the position she was excluded from including the payment of her back salaries, actual expenses incurred in connection with the case and other emoluments due her by virtue of the office, and (2) the payment of damages, actual moral and exemplary as a result of her dismissal. 4. The manifestation of respondents speaks only of the restoration of petitioner to the position she was excluded from and the payment of her back salaries, other emoluments due her and the actual expenses incurred in connection with the case at bar, but leaving out, or perhaps purposely omitting the question of damages prayed for in the petition of origin out of the manifestation and excluding also the award of attorney's fees to petitioner.

5. The concurrence therefore, of your petitioner to the manifestation of respondents is only limited to the matters therein mentioned but without prejudice to her claim of actual moral and exemplary damages. (Pp, 111-112, Record,) with prayer that: WHEREFORE, it is most respectfully prayed to this Most Honorable Tribunal that an order be issued to respondents to a. restore your petitioner to her former position; b. pay your petitioner's back salaries, and other emoluments due her by virtue of the office, c. reimburse your petitioner the expenses she actually incurred in connection with the case; d. pay attorney's fees as prayed for in the petition of origin which includes actual moral and exemplary or in the alternative, to remand the question of damages to the court of origin. FURTHER, petitioner prays for such other relief deemed just, proper and equitable under the premises. (Pp. 112-113, Record.) which prayer she reiterated in her subsequent motions of September 24, 1976, November 8, 1976 and September 13, 1977. With this denouement in the circumstances of this case after the same was submitted for Our decision it has become unnecessary for Us to pass on the claims of petitioner to (1) reinstatement, (2) back salaries and other emoluments due her by virtue of her office and (3) reimbursement of all expenses actually incurred by her in connection with this case. Respondents have already committed themselves to accede to her prayer in these respects, thus: Your respondents hereby respectfully submit that it is no longer necessary for the petitioner to pray to this Honorable Tribunal that judgment be rendered ordering respondents to: l. Restore your petitioner movant to her former position; 2. Pay your petitioner movant her back salaries and other emoluments due her by virtue of the position, 3. Reimburse your petitioner movant the expenses actually incurred in connection with the case, including attorney's fees; because the respondents, though without admitting the validity of the cause of action of the petitioner, have already voluntarily and freely expressed their absolute and unqualified willingness and ability to comply with those demands of petitioner, as respondents have expressed in the Administrative Order No. 6 dated May 12, 1975 and in their Manifestation dated May 22, 1975 wherein they further unconditionally committed themselves that petitioner can return to work any time without waiting for any resolution of this Honorable Tribunal. That which is already being voluntarily complied with need not be ordered anymore. (Manifestation and Comment of respondents dated November 12, 1976.) In the same Manifestation and Comment just partially quoted, however, respondents pleaded as follows: However, because of the unexplained failure of petitioner to report back to work pursuant to Administrative Order No. 6, the herein respondent bank's commitment to pay back salaries and allowances, we beg leave, should be confined and limited to the period from October 16, 1972 (date of her dismissal) up to only some reasonable time from May 12, 1975 when Administrative Order No. 6 was issued. Thus, the only issue left for determination and resolution of this Honorable Tribunal is whether or not the respondent is still liable for moral or exemplary damages despite respondents' voluntary action to reinstate petitioner and pay her back salaries, allowances and actual damages. As regards this issue, both petitioner and respondents are in unison in moving that this Honorable Tribunal resolve the said issue without remanding the case to the court of origin. The willingness and voluntary action of respondent Bank to reinstate petitioner, to pay all back salaries and allowances and actual expenses incurred by petitioner, we beg leave of this Honorable Tribunal to be considered in the determination and passing judgment upon the petitioner's claim for moral and/or exemplary damages. In this connection the respondents Bank and Esteban B. Cabanos profess good faith as they were impelled not by ill-will nor personal malice, but only by their ultimate purpose to serve the best interest of the Bank and the Goals of the New Dispensation and the Program of Reform in and out of the Government service. WHEREFORE, the herein represented respondents move for the early resolution of the instant case without further remanding the same to the court of origin and in the consideration of the facto and law applicable to the instant case, herein respondents further respectfully pray that this Honorable Tribunal take into account the honest and sincere gesture of the respondents in issuing Administrative Order No. 6 dated May 12, 1975 in clear manifestation of their desire to promote industrial peace, to reassure labor of the fairness of management in the respondent Philippine Veterans Bank.

Herein respondents also pray that no award of moral and exemplary damages be imposed against them. In the factual premises just stated, We do not believe petitioner is entitled to more than what respondents are willing to concede. For a moment some members of the Court entertained the thought of awarding her moral and exemplary damages plus attomey's fees. On further reflection, however, the Court has come to the unanimous conclusion that petitioner's reaction to the well taken decision of respondents to rectify whatever legal injury had been caused her by her dismissal, that indeed appears to be rather precipitate, does not conform with law and justice. It is Our considered view that upon receipt of the above-quoted memorandum of May 12, 1975 and, particularly, the manifestation of respondents of May 22, 1975, which were duly served on her counsel, it became the inescapable duty of petitioner to immediately report for work without having to wait for Our final action. Indeed, by her posture of obstinacy in refusing to report for duty after respondent insistently reiterated their conformity, in their Manifestation and Comment of November 12, 1976 above referred to and partly quoted, to her demand for reinstatement, payment of back salaries and all incidental expenses, she lost every ground of fairness and equity she might have initially had as a result of her abrupt separation from the service. As may be observed, respondents' order of reinstatement and formal tender of her back salaries and expenses was expressly subject to the ultimate outcome of this case. There was, therefore, nothing anymore that petitioner could risk by immediately reporting for work, insofar as her right to relief in law is concerned. All she could be entitled to could not have been more securely safeguarded. Under these circumstances, We have no alternative than to hold that she has deprived herself of legal and equitable basis for the additional relief of moral and exemplary damages. The unbending rule of jurisprudence in this jurisdiction ' regarding the right of an employee or worker to reinstatement after an unlawful dismissal does not permit him or her to stand Idly by for a long time while awaiting the settlement of the issue. Concomitant with the right to be taken back is the obligation of the dismissed employee or worker to endeavor to secure gainful employment elsewhere. The foundation of such a rule is the principle of no work, no pay. In this particular case, petitioner's failure to report for duty as directed might have impaired the public service being performed by her employer, considering that her expected return must have derailed any plans for her replacement. Besides, the law on damages imposes upon the claimant, regardless of the unquestionability of his or her entitlement thereto, to minimize the same as much as possible. Such indeed is the demand of equity, for the juridical concept of damages is nothing more than to repair what has been lost materially and morally. It may not be taken advantage of to allow unjust enrichment. Any relevant act of unfairness on the part of the claimant correspondingly writes off the moral wrong involved in the juridical injury inflicted upon him or her. WHEREFORE, the respondent court's order of September 3, 1974 is hereby declared null and void and set aside, and Civil Case No. 94986 is deemed terminated in accordance with the terms of this decision. The Court further rules that petitioner should report for work within thirty (30) days from service of this decision upon her counsel of record, on pain of her losing her job, if she fails to do so. Respondents' tender of her back salaries and expenses in accordance with their manifestations before the Court of May 22, 1975 and November 12, 1976 is declared well taken, and whether or not petitioner returns for work as herein indicated, she should be paid what she has been promised which, for clarity, We hold includes (a) payment of petitioner's back salaries from October 16, 1972, the date of her dismissal up to one month or thirty (30) days after her counsel's receipt of the respondents' Manifestation and Comment of November 12, 1976 above referred to and (b) reimbursement of her expenses actually incurred in connection with this case, including attorney's fees equivalent to ten (10) per centum of the amount of total recovery as herein allowed. (2) No costs.

G.R. No. L-18390 December 20, 1971

PEDRO J. VELASCO, plaintiff-appellant, vs. MANILA ELECTRIC CO., ET AL., defendants-appellees. REYES, J.B.L., J.: Both appellant Velasco and appellee Manila Electric have filed their respective motions to reconsider the decision of this Court dated 6 August 1971. For the sake of clarity, the two motions will be here dealt with separately. A APPELLANT'S MOTION FOR RECONSIDERATION The thrust of this motion is that the decision has incorrectly assessed appellant's damages and unreasonably reduced their amount. It is first argued that the decision erred in not taking into account, in computing appellant's loss of income, the appellant's undeclared income of P8,338.20, assessed by the Bureau of Internal Revenue for the year 1954, in addition to his declared income for that year (P10,975), it being argued that appellant never claim any other source of income besides his professional earnings. Several circumstances of record disprove this claim. (1) That the amount of P8,338.20 was kept apart from ordinary earnings of appellant for the year 1954 (P10,975), and not declared with it, is in itself circumstantial evidence that it was not of comparable character. (2) If it was part of his ordinary professional income, appellant was guilty of fraud in not declaring it and he should not be allowed to derive advantage from his own wrongdoing. (3) The decision pointed out that by including the undeclared amount in appellant's disclosed professional earning for 1954, to a grand total of P19,313.20, the income for said year becomes abnormally high (in fact, more that double), as compared to appellant's earnings for the preceding years, 1951-1953, that averaged not more that P7,000 per annum. Such abnormality justifies the Court's refusal to consider the undisclosed P8,338.20 as part of appellant's regular income for the purpose of computing the reduction in his earnings as a result of the complained acts of appellee. (4) Finally, the true source of the undeclared amount lay in appellant's own knowledge, but he chose not to disclose it; neither did he call upon the assessing revenue officer to reveal its character. Appellant Velasco urges that the damages awarded him are inadequate considering the present high cost of living, and calls attention to Article 1250 of the present Civil Code, and to the doctrines laid down in People vs. Pantoja G.R. No. L-18793, 11 October 1968, 25 SCRA 468. We do not deem the rules invoked to be applicable. Article 1250 of the Civil Code is to the effect that: ART. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. It can be seen from the employment of the words "extraordinary inflation or deflation of the currency stipulated" that the legal rule envisages contractual obligations where a specific currency is selected by the parties as the medium of payment; hence it is inapplicable to obligations arising from tort and not from contract, as in the case at bar, besides there being no showing that the factual assumption of the article has come into existence. As to the Pantoja ruling, the regard paid to the decreasing purchase of the peso was considered a factor in estimating the indemnity due for loss of life, which in itself is not susceptible of accurate estimation. It should not be forgotten that the damages awarded to herein appellant were by no means full compensatory damages, since the decision makes clear that appellant, by his failure to minimize his damages by means easily within his reach, was declared entitled only to a reduced award for the nuisance sued upon (Steel vs. Rail & River Coal Co., 43 Ohio App. 228,182 N.E. 552); and the amount granted him had already taken into account the changed economic circumstances. Nor is the fact that appellant lost a chance to sell his house for P95,000 to Jose Valencia constitute a ground for an award of damages in that amount. As remarked in the main decision, there is no adequate proof of loss, since there is no evidence of the depreciation in the market value of the house in question caused by the acts of defendant Meralco The house, after all, has remained with appellant and he admits in his motion for reconsideration (page 48) that properties have increased in value by 200% since then. For the foregoing reasons, the motion for reconsideration is denied. B APPELLEE'S MOTION TO RECONSIDER Appellee Manila Electric Company argues that in case the noise emitted by its substation can not be brought down to the 50 decibel level imposed by our decision in chief, the remedy of the appellant would be to compel appellee Company to acquire and pay for the value of the house, under the so-called doctrine of "inverse condemnation and cites in support our doctrines in Bengzon vs. Province of Pangasinan, 62 Phil. 816, and Republic vs. Philippine Long Distance Telephone Co., L-18841, 27 January 1969, 26 SCRA 620-634. But as pointed out by appellant in his opposition, this issue was not raised, nor was the inverse condemnation doctrine invoked in the trial court, so that it would be improper to consider it on appeal, and worse still, on a motion for reconsideration of the decision on the merits. Furthermore, there is no showing that it is impossible to reduce the substation noise to the level decreed by this Court in the main decision. On the contrary, appellee's own evidence is that the noise can be reduced by erecting a wall barrier on the line separating the substation lot and the property of appellant. The version that appellee did not erect the wall because of the objections of appellant's wife was denied by her, and there is no preponderance of evidence in favor of appellee on this point. Moreover, since it was appellant Dr. Velasco who complained, his wife's objection would not suffice to constitute a waiver of his claim. As to the petition to increase the sound level prescribed by his Court from 50 to 55 decibels on the ground that present "ambient sound already ranges from 44 to 55 decibels in the mornings", the same can not be granted. As shown by the evidence at the trial, the intensity of the noise emitted by appellee's transformers are most objectionable at night, when people are endeavoring to rest and sleep in compensation for the fatigue and tensions accumulated during daytime.

WHEREFORE, appellee's motion to reconsider is likewise denied.

G.R. No. L-28999 May 24, 1977

COMPAIA MARITIMA, plaintiff-appellee, vs. ALLIED FREE WORKERS UNION, SALVADOR T. LLUCH, MARIANO LL. BADELLES, individually and in their capacities as President and Vice-President, respectively of the Allied Free Workers Union, NICANOR HALEBAS and LAURENTINO LL. BADELLES, individually and officers of Allied Free Workers Union, defendants-appellants. AQUINO, J.: Antecedents. - Since the onset in 1954 of litigation between the parties herein, this is the fifth case between them that has been elevated to this Court. The incidents preceding the instant appeal are as follows: On August 11, 1952 the Compaia Maritima and the Allied Free Workers Union entered into a written contract whereby the union agreed to perform arrastre and stevedoring work for the consignees. vessels at Iligan City. The contract was to be effective for one month counted from August 12, 1952. It was stipulated that the company could revoke the contract before the expiration of the term if the union failed to render proper service. The contract could be renewed by agreement of the parties (Exh. J). At the time the contract was entered into, the union had just been organized. Its primordial desire was to find work for its members. The union agreed to the stipulation that the company would not be liable for the payment of the services of the union "for the loading, unloading and deliveries of cargoes" and that the compensation for such services would be paid "by the owners and consigness of the cargoes" as "has been the practice in the port of Iligan City" (Par. 2 of Exh. J). The union found out later that that stipulation was oppressive and that the company was unduly favored by that arrangement. Under the contract, the work of the union consisted of arrastre and stevedoring service. Arrastre, a Spanish word which refers to hauling of cargo, comprehends the handling of cargo on the wharf or between the establishment of the consignee or shipper and the ship's tackle. The service is usually performed by longshoremen. On the other hand, stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. The shippers and consignees paid the union oth for the arrastre work. They refused to pay for the stevedoring service. They claimed that the shipowner was the one obligated to pay for the stevedoring service because the bill of lading provided that the unloading of the cargo was at the shipowner's expense (Exh. 1). On the other hand, the company refused to pay for the stevedoring service because the contract (Exh. J) explicitly provided that the compensation for both arrastre and stevedoring work should be paid by the shippers and consignees, as was the alleged practice in Iligan City, and that the shipowner would not be liable for the payment of such services. Thus, the issue of whether the company should pay for the stevedoring service became a sore point of contention between the parties. The union members labored under the impression that they were not being compensated for their stevedoring service as distinguished from arrastre service. Although the arrastre and stevedoring contract (Exh. J) was disadvantageous to the union, it did not terminate the contract because its members were in dire need of work and work, which was not adequately compensated, was preferable to having no work at all (204, 214-5, 226-7 tsn May 20, 1960). Upon the expiration of the one-month period, the said contract was verbally renewed. The company allowed the union to continue performing arrastre and stevedoring work. On July 23, 1954 the union sent a letter to the company requesting that it be recognized as the exclusive bargaining unit to load and unload the cargo of its vessels at Iligan City. The company ignored that demand. So, the union filed on August 6, 1954 in the Court of Industrial Relations (CIR) a petition praying that it be certified as the sole collective bargaining unit. Despite that certification case, the company on August 24, 1954 served a written notice on the union that, in accordance with payment of the 1952 contract, the same would be terminated on August 31, 1954. Because of that notice, the union on August 26, 1954 filed in the CIR charges of unfair labor practice against the company. On August 31, 1954 the company entered into a new stevedoring and arrastre contract with the Iligan Stevedoring Association. On the following day, September 1, the union members picketed the wharf and prevented the Iligan Stevedoring Association from performing arrastre and stevedoring work. The picket lasted for nine days. On September 8, 1954 the company sued the union and its officers in the Court of First Instance of Lanao for the rescission of the aforementioned 1952 contract, to enjoin the union from interfering with the loading and unloading of the cargo, and for the recovery of damages. On the following day, September 9, the lower court issued ex parte a writ of preliminary injunction after the company had posted a bond in the sum of P20,000. A few hours lateron that same day the union was allowed to file a counterbond. The injunction was lifted. The union members resumed their arrastre and stevedoring work.

Later, the union assailed in a prohibition action in this Court the jurisdiction of the trial court to entertain the action for damages, and injunction. A majority of this Court held that the lower court had jurisdiction to issue the injunction and to take cognizance of the damage suit filed by the company but that the injunction was void because it was issued ex parte and the procedure laid down in section 9(d) of Republic Act No. 875 was not followed by the trial court (Allied Free Workers Union vs. Judge Apostol, 102 Phil. 292, 298). After trial, the lower court rendered a decision dated December 5, 1960, amended on January 11, 1961, (1) declaring the arrastre and stevedoring contract terminated on August $1, 1954; (2) dismissing the union's counterclaim; (3) ordering the union and its officers to pay solidarily to the company P520,000 as damages, with six percent interest per annum from September 9, 1954, when the complaint. was filed; (4) permanently enjoining the union from performing any arrastre and stevedoring work for the company at Iligan City, and (5) requiring the union to post a supersedeas bond in the sum of P520,000 to stay execution. The union filed a motion for reconsideration. On the other hand, the company filed a motion for the execution pending appeal of the money judgment. It filed another motion for the immediate issuance of a writ of injunction. That second motion was filed in the municipal court of Iligan City in view of the absence of the District Judge. The municipal court issued the writ of injunction. However, this Court set it aside because it was not an interlocutory order and no special reasons were adduced to justify its issuance (Allied Free Workers Union vs. Judge Estipona, 113 Phil. 748). The union on January 6, 1961 had perfected an appeal from the lower court's original decision. It did not appeal from the amended decision. On March 24, 1962 the lower court issued an order declaring its amended decision final and executory in view of the union's failure to appeal therefrom. The court directed the clerk of court to issue a writ of execution. That order was assailed by the union in a certiorari action filed in this Court. A preliminary injunction was issued by this Court to restrain the execution of the judgment. On May 16, 1962 this Court dissolved the injunction at the instance of the company which had filed a counterbond. Thereupon, the 225 members of the union yielded their ten-year old jobs to the new set of workers contracted by the company. The certiorari incident was decided on June 30, 1966. This Court noted that the lower court amended its decision for the purpose of correcting certain errors and omissions which were not substantial in character and that its amended decision was served upon the parties after the union had perfected its appeal from the original decision. Under those circumstances, this Court held that the union's appeal should be given due coarse, subject to the amendment of its record on appeal. This Court reserved to the members of the union the right to secure restitution under sections 2 and 5, Rule 39 of the Rules of Court (Allied Free Workers Union vs. Estipona, L-19651, June 30, 1966,17 SCRA 513, 64 O.G. 2701). Pursuant to that reservation, the union on December 16, 1966 filed a motion for restitution, praying that its 225 members be restored to their jobs and that the company be ordered to pay P 1,620,000 as damages, consisting of the lost earnings during the four-years period from May 8, 1962 to May 8, 1966. On the other hand, the company in its motion of January 18, 1967 reiterated its 1960 motion for the execution of the lower court's judgment as to the damages, of P520,000 and the permanent injunction. Later, the company called the lower court's attention to this Court's decision dated January 31, 1967. In that decision, this Court affirmed the CIR's decision holding that the company did not commit any unfair labor practice and reversed the CIR's directive that a certification election be held to determine whether the union should be the exonemtod bargaining unit. This Court held that the union could not act as a collective bargaining unit because the union was an independent contractor and its members were not employees of the company (Allied Free Workers Union vs. Compaia Maritima, L-22951-2 and L-22971, 19 SCRA 258). The lower court in its order of April 25, 1967 (1) denied the union's motion for restitution and to stay execution of its amended decision on January 11, 1961 and (2) required the union to file a supersedeas bond in the sum of P100,000 within thirty days from notice. The bond was reduced to P50,000 in the lower court's order of August 16, 1967. The union posted the bond on August 24,1967. The lower court approved the union's amended record on appeal in its order of October 6, 1967. The union appealed directly to this Court because the amount involved exceeds P200,000. The appeal was perfected before Republic Act No. 5440 took effect on September 9,1968. Other proceedings. - The company in its original complaint prayed that the union and its officials be ordered to pay actual damages, amounting to P15,000 for the union's failure to load and unload cargo in and from the consignees. vessels from September 1 to 8, 1954; P50,000 as damages, due to the union's inefficiency in performing arrastre and stevedoring work "during the latter part of the existence" of the contract; P50,000 as moral and exemplary damages, (not supported by any allegation in the body of the complaint) and P5,000 as attorney's Considering (10-12, Record on Appeal). On September 15, 1954 the company added a fourth cause ofaction to its complaint. It alleged that by reason of the acts of harassment and obstruction perpetrated by the union in the loading and unloading ofcargo the company suffered additional damage in the form of lost and unrealized freight and passenger charges in the amount of P10,000 for September 9 and 10, 1954 (66, Record on Appeal).

On November 2, 1954 the company attached to its motion for the revival of the injunction against the union an auditor's report dated September 15, 1954 wherein it was indicated that the company lost freight revenues amounting to P178,579.20 during the period from January 1 to September 7, 1954 (121-143, Record on Appeal). On November 27, 1954 the company filed another motion for the restoration of the injunction. In support of that motion the company attached a trip operation report showing the unloaded cargoes on the consignees. vessels, when they docked at Iligan City on September 14, 19, 22 and 26 and October 3 and 5, 1954, as well as the delays in their departure (157-162, Record on Appeal). On March 5, 1955 the company added a fifth cause ofaction too its complaint. It alleged that during the period from September 12 to December 28, 1954 it lost freight charges on unloaded cargoes in the sum of P62,680.12, as shown in a detailed statement, and that it incurred an estimated amount of P20,000 for overhead expenses. for the delay in the dismissal of its vessels attributable to the union's unsatisfactory stevedoring and arrastre work (225-229, 237-8, Record on Appeal). Also on March 5, 1955 the union answered the original and supplemental complaints. It denied that its members had rendered inefficient service. It averred that the termination of the contract was prompted by the consignees. desire to give the work to the Iligan Stevedoring Association which the company had allegedly organized and subsidized. The union filed a counterclaim for P200,000 as compensation for its services to the company and P500,000 as other damages, (239-252, Record on Appeal). On March 9, 1960 the company filed a third supplemental complaint, It alleged that the continuation of the stevedoring and arrastre work by the union for the company from 1955 to date had caused losses to the company at the rate of P25,000 annually in the form of lost freight on shutout cargoes and the expenses. for the equipment used to assist the union members in performing their work (320-3, Record on Appeal). Plaintiff company's evidence. - Jose C. Teves, the consignees. branch manager at Iligan City, testified that on August 24, 1954 he terminated the arrastre and stevedoring contract with the union (Exh. J) upon instruction of the head office. The contract was terminated in order to avoid further losses to the company caused by the union's inefficient service (85-86 tsn March 11, 1960). After the termination of the contract, the members of the union allegedly harassed the company with the help of goons. The cargoes could not be unloaded in spite of the fact that the company had sought the protection of the law-enforcing authorities (88). The consignees. last recourse was to go to court. (89). The company supposedly suffered losses as a result of the union's inefficient service since September 1, 1954 (91). Teves hired auditors to ascertain the losses suffered by the company during the period from January 1 to September 11, 1954. The trial court awarded actual damages, amounting to P450,000 on the basis of the auditor's reports, Exhibits A to I. It did not carefully examine the said exhibits. Contrary to the trial court's impression, Exhibits B, C and D are not auditors' reports. The trial court did not bother to make a breakdown of the alleged damages, totalling P450,000. The reports of the two hired accountants, Demetrio S. Jayme and M. J. Siojo, show the following alleged damages, in the aggregate amount of P349,245.37 (not P412,663.17, as erroneously added by the consignees. counsel, 161,163-4 tsn March 11, 1960): TABULATION OF ALLEGED DAMAGES CLAIMED BY COMPAIA MARITIMA (1) Freight for 74,751 bags of fertilizer allegedly booked for shipment in the company's vessels but loaded in other vessels during the period from Jan. 1 to August 31, 1954, Statement A in Exh. A, CPA Jayme's report......................................................... (2) Lost freight on other shutout cargoes for January 1 to August 31, 1954, Statement A in Exh. A, of CPA Jayme ......................... (3) Lost freight on shutout cargoes for September 2 to 7, 1954 booked for shipment in M. V. Mindoro, Panay and Masterhead Knot, Statement B in Exh. A, CPA Jayme's report... (4) Losses sustained in voyages of M.V. 6,167.16 4,339.64 P29,900.40

Panay and Mindoro in four voyages from September 4 to 11, 1954, with estimates, Statement B, Exh. A............................... (5) Other estimated losses for the said voyages of M.V. Panay and Mindoro for the same period, based on interviews of parties at the wharf, Statement B, Exh. A............... (6) Additional subsistence expenses. for the M.V. Mindoro and Panay due to the delays in their dismissal from January 1 to August 31, 1954 as certified by the pursers of the two vessels, Statement C, Exh. A..................... (7) Estimated loss in freight and passenger revenue for the period from January 1 to August 31, 1954, based on 1953 freight revenue for the same period Statement D, Exh. A..... (8) Estimated loss in passenger fares for the period from September to December 31, 1954, Statement D, Exh. A....................... (9) Lost freight charges from September 12 to December 28, 1954, as certified by the chief clerk of the consignees. Iligan office. Exh. B............................................................. (10) Estimated overhead expenses for delay of vessels in port, Exh. B................. (11) Forklift operating expenses. for 1955, consisting of salaries and maintenance expenses, Exh. E- 1.................................... (12) Lost freight revenue for 1955, Exh. E2............................................................... (13) Forklift operating expenses. for 1956, Exh. F- 1................................................... (14) Lost freight revenue for 1956, Exh. F-2 (15) Forklift operating expenses. for 1957, Exh. G- 1................................................... (16) Lost freight revenue for 1957, Exh. G2.................................................................... (17) Forklift operating expenses. for 1958, Exh. H-1................................................... 7,503.45 14,538.10 8,259.08 3,520.90 3,849.56 17,838.78 5,677.54 20,000.00 62,680.12 20,000.00 100,000.00 4,407.50 10,000.00 3,764.50

(18) Lost freight revenue for 1958, Exh. H2............................................................. (19) Forklift operating expenses. for 1959, Exh. I-1.................................................... (20) Lost freight revenue for 1959, Exh. I-2 T OT A L 8,745.35 7,959.83 P349,245.37 10,193.46

We tabulated the alleged damages, to show that the trial court's award to the company of P450,000 as damages, is not supported by the evidence. On the other hand, the statement of the consignees. counsel that the damages, totalled P412,663.17 (162- 164 tsn March 11, 1960) is wrong. Teves, the consignees. branch manager, submitted a statement (Exh. K) showing the alleged cost of three forklifts, 200 pieces of pallet boards, 530 pieces of wire rope slings and two pieces of tarpaulins in the total sum of P27,215. In that statement, he claims that the damages, to the company by reason of the depreciation of the said items of equipment amounted to P38,835 or more than the cost thereof. The company's counsel, in his summary of the damages, ignored the alleged damages, of P38,835 indicated by Teves in Exhibit K. The consignees. counsel relied oth on the auditors' reports, Exhibits A and E to I and on Exhibit B, the chief clerk's statement. As already noted, those documents show that the total damages, claimed by the company amounted to P349,245.37. The best evidence on the cost of the said equipment would have been the sales invoices instead of the oral testimony of Teves. He did not produce the sales invoices. Teves further testified that Salvador T. Lluch was the president of the union; Nicanor Halibas, the treasurer; Mariano Badelles, the general manager, and Luarentino Badelles, a vice president. Appellants' statement of facts. - To sustain their appeal, the appellants made the following exceedingly short and deficient recital of the facts: Sometime in the month of August, 1954, defendant, Allied Free Workers Union filed an unfair labor practice case against defendant (should be plaintiff) and its branch manager, Mr. Jose Teves, with the Court of Industrial Relations, Manila, and docketed as Case No. 426-UPL: defendant union also filed a petition for certification election docketed as Case No, 175-MC against plaintiff; defendant union also filed a notice of strike dated August 27, 1954; the Secretary of Labor wired the public defender, Iligan City, on August 27, 1954 (see annexes 1-4, motion to dismiss, Record on Appeal, pp. 54-65). To counteract these legitimate moves of labor, plaintiff filed the complaint docketed as Civil Case No. 577 in the Court of First Instance of Lanao (now Lanao del Norte) for damages, and/or resolution of contract with writ of preliminary injunction, On a decision adverse to their interests, defendants take this appeal. On the question of jurisdiction taken before this Honorable Tribunal in G.R. No. L-8876, it was held: ... for the instant case merely refers to the recovery of damages, occasioned by the picketing undertaken by the members of the union and the rescission of the arrastre and stevedoring contract previously entered into between the parties. The appellants did not discuss their oral and documentary evidence. * First assignment of error. - The appellants contend that the trial court erred in awarding to the company actual damages, amounting to P450,000, moral damages, of P50,000 and attorney's Considering of P20,000, and in holding that the four officers of the union are solidarily liable for the said damages. Appellants' counsel assailed the award of actual damages, on the ground that the auditors' reports, on which they were based, were hearsay. After analyzing the nature of the damages, awarded, how the same were computed, and the trustworthiness of the company's evidence, we find the first assignment of error meritorious. We have already stress that, on the basis of the reports of the two accountants, the damages, claimed by the complaint as a matter of simple addition, does not reach the sum of P 450,000 fixed by the trial court. The damages, shown in the accountants' reports and in the statement made by the consignees. chief clerk (who did not testify) amount to P349,245.37, or much less than P450,000. The company argues that the accountants' reports are admissible in evidence because of the rule that "when the original consists of numerous accounts or other documents which cannot be examined in court without great loss-of time and the fact sought to be established from them is oth the general result of the whole", the original writings need not be produced (Sec. 2[e], Rule 130, Rules of Court).

That rule cannot be applied in this case because the voluminous character of the records, on which the accountants' reports were based, was not duly established (U. S. vs. Razon and Tayag, 37 Phil. 856, 861; 29 Am Jur 2nd 529). It is also a requisite for the application of the rule that the records and accounts should be made accessible to the adverse party so that the company, of the summary may be tested on cross-examination (29 Am Jur 2nd 517-8; 32A C.J.S. 111). What applies to this case is the general rule "that an audit made by, or the testimony of, a private auditor, is inadmissible in evidence as proof of the original records, books of accounts, reports or the like" (Anno 52 ALR 1266). That general rule cannot be relaxed in this case because the company failed to make a preliminary showing as to the difficulty or impossibility attending the production of the records in court and their examination and analysis as evidence by the court (29 Am Jur 2nd 529). A close scrutiny of the accountants' reports reveals their lack of probative value. The propriety of allowing the different items of damages, is discussed below. Unrealized freight and passenger revenue for 1954 ascertained by Accountant Demetrio S. Jayme. - In his report (Exh. A, pp. 134 to 147, Record on Appeal), Jayme used the pronouns "we" and "our" and made reference to the examination made by the "auditors" and his accounting office. He did not disclose the names of other "auditors" who assisted him in making the examination of the consignees. records. He gave the impression that he was an independent accountant hired by the company to make a "special investigation" of the consignees. losses for the period from January 1 to September 7, 1954. The truth is that Jayme was a "personal friend" of Teves, the consignees. branch manager at Iligan City. Teves was the consignees. principal witness in this case. He verified the complaint. herein. He signed for the company the stevedoring and arrastre contract which he later rescinded. In fact, Teves intervened in the drafting of the contract. It was his Idea that the company should not pay the arrastre and stevedoring Considering and that those charges should be borne by the shippers and consignees. Jayme was not only the friend of Teves but was also his co-employee. Jayme was the consignees. branch manager at Ozamis City and later at Cagayan de Oro City (217-8 tsn May 20, 1960; Exh. 12). He suppressed that fact in his report of examination. Apparently, the practice of accounting was his sideline or he practised accounting and, as the saying goes, he moonlighted as the consignees. branch manager. Obviously, Jayme would be biased for the company. He violated a rule of the accountants' code of ethics by not disclosing in his report of examination that he was an employee of the company (84 tsn June 2, 1960). Accountant Jayme allegedly found from the consignees. records at Iligan City that its freight and passenger revenue for the eight- month period from January 1 to August 31, 1953 amounted to P373,333.14 and that for the same period in 1954, that revenue amounted to P470,716.29, or an increase of P97,383.12 (Statement D of Exh. A, 145, Record on Appeal). Jayme interpreted those figures as signifying that the company would have realized more revenue if the union had rendered better service. He reasoned out that there was a big volume of business in Iligan City due to the Maria Cristina Fertilizer Plant, Iligan Steel Mill and NPC Hydroelectric Plant. He imagined that the consignees. freight revenue during the first eight months of 1954 could have amounted to at least P600,000 and that since it actually realized oth P 470,716.29, its loss of freight revenue for that period could be "conservatively" estimated at least P100,000 (item 7 of the tabulation of damages). He stated that he attached to his report on the comparative statement of gross revenue a certificate of the captain of the vessel Panay showing the delays in its dismissal in Iligan City as indicated in its logbook. No such document was attached to Jayme's report. And from the fact that the total fares received by the company during the eight-month period were reduced in the sum of P3,951.58 (Jayme fixed the reduction at the round figure of P4,000), he calculated that the company suffered a loss of at least P20,000 in passenger revenue up to December 31, 1954 (Item 8 of the tabulation of damages). Jayme also included in his report (a) damages, amounting to P10,000 as his estimate of losses supposedly "based on interviews with disinterested parties at the wharf and city proper customers"; (b) damages, amounting to P3,764.50 allegedly suffered in the operation of the vessels Mindoro and Panay from September 4 to 11, 1954, consisting of extra meals, expenses. for unloading cargo, estimated loss in passage revenue for four voyages, and estimated loss from 14 re-routed freights to competing vessels" (consisting of rice, corn and bananas), and (e) the sum of P4,407.50 as alleged additional subsistence incurred for the crew of the Panay and Mindoro from January 1 to August 31, 1954 (items 4, 5 and 6 of the tabulation of damages). The records of the purser and chief steward were allegedly examined in ascertaining those damages. It would not be proper to allow Jayme's estimates as recoverable damages. They are not supported by reliable evidence. They can hardly be sanctioned by the "generally accepted auditing standards" alluded to in Jayme's report. The pertinent records of the company should have been produced in court. The purser and steward did not testify. The rule is that the auditor's summary should not include his conclusions or inferences (29 Am Jur 2d 519). His opinion is not evidence. The trial court unreservedly gave credence to the conjectures of Jayme. Obviously, his inflated guesses are inherently speculative and devoid of probative value. Furthermore, his estimate of the unrealized freight revenue for January 1 to August

31, 1954 overlapped with his computation of the lost freight for the unloaded 74,751 bags of fertilizer and other cargoes covering the same period (Statement A of Exh. A). The foregoing discussion shows Jayme's unreliable modus operandi in ascertaining the 1954 losses which the company claimed to have suffered in consequence of the union's alleged inefficiency or poor service. It is noteworthy that those losses were not averred with particularity and certitude in the consignees. complaint. The same observations apply with equal cogency to the damages, amounting to P40,407.20 as lost freight revenue also for the year 1954 (items 1 to 3 of the tabulation of damages) which were computed by Accountant Jayme. Those items refer to (1) the sum of P29,900.40 as lost freight revenue on 74,751 bags of fertilizer, already mentioned, which were booked for shipment in the consignees. vessels from January 1 to August 31, 1954 but which were allegedly loaded in other vessels; (2) P4,339.64 as unrealized freight revenue for other cargoes booked in the consignees. vessels but not loaded therein during the same eight-month period, and (3) P6,167,16 as unrealized freight revenue on shutout cargoes not loaded in the consignees. vessels during the six-day period from September 2 to 7, 1954. Jayme allegedly based his computations on the records of the company which were not produced in court. The union objected to Jayme's report as inadmissible under the hearsay rule or as not being the best evidence. Even if the presentation of the records themselves as exhibits should have been dispensed with, yet the complaint to show good faith and fair dealing, could have brought the records in court (manifests, bills of lading, receipts for the freights, if any, etc.) and enabled the court and the union's counsel and its expert accountant to verify the accuracy of Jayme's summaries. Photostatic copies of some manifests and bills of lading proving that the company was not able to collect the stipulated freight on the alleged shutout cargoes should have been proforma. in evidence as supporting papers for Jayme's report. No such exhibits were presented. The flaw or error in relying merely on Jayme's summaries is that, as pointed out by witness Mariano LL. Badelles, cargoes might be shutout due to causes other than the supposed inefficiency of the union. He testified that cargoes were shutout deliberately by the company because they could not be loaded in one vessel (for example, 50,000 bags of fertilizer), or a shipper had no allotment, or because the company did not want to load cargoes like bananas (189-194 tsn May 20, 1960). Jayme's summaries did not take into account the probability that a part of the cargo booked in the consignees. vessel for a certain date might not have been loaded on that date but was loaded in another vessel of the company which docked at the port a few days later, In that case, there would be no loss of freight revenue. The mere shutting out of cargo in a particular voyage did not ipso facto produce loss of freight revenue. Our conclusion is that an injustice would be perpetrated if the damages, aggregating P178,579 computed and estimated in the report of Jayme, a biased witness, should be accepted at their face value. Damages computed by Salvador M. Magante. - The company also claims as damages, for the period from September 12 to December 28, 1954 lost freight charges on shutout cargoes in the sum of P62,680.12, and the sum of P20,000 as "overhead expenses. for delay of vessels in port", as set forth by Salvador M. Magante, the consignees. chief clerk at Iligan City, in his statement, Exhibit B (items 9 and 10 of the tabulation of damages). Magante did not testify on his statement. Instead, accountant Jayme, substituting for Magante, testified on that statement. Jayme said that he verified the consignees. records on which Magante based his statement. Jayme assured the court that the figures in Magante's statement were supported by the consignees. records. But as to the damages, of P20,000, Jayme said that he could not certify as to their company, because he had not finished his investigation (33 tsn March 9, 1955). In spite of that admission, the trial court allowed that item of damages. The trial court erred in allowing the damages, totalling P82,680.12 because Magante's statement, Exhibit B, is hearsay. Magante should have been proforma. as a witness. Jayme was not competent to take his place since the statement was prepared by Magante, not by Jayme. More appropriate still, the documents and records on which the statement was based should have been proforma. as evidence or at least brought to the court for examination by the union's counsel and its accountant. The trial court required the production of the manifests supporting Magante's statement (85-86 tsn march 9, 1955). Only one such manifest, Exhibit C, was produced. The nonproduction of the other records was not explained. Lost freight revenue and operating expenses for the forklifts. - The company claimed as damages, the sum of P87,986.05 (P151,403.85 as erroneously computed by the consignees. counsel, 163 tsn March 11, 1950) consisting of supposed unrealized freight charges for shutout or unloaded cargoes for the year 1955 to 1959 (Exh. E to I, Items 11 to 20 of the tabulation of damages). The claim is covered by the company's third supplemental complaint dated March 9, 1960 wherein it was alleged that due to the acts of the union and its officers the company had suffered damages, of not less than P25,000 annually since 1955 (320-3, Record on Appeal). That supplemental complaint was hurriedly filed during the trial as directed by the trial court. The said damages, were computed in the reports of Miguel J. Siojo, an accountant who, for two days and nights, March 8 to 10, 1960, or shortly before and during the trial, allegedly examined the consignees. record at Iligan City, such as its cash book , cash vouchers, reports to the head office, shipping manifests, and liquidation reports. Those records were not produced in court. Their nonproduction was not explained. If the accountant was able to summarize the contents of those records in two days, they could not have been very voluminous. They should have been offered in evidence.

The alleged expenses. in the operation of the forklifts consisted of (a) the wates of the operators hired by the company and (b) the cost of gasoline and oil and expenses. for repair. The company's theory is that under the 1952 contract (Exh. J) the union was obligated to provide for forklifts in the loading and unloading of cargo. Inasmuch as the union allegedly did not have forklifts, the complaint to expedite the arrastre and stevedoring work, purchase forklifts, hired laborers to operate the same, and paid for the maintenance expenses. The company treated those expenses as losses or damages. Those alleged damages, amounting to P87,986.05 are in the same category as the depreciation allowances amounting to P38,835 which the company claimed for the forklifts, pallet boards, tarpaulins and wire rope slings that it purchased for oth P27,215, We have stated that the consignees. counsel ignored that depreciation in his recapitulation of the damages, claimed by the plaintiff. The union contends that Siojo's reports (Exh. E to I) were inadmissible evidence because they were hearsay, meaning that the original documents, on which the reports were based, were not presented in evidence and, therefore, appellants' counsel and the court itself were not able to gauge the correctness of the figures or data contained in the said reports. The person who had personal knowledge of the operating expenses. was not examined in court. We are of the opinion that, to avoid fraud or fabrication, the documents evidencing the alleged expenses. should have been proforma. in evidence. Siojo's reports were not the best evidence on the said operating expenses. The explanation of Badelles with respect to shutout cargoes and our observations on Jayme's summaries are applicable to accountant Siojo's reports. A more substantial ground for rejecting Siojo's reports is that the said expenses, if really incurred, cannot be properly treated as darn ages to the company. The union's witness, Mariano LI. Badelles, testified that the consignees. forklifts were not used exclusively on the wharf. They were used in the fertilizer and carbide plants. Sometimes, the union supplied the driver and the gasoline for the operation of the forklifts (174-177 tsn May 20, 1960). Moreover, as stated earlier, the company was not paying the union a single centavo for arrastre and stevedoring work. The shippers and consignees paid for the arrastre service rendered by the union. The union did not receive any compensation for stevedoring work. The company complained that the union had been rendering unsatisfactory arrastre and stevedoring services. That grievance was controverted by the union. The use of the forklifts, tarpaulins pallet boards and wire rope slings immeasurably benefitted the company. It is not proper nor just that the consignees. investment in those pieces of equipment should be considered damages, just because it was able to bind the union to a one-sided contract which exempted it from the payment of arrastre and stevedoring Considering and which impliedly obligated the union to purchase the said equipment. If the service rendered by the union members was unsatisfactory, it must be because the poor stevedores were underfed and underpaid. They were underfed and underpaid because the company was astute enough to insure that it would obtain stevedoring service without paying for it. If to improve the arrastre and stevedoring service, the company had to incur expenses. for the purchase of forklifts, pallet boards, tarpaulins and wire rope slings and for the operation of the forklifts, the union should not be required to reimburse the company for those expenses. The company should bear those expenses. because the same redounded to its benefit. The trial court erred in ordering the union and its officials to pay the amount of the said expenses. as damages, to the company. Moral damages and attorney's fees. - Considering that the consignees. claim for moral damages, was based on the same facts on which it predicated its claim for actual deduction which we have found to be groundless, it follows that the company, a juridical person, is not entitled to moral damages. Anyway, the company did not plead and prove moral damages. It merely claimed moral damages, in the prayer of its complaint. That is not sufficient (Darang vs. Ty Belizar, L-19487, January 31, 1967, 19 SCRA 214, 222). Under the facts of this case, we do not find any justification for awarding attorney's Considering to the company. Hence, the trial court's award of P20,000 as attorney's Considering is set aside. Appellants' first assignment of error, although not properly argued by their counsel, should be sustained. Other assignments of error. - The union and its officers contend that the lower court erred in dismissing their counterclaims. Their counsel did not even bother to state in their brief the amount of the counterclaims. The union filed counterclaims for P200,000 as compensation for stevedoring services from August, 1952 to March 4, 1955; P500,000 as deduction P10,000 as attorney's Considering and P5,000 as premium on the counterbond (251-2, Record on Appeal). In their supplemental counterclaim, they demanded P500,000 as stevedoring charges for the period from March 4, 1955 to March 4, 1960 and additional damages, of P10,000 (308-10, Record on Appeal). The trial court dismissed the said counterclaims.

The appellants in their three-sentence argument in support of their counterclaims alleged that the company's bill of lading provided that the unloading of the cargoes was at the consignees. expense (Exh. 1); that the company had not paid the sum of P500,000 as compensation for the stevedoring services rendered by the laborers up to 1960, and that the stipulation in the arrastre contract, "that the Compaia Maritima shall not be liable for the payment of the services rendered by the Allied Free Workers Union for the loading and deliveries of cargoes as same is payable by the owners and consignees of cargoes, as it has been the practice in the port of Iligan City" (Exh. J, pp. 14, 334, 359, 500 Record on Appeal), was 'non- operative" and void, "being contrary to morals and public policy". That superficial argument is not well-taken. The printed stipulation in the bill of lading was superseded by the contractual stipulation. The contract was prepared by the union officials. As already noted, it was stipulated in the contract that the stevedoring and arrastre charges should be paid by the shippers and consignees in consonance with the practice in Iligan City. That stipulation was binding and enforceable. The supposed illegality of that stipulation was not squarely raised by the union and its officials in their answer. They merely averred that the contract did not express the true agreement of the parties. They did not sue for reformation of the instrument evidencing the contract. The lower court did not err in dismissing defendants' counterclaims. The other two errors assigned by the appellants, namely, that the lower court erred in issuing a permanent injunction against them and in executing its decision pending appeal, are devoid of merit. The appellants invoke section 9(d) of the Magna Carta of Labor regarding the issuance of injunctions. That section has no application to this case because it was definitively ruled by this Court in the certification and unfair labor practice cases that there is no employer-employee relationship between the company and the stevedores. (They work under the cabo system). The lower court did not execute the money aspect of its judgment. It merely required the defendants to file a supersedeas bond of P50,000. As to the injunction, it should be recalled that it was this Court which, in its resolution of May 16, 1962 in the execution and appeal incident (L-19651, 17 SCRA 513), allowed the company to terminate the stevedoring and arrastre work of the union and to use another union to perform that work. The company had the contractual right to terminate the 1952 contract (Taylor vs. Uy Teng Piao, 43 Phil. 873). The lower court did not err in sustaining the consignees. rescission of the contract and in enjoining the union from performing arrastre and stevedoring work. WHEREFORE, that portion of the trial court's judgment declaring the arrastre and stevedoring contract terminated, permanently enjoining the union and its officials from performing arrastre and stevedoring work for the vessels of the Compaia Maritima, and dismissing defendants' counterclaim is affirmed. The lower court's award of damages, is reversed and set aside. No costs. SO ORDERED.

G.R. No. 118325 January 29, 1997 VIRGILIO M. DEL ROSARIO and CORAZON PAREDES-DEL ROSARIO, petitioners, vs. COURT OF APPEALS and METAL FORMING CORPORATION, respondents. NARVASA, C.J.: On August 28, 1995, the Court En Banc promulgated judgment in the case of Metal Forming Corporation v. Office of the 1 President, etc., et al., dismissing the petitioner's appeal and affirming the decision of the Office of the President dated April 30, 1993. The latter decision in turn affirmed that of the Department of Trade and Industry rendered on May 29, 1991 in an administrative case initiated against Metal Forming Corporation (hereafter, MFC) by complaint of the "spouses Virgillo M. del Rosario and Corazon Paredes-del Rosario." The Del Rosarios' complaint, filed on November 21, 1990, charged MFC with a violation of Section 3 of Act No. 3740, "An Act to 2 Penalize Fraudulent Advertising, Mislabeling or Misbranding of Any Product, Stocks, Bonds, etc." It alleged that: 1) "in selling to the public roofing materials known as "Banawe" shingles, . . . (MFC) made representations on the durability of the product and the sturdiness of its installation" through massive advertisements in print media and television. . . (and) brochures :" 2) these representations particularly those characterizing the shingles as "STRUCTURALLY SAFE AND STRONG" and that the "BANAWE METAL TILE structure acts as a single unit against wind and storm pressure due to the strong hook action on its overlaps" "prompted. . . (the Del Rosarios) to buy the "Banawe" shingles and. . . (have) them installed at their residence;" but 3) "(b)arely two (2) months after completion of the installation, portions of the roof of. . . (the Del Rosarios) were blown away by strong wind brought about by typhoon "Ruping." After due proceedings, the DTI rendered judgment declaring that MFC had indeed misrepresented its product because "as the records showed," strong winds actually blew off part of the structure/roof of the Del Rosario Spouses and the same acted in parts (instead of as a single unit) when strong winds blew, a part remaining while another part was blown off. MFC was accordingly sentenced to pay an "administrative fine of P10,000.00" (within ten [10] days from finality of the decision), otherwise its "business name and registration. . . would be deemed suspended and its establishment closed until the fine was fully paid." As already stated, the decision of the DTI (of May 29, 1991) was, on appeal, affirmed in toto by the Office of the President on April 30, 1993; and the latter judgment was in turn affirmed by this Court on August 28, 1995 with a modification solely as to the fine, which was reduced to P5,000.00. In said judgment of August 28, 1995, this Court, stressing that the factual findings of such administrative bodies as the Office of the President are generally to be accorded respect, if not indeed invested with finality, pronounced as correct that Office's ruling, among others, that: (A)lthough the occurrence of a typhoon is a fortuitous event which by itself might have exempted petitioner from liability to private respondents ". . . it cannot efface the fundamental fact that (petitioner) acted in bad faith and/or with gross negligence in failing to deliver the necessary accessories for the proper installation of the structure. . . and actually installed inferior roofing materials at (private respondents') residence, in violation of the proper installation procedure expressly specified in the former's brochures and advertisements for installation, i.e., the metal tile attached to the roof panels should be by two (2) self-drilling screws for one [1] metal cleat. However, instead of conforming with this procedure, (petitioner) attached some of the metal cleats with only one (1)-inch ordinary nail each and others were fastened with only one (1) wood screw each.. . ." It appears that MFC replaced and repaired the roof free of charge, evidently acknowledging that the damage was covered by its one-year warranty on the materials and the installation. The repair work was observed and analyzed by the Esteban Adjusters 3 and Valuers, Inc., which was engaged by the Del Rosarios to determine the cause of the destruction. The repair; work was begun on October 23, 1989, with the delivery of replacement tiles, and completed on November 7, 1989. Thereafter the Esteban 4 Adjusters and Valuers, Inc. submitted its report to the Del Rosarios, dated November 8, 1989, in which it made the following conclusion: The "Banawe" metal tiles which were detached from the roof trusses were not fastened with two (2) wood screws on each metal cleat as required but only with a single wood screw or a combination of a single wood screw and a 1-inch nail which is contrary to the design and specification. We have observed during the course of repai(r) works that some "Banawe" metal tiles installed were no longer than the roof span, hence there is overlapping on the ridge roll/hip. It is very evident that the original subcontractor (which we were not able to identify) were in haste to complete the project. . . . MFC however declined to concede liability for the other damages claimed by the Del Rosario Spouses to have been caused to the interior of their home. This prompted the latter to commence a civil action against MFC on April 16, 1990 in the Regional 5 Trial Court of Manila. In this suit, docketed as Civil Case No. 90-52734, the spouses sought to recover from MFC, damages resulting from the events just narrated, contending that aside from the destruction of the roof of their house, injury was also 6 caused to its electrical wiring, ceiling, furtures, walls, wall paper, wood parquet flooring and furniture. The plaintiff spouses reckoned their actual damages at P1,008,003.00 "representing the estimated cost of the repair, restoration and/or replacement of the damaged areas and items in plaintiffs' house and the .cost of the inspection conducted by the independent

adjuster (engaged by them), with legal interests thereon from 21 February 1990 when defendant (MFL) received the formal 7 demand from plaintiffs until fully paid." They also prayed for an award to them of moral damages in the sum of P3,000,000,00, exemplary damages in the amount of P1,000,000.00, and attorney's fees in the sum of P1,000,000.00. MFC moved to dismiss the complaint for lack of cause of action. If stated that it had no contractual relationship with the Del Rosarios since the contract for the purchase and installation of the roofing, upon which the latter's claims were based, was actually entered into between it and another person, Jesus M. Puno (an engineer identified as the Del Rosarios' contractor). The Trial Court denied the motion. MFC assailed that denial in the Court of Appeals, but was rebuffed; and its recourse to this Court 8 (G.R. No. 95514) was also unsuccessful. Trial then ensued after which judgment was rendered on November 18, 1991 by the Regional Trial Court in favor of the Del 9 10 Rosarios, the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, to pay: "a) Actual Damages in the amount of ONE MILLION EIGHT THOUSAND THREE (P1,008,003.00) PESOS, with legal interest thereon, from June 31, 1990 until fully paid; "b) Moral Damages in the amount of FIVE HUNDRED THOUSAND (P500,000.00) PESOS; "c) Exemplary Damages in the amount of THREE HUNDRED THOUSAND (P300,000.00) PESOS; and "d) Attorney's fees and expenses of litigation in the amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS. Counter claims filed by the defendant are dismissed. SO ORDERED. The Trial Court held the corporation liable for breach of its contract for the supply and installation of the roofing materials in the 11 Del Rosarios' residence. According to the Court: The following facts were duly established from the evidence supporting plaintiffs' claim for damages: "1 There was actually serious damages caused on plaintiffs' house on account of faulty or inferior installation; "2. Defendant himself admitted its liability by making partial repairs of the roofing of "Banawe" shingles, free of charge, after the typhoon. . . (Ruping); "3. There was an expressed warranty specified in the brochure that there should be two (2) metal screws for one (1) cleat but the same was violated by the defendant who only used one (1) 1-inch nail or a combination of one (1) metal screw to one (1) cleat; "4. There is ample evidence including the testimony of Engr. Puno that it was defendant Metal Forming Corporation who. . . (had) a contract with the plaintiffs for the supply and installation of roofing materials in plaintiffs' residential house located at No. 17 Tabuena Street, Corinthian Gardens, Quezon City; and "5. There was a declared warranty by the defendants relied upon by the plaintiffs and that the defendant was guilty of fraud and/or breach of warranty." Parenthetically, these conclusions are substantially the same as those made by the Department of Trade and Industry in its own judgment rendered on May 29, 1991 affirmed by the Office of the President in a decision dated April 30, 1993, and ultimately 12 by this Court En Banc in its decision promulgated on August 28, 1995. The Trial Court ruled that there was privity of contract between the Del Rosarios and MFC; Engineer Puno acted as MFC's agent in the signing of the contracts for the supply and 13 installation of the "Banawe'' shingles; hence, the contract was really between the Del Rosarios and that company. MFC appealed to the Court of Appeals. In its Decision promulgated on June 29, 1994. said Court reversed the Trial Court's 15 judgment, It ruled that there was no privity of contract between the Del Rosarios and MFC, for the following reasons: a. The contracts for the supply of materials and installation of the roof were signed by Engr. Puno. On the face of the contracts, it does not appear that the Del Rosarios were parties to it or that it was entered into for their benefit. It does not also appear that Engr. Puno acted as agent of the Del Rosarios nor of the corporation. b. The holding of the trial court that Engr. Puno was an agent of the corporation is not borne out by the records. There is no evidence, apart from Engr. Puno's testimony, to show that any agency exists. c. The nature of the relationship between the Del Rosarios and Engr. Puno is also not clear from the records of the case. d. While it may be implicit in the complaint of the Del Rosarios that there was a contract between them and the corporation, this is not supported by the evidence presented.
14

There being no such privity, according to the Court of Appeals, the Del Rosarios had no cause of action against MFC for breach of warranties, there being no law allowing them to proceed directly against those whom their contractor had subcontracted to 16 furnish materials and do part of the work that the latter was engaged to perform. The Del Rosarios appealed, and in this Court expectedly present for resolution, A PRIVITY OF CONTRACT BETWEEN THE PARTIES,'"
17

the issue of "'WHETHER OR NOT THERE IS

There is merit in the petition. The essential issue is whether or not upon the facts established by the evidence, MFC is answerable to the Del Rosarios for the damage caused to the latter's residence when its roof, made of shingles purchased from and installed by the former, was blown away by a typhoon. The Court rules that it is. The facts on record including those set forth in the final judgment of the Court En Banc involving the same parties, adverted 18 to in the opening paragraph of this opinion, supra. of which judgment official cognizance may properly be, as it is hereby, taken constitute adequate basis for a verdict against MFC. These are the following: 1. MFC was engaged in the business of selling to the public roofing materials known as "Banawe" shingles or metal tiles, and through extensive advertisements in media and in its brochures, made representations respecting the durability of its tiles and the sturdiness of roofing installed in accordance with its particularly described method, These representations included statements that the shingles are "STRUCTURALLY SAFE AND STRONG" and that the "BANAWE METAL TILE structure acts as a single unit against wind and storm pressure due to the strong hook action on its overlaps." 2. After reading MFC's brochures and advertisements, the Del Rosario Spouses instructed their contractor, Engineer Puno, to use the "Banawe" shingles or metal tiles in the roofing of their house then under construction.
19

3. In other words, paraphrasing Article 1546 of the Civil Code, MFC, as seller to the general public had made a affirmations of fact and promises relating to its advertised product, the "Banawe" tiles, the natural tendency of which was to induce the buyers, as infact it did induce the Del Rosarios, to purchase the same, relying thereon. 4. Pursuant to the Del Rosarios' instructions. Puno placed orders with MFC and signed the pertinent contracts for the purchase of the shingles, accepted deliveries thereof and signed corresponding invoices, and made 20 payments thereon with the spouses funds. 5. Deliveries of the "Banawe" metal tiles or shingles were made by MFC's employees to the construction site of the Del Rosarios' residence; and installation of the metal tiles in the roof of the Del Rosario's house was made by MFC's workers. 6. MFC "acted in bad faith and/or with gross negligence in failing to deliver the necessary accessories for the proper installation of the structure. . . and actually installed inferior roofing materials at (private respondents') residence, in violation of the proper installation procedure expressly specified in the former's brochures and advertisements for installation, i.e., the metal tile attached to the roof panels should be by two (2) self-drilling screws for one (1) metal cleat. . . (but) instead of conforming with this procedure, (petitioner) attached some of the metal cleats with only one (l)-inch ordinary nail each and others were fastened with only one (1) wood screw 21 each. . ." 7. As a result, barely two (2) months after completion of the installation of the roof by MFC's workers, portions thereof were blown away by the winds of typhoon "Ruping," 8. MFC replaced the roof free of charge, in acknowledgment of its one-year warranty on the materials and their installation. All the quibbling about whether Engineer Puno acted as agent of MFC or of the spouses, is pointless. The matter is not a factor in determining MFC's liability for its workers' use of inferior materials and their defective installation of the "Banawe" metal tiles in the roof of the latter's residence, Prescinding from the persuasive proof on record that at all times material and with regard to the acquisition and installation of the metal tiles or shingles, Puno was in truth acting as contractor of the Del Rosarios and on their 22 instructions, ascertainment of the definite identity of the person who actually ordered the shingles from MFC is utterly inconsequential it might just as well have been a construction foreman, a trusted domestic, or any friend or acquaintance of the Del Rosarios in view of the indisputable fact not only (1) that the tiles were delivered to the Del Rosarios and used in fabricating the roof of their home, but also (2) that it was the employees and workers of MFC who (a) delivered the shingles or metal tiles to the construction site of the Del Rosarios' home, and (b) undertook and completed the installation thereof These they did in bad faith, using inferior materials and assembling them in a manner contrary to MFC's express representations in its brochures and advertisements circulated and broadcast to the general public which representations had, in the first place, induced the Del Rosarios to choose the metal tiles in question for their roofing. In fine, since MFC, in bad faith and with gross negligence, infringed the express warranty made by it to the general public in connection with the "Banawe" tiles brought to and set up in the house of the Del Rosarios who had relied on the warranty, and thereby caused them considerable injury, the identity of the individual who actually dealt with MFC and asked the latter to make such delivery and installation is of little moment. Turning now to the matter of damages, it is the Del Rosarios' contention that the pecuniary detriment to their home amounted to P1,008,003.00, covering not only the destruction of the roof, but also substantial harm to the electrical wiring, ceiling, fixtures, 23 24 walls, wallpaper, wood parquet flooring and furniture. They rely on the Report of the Esteban Adjusters and Valuers, Inc., to which the Regional Trial Court accorded full credit. But that report contains no statement whatever of the amount of the damage.

Indeed, the testimony of Engineer Abril, the representative of the Esteban Adjusters and Valuers, Inc., is that his firm had been 25 retained only to determine the cause of the damage, not to estimate and assess it. A similar aridity as to the amount of the damage, unfortunately characterizes the testimony of Atty. Virgilio Del Rosario and the rest of the spouses' proofs. There is therefore no evidentiary foundation upon which to lay an award of actual damages. The Trial Court's grant thereof must be 26 struck down. Lufthansa German Airlines vs. CA, et al., promulgated on April 21, 1995, inter alia ruled that: Actual or compensatory damages cannot be presumed, but must be duly proved and proved with reasonable degree of certainty. A 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 and on evidence of the actual amount thereof. Its grant of moral and exemplary damages was justified by the Trial Court as follows:
27

Form the evidence presented, plaintiffs' sufferings have been duly and substantially proven by the defendant's fraudulent actuation and breach of warranty, and thereby entitled for the claim of damages and litigation costs as enunciated by the testimony of the plaintiff... that the damages to his house caused sufferings and feelings of shock. helplessness, fears, embarrassment and anger, thereby entitling him to Moral Damages which should be assessed at P500,000.00. "The moral damages. . . . (are awarded) for indemnity or reparation not punishment or correction, that is, an award to entitle the injured party to obtain means (of) diversions and amusement that will serve to alleviate the moral sufferings he has undergone by reason of defendant's culpable action. (RNB Surety and Ins. Co. v. IAC, G.R No. 64515, June 22, 1984, 129 SCRA 745)." That MFC did in truth act with bad faith, in flagrant breach of its express warranties made to the general public and in wanton disregard of the rights of the Del Rosarios who relied on those warranties, is adequately demonstrated by the recorded proofs. The law explicitly authorizes the award of moral damages "in breaches of contract where the defendant acted fraudulently or in 28 bad faith." There being, moreover, satisfactory evidence of the psychological and mental trauma actually suffered by the Del Rosarios, the grant to them of moral damages is warranted. Over a period of about a month. they experienced "feelings of 29 30 shock, helplessness, fear, embarrassment and anger." As declared by this Court in Makabili v. Court of Appeals, among other precedents: It is essential. . . . in the award of damages that the claimant must have satisfactorily proven during the trial the existence of the factual basis of the damages and its causal connection to defendant's 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 (Enervida v. De la Torre, 55 SCRA 340 [1974.] and are allowable only when specifically prayed for in the complaint. (San Miguel Brewery, Inc. v. Magno, 21 SCRA 292 [1968]) As reflected in the records of the case, the Court of Appeals was in agreement with the findings of the trial court that petitioners suffered anguish, embarrassment and mental sufferings due to the failure of private respondent to perform its obligation to petitioners. According to the Court of Appeals, private respondent acted in wanton disregard of the rights of petitioners. These pronouncements lay the basis and justification for this Court to award petitioners moral and exemplary damages." This Court also agrees with the Trial Court that exemplary damages are properly exigible of MFC, "Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, While exemplary damages cannot be recovered as a matter of right, they need not be proved, although plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should 31 be awarded." "Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent 32 against or as a negative incentive to curb socially deleterious actions." However, the same statutory and jurisprudential standards just mentioned dictate reduction of the amounts of moral and exemplary damages fixed by the Trial Court. There is, to be sure, no hard and fast rule for determining what would be a fair amount of moral (or exemplary) damages, each case having to be governed by its attendant particulars, Generally, the amount 33 of moral damages should be commensurate with the actual loss or injury suffered. In the case of PNB v. C.A, just cited, this 34 Court quoted with approval the following observation from RCPI v. Rodriguez, viz.: . . . Nevertheless, we find the award of P100,000.00 as moral damages in favor of respondent Rodriguez excessive and unconscionable. In the case of Prudenciado v. Alliance Transport System, Inc. (148 SCRA 440 [1987]) we said: ". . . [I]t is undisputed that the trial courts are given discretion to determine the amount of moral damages (Alcantara v. Surro, 93 Phil. 472) and that the Court of Appeals can only modify or change the amount awarded when they are palpably and scandalously excessive "so as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court" (Gellada v. Warner Barnes & Co., Inc., 57 O.G. [4] 7347, 7358; Sadie v. Bacharach Motors Co., Inc., 57 O.G. [4] 636 and Adone v. Bacharach Motor Co., Inc., 57 O.G. 656). But in more recent cases where the awards of moral and exemplary damages are far too excessive compared to the actual loses sustained by the aggrieved party, this Court ruled that they should be reduced to more reasonable amounts. . . . (Emphasis ours.) In other words, the moral damages awarded must be commensurate with the loss or injury suffered.

In the same case (PNB v. CA), this Court found the amount of exemplary damages required to be paid (P1,000,000.00) "too excessive" and reduced it to an "equitable level" (P25,000.00). . . . (T)he award of P1,000,000.00 exemplary damages is also far too excessive and should likewise be reduced to an equitable level. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. In another case involving strikingly analogous facts decided in 1994, Geraldez vs. CA., where no actual damages were adjudicated but moral and exemplary damages in similar amounts (P500.000.00 and P300,000.00, respectively) were awarded by the Trial Court, as in this case, this Court reduced the amount of moral damages to P100,000.00 and of exemplary damages to P50,000.00. The Court sees no reason to adopt a different treatment in the case at bar, and accordingly reduces the moral damages from P500,000.00 to P100,000.00, and the exemplary damages from P300,000.00 to P50,000.00. Finally, like the adjudication of actual or compensatory damages, the award of attorney's fees must be deleted. The matter was dealt with only in the dispositive portion of the Trial Court's decision. Since the judgment does not say why attorney's fees are awarded, there is no basis for such award, which should consequently be removed. So did this Court rule, for instance, in Scott 37 Consultants and Resource Development Corp., Inc. vs. CA, et al.: It is settled that the award of attorney's fees is the exception rather than the rule and counsel's fees are not to be awarded every time a party wins. The power of the court to award attorney's 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 attorney's fees. WHEREFORE, the challenged Decision of the Court of Appeals of June 29, 1994 is REVERSED and SET ASIDE; and the Decision of the Regional Trial Court of November 18, 1991 is REINSTATED AND AFFIRMED, with the modification that the award of actual damages and attorney's fees is deleted, and the moral and exemplary damages awarded are reduced from P500,000.00 to P100,000.00, and from P300,000.00 to P50,000.00, respectively. IT IS SO ORDERED.
36

35

G.R. No. 130030 June 25, 1999 EXPERTRAVEL & TOURS, INC., petitioner, vs. THE HON. COURT OF APPEALS and RICARDO LO, respondents. VITUG, J.: Petitioner, Expertravel and Tours, Inc., seeks in the instant petition for review on certiorari a modification of the decision, dated 20 March 1997, of the Court of Appeals affirming in toto the 07th November 1994 judgment of the Regional Trial Court (Branch 5) of Manila, the dispositive portion of which reads: WHEREFORE, in view of all the foregoing, judgment is rendered declaring the instant suit DISMISSED, and hereby orders the plaintiff to pay defendant Ricardo Lo moral damages in the amount of P30,000.00; attorney's fees in the amount of P10,000.00, and to pay the costs of the suit. No pronouncement as to other damages for lack of evidence to warrant the same.
1

The factual and case settings of the controversy are culled from the pleadings on record and the assailed decision of the appellate court and that of the court a quo. On 07 October 1987, Expertravel & Tours, Inc., ("Expertravel"), a domestic corporation engaged in the travel agency business, issued to private respondent Ricardo Lo four round-trip plane tickets for Hongkong, together with hotel accommodations and transfers, for a total cost of P39,677.20. Alleging that Lo had failed to pay the amount due, Expertravel caused several demands to be made. Since the demands were ignored by Lo, Expertravel filed a court complaint for recovery of the amount claimed plus damages. Respondent Lo explained, in his answer, that his account with Expertravel had already been fully paid. The outstanding account was remitted to Expertravel through its then Chairperson, Ms. Ma. Rocio de Vega, who was theretofore authorized to deal with the clients of Expertravel. The payment was evidenced by a Monte de Piedad Check No. 291559, dated 06 October 1987, for P42,175.20 for which Ms. de Vega, in turn, issued City Trust Check No. 417920 in favor of Expertravel for the amount of P50,000.00, with the notation "placement advance for Ricardo Lo, etc." Per its own invoice, Expertravel received the sum on 10 October 1987. The trial court, affirmed by the appellate court, held that the payment made by Lo was valid and bidding on petitioner Expertravel. Even on the assumption that Ms. de Vera had not been specifically authorized by Expertravel, both courts said, the fact that the amount "delivered to the latter remain(ed) in its possession up to the present, mean(t) that the amount redounded to the benefit of petitioner Expertravel, in view of the second paragraph of Article 1241 of the Civil Code to the effect that payment made to a third person shall also be valid in so far as it has rebounded to the benefit of the creditor." In this recourse, petitioner confines itself to the following related legal issues; viz.: I. Can moral damages be recovered in a clearly unfounded suit? II. Can moral damages be awarded for negligence or quasi-delict that did not result to physical injury to the 2 offended party? There is merit in the petition. Moral damages are not punitive in nature but are designed to 3 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 to a person. Although incapable of pecuniary computation, moral damages, nevertheless, must somehow be proportional to and in approximation of the suffering 4 inflicted. Such damages, to be recoverable, must be the proximate result of a wrongful act or omission the factual basis for 5 which is satisfactorily established by the aggrieved party. An award of moral damages would require certain conditions to be met; to wit: (1) First, there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be a culpable act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the 6 cases stated in Article 2219. Under the provisions of this law, in culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of his contractual obligation and, exceptionally, when the act of breach of contract itself is constitutive of tort resulting 7 in physical injuries. By special rule in Article 1764, in relation to Article 2206, of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage. In culpa aquiliana, or quasi-delict, (a) when an act 8 or omission causes physical injuries, or (b) where the defendant is guilty of intentional tort, moral damages may aptly be recovered. This rule also applies, as aforestated, to contracts when breached by tort. In culpa criminal, moral damages could be lawfully due when the accused is found guilty of physical injuries, lascivious acts, adultery or concubinage, illegal or arbitrary detention, illegal arrest, illegal search, or defamation. Malicious prosecution can also give rise to a claim for moral damages. The term "analogous cases," referred to in Article 2219, following the ejusdem generis rule, must be held similar to those expressly 9 enumerated by the law. Although the institution of a clearly unfounded civil suit can at times be a legal justification for an award of attorney's fees, such filing, however, has almost invariably been held not to be a ground for an award of moral 11 damages. The rationale for the rule is that the law could not have meant to impose a penalty on the right to litigate. The
10

anguish suffered by a person for having been made a defendant in a civil suit would be no different from the usual worry and anxiety suffered by anyone who is haled to court, a situation that cannot by itself be a cogent reason for the award of moral 12 damages. If the rule were otherwise, then moral damages must every time be awarded in favor of the prevailing defendant 13 against an unsuccessful plaintiff. The Court confirms, once again, the foregoing rules. WHEREFORE, the petition is GRANTED and the award of moral damages to respondent Ricardo Lo under the assailed decision is DELETED. In its other aspects, the appealed decision shall remain undisturbed. No costs. SO ORDERED.

G.R. No. L-12347

May 30, 1961

HERCULANO GRAPILON, petitioner-appellee, vs. MUNICIPAL COUNCIL OF CARIGARA, LEYTE, ET AL., respondents-appellants. DIZON, J.: In the general elections held on November 8, 1955 in the municipality of Carigara, Leyte, Jose Aguilar and Herculano Grapilon were elected mayor and vice-mayor, respectively. Thereafter, both qualified for and assumed office in accordance with law. On March 6, 1957, in compliance with a resolution duly approved by the municipal council, Mayor Aguilar left Carigara for Manila on official business. On that same date appellee inquired from the municipal secretary if it was true that the mayor had left for Manila, to which the municipal secretary replied in the affirmative, informing him besides that Mayor Aguilar left for Manila on official business, without designating anybody as acting municipal mayor. After receiving the secretary's answer appellee informed him "that I assume office as acting municipal mayor effective today and for the duration of his absence pursuant to the provision of Section 2195 of the Revised Administrative Code" (Exhibit A). He dressed a similar notice to the chief of police of the municipality and to the provincial governor of Leyte. In his notice (by telegram) to the latter, appellee also informed him that the municipal secretary had refused to recognize him as acting mayor and asked for advice. Answering petitioner's telegram, the provincial governor, under date of March 7, 1957, wrote him an official letter in which he said that, in view of the reasons therein stated, "in the absence of the municipal mayor when such absence is for official purpose he may not leave the office to the vicemayor and there shall not be an acting mayor" (Annex B to Exhibit G, page 10 of the Record of Exhibits). On March 11, 1957, alleging that the municipal council, the municipal secretary Felipe Lianza and the chief of police Ulpiano Arpon had refused to recognize him as acting mayor and had excluded him from the use and enjoyment of the office of municipal mayor, appellee filed with the lower court a petition for mandamus praying that judgment be rendered requiring the therein respondent to (1) recognize, submit to, and respect his authority as acting municipal mayor; (2) open, unlock and allow his entry into the office of the municipal mayor in the Municipal Hall of Carigara, Leyte; and (3) perform their duties according to law and cooperate with their legitimate superior the acting municipal mayor. He also prayed that the respondents be ordered to pay him P10,000.00 as moral damages, P1,500.00 as attorney's fees, and P100.00 as costs of litigation. Upon denial of their motion to dismiss, appellants filed their answer alleging therein, inter alia, that the municipal council had no juridical personality and therefore could not be sued; that appellee had not been designated as acting municipal mayor, and, therefore, had no right to exercise the rights and prerogatives of said office; that mandamus was not the proper remedy because appellee should have sought relief under the provisions of Sections 2188-2191 of the Revised Administrative Code before resorting to the courts. After trial upon the issues thus raised, the lower court rendered the appealed decision, the dispositive part of which reads as follows: . FOR ALL THE FOREGOING, the Court declares that the Vice Mayor is entitled to assume and discharge the office of Municipal Mayor in accordance with Sec. 2195 of the Rev. Adm. Code in the absence of the latter without having designated anyone to act as such; and considering that there is no other plain, speedy and adequate remedy in the ordinary course of law to which the petitioner may resort, the special remedy of Mandamus is in order and by the present is granted. The respondents Municipal Secretary, Chief of Police and the five members of the Municipal Council, Dr. Benito Go, Mrs. Marpa, Mr. Torrevillas, Mr. Molo and Mr. Badiable are hereby ordered to immediately recognize the authority and personality of the petitioner as acting Municipal Mayor, of the municipality of Carigara and to pay the costs without pronouncement as to moral damages and other incidental expenses alleged in the petition or in the counterclaim. The respondents appealed and now urge us to reverse the decision of the lower court upon the following grounds: firstly, appellee was not entitled to a writ of mandamus because he had a plain, speedy and adequate remedy in the ordinary course of the law to secure the relief sought in his petition; secondly, under the provisions of Section 2195 of the Revised Administrative Code appellee was not entitled to assume the office of municipal mayor of Carigara during the absence of mayor Aguilar on official business in Manila; and thirdly, the lower court erred in not awarding the moral damages, attorney's fees and expenses of litigation claimed in their counterclaim. Inasmuch as the incident involved in this case happened four years ago, the principal legal question involved herein could be considered as moot were it not for the fact that appellants claim that the lower court erred in not awarding them the damages sought in their counterclaim. Their right thereto depends principally if not entirely upon whether appellee's action was justified and, if it was not, whether he filed suit in bad faith. It is not disputed that mayor Aguilar left Carigara for Manila on March 6, 1957 on official business, in compliance with a duly approved resolution of the municipal council. While appellee contends that it was enough for the mayor to be away not present physically from Carigara for him to be entitled to step into his shoes appellants, for their part, contend that the "absence, suspension or other temporary disability of the mayor" mentioned in the legal provision relied upon by appellee refer to disability which temporarily prevents the municipal mayor from performing the duties of his office. Consequently appellants argue, inasmuch as mayor Aguilar was in Manila on official business, he was not disabled at all but was actually performing the duties of his office. To allow the vice-mayor to act as acting mayor under such state of facts would lead to the irregular situation of two mayors for the same municipality acting at the same time. Appellants' contention seems to be logical. Section 2195 of the Revised Administrative Code considers "absence" on the same level as "suspension" and other forms of temporary disability. If a municipal mayor is supended as in the case of Laxamana

vs. Baltazar, G.R. No. L-5955, relied upon by appellee obviously he is disabled temporarily; he can not act as mayor or exercise the powers and prerogatives of his office while under suspension. The "absence" that would authorize the vice-mayor to act as acting mayor should, therefore, be construed in the same manner; it should be such absence as disables the mayor from exercising the powers and prerogatives of his office. Such is not the case in the one before us because mayor Aguilar was in Manila precisely in his capacity as mayor of Carigara transacting official business. Although physically absent from Carigara, he was in the exercise of the powers and prerogatives of his office and was naturally entitled to continue drawing his salary. Furthermore, while the ordinary meaning of "absence" is the state of being away or not present, we believe that an officer's absence is not such as to warrant the placing of another person temporarily in his place unless said officer is absent on an occasion demanding the immediate exercise of the powers of his office. In the case before us there is no satisfactory evidence showing that during the absence of mayor Aguilar on official business in Manila particularly at the time appellee attempted to assume the office of acting mayor of Carigara, an occasion had arisen demanding immediate and peremptory exercise of the powers of that office either for the preservation of public order or for the enforcement of the laws and ordinances. We, therefore, agree with appellants that under the circumstances of the case, appellee had no right to assume the office of acting mayor. This question has already been decided by the Executive Branch of the government. On November 25, 1948 the then Secretary of the Interior rendered an opinion upon a case on all fours with the present, the pertinent portions of which are as follows: The phrase 'other temporary disability' found in section 2195 of the Code. follows the words 'absence' and 'suspension' and is used as modifier of the two preceding words, under the principle of statutory construction known as ejusdem generis. Under American jurisprudence, 'absence' is construed to mean not merely physical absence, but absence which prevents the mayor from the active performance of his duties. In the case of the mayor of a municipality it is usually provided that the president of the municipal council shall exercise all the powers of the mayor during his absence from the municipality, and under such a provision it has been held that 'absence' must be construed reasonably, and so construed means what may be called 'effective' absence. (37 American Jurisprudence, 893.' In the case of Gelina v. Fugere (R.O.) 180 A. 346, 351, 'effective' absence was given the same interpretation. In the instant case however, Mayor Carlos E. Perez left his office for Manila, for the purpose of transacting official business affecting his municipality . . . . Under this circumstance, his absence can not be called 'effective' to warrant the assumption by the vice-mayor of his position by operation of law, as to all intents Mayor Perez continues in the exercise of his power and prerogatives even while outside the municipality and draws his salary for the period he was out of his official station. (Decision, Secretary of the Interior, dated November 25, 1948, pp. 54-55, The Provincial and Municipal Law, by Cortes). While the above opinion is not necessarily controlling upon the courts, it must be accorded considerable weight giving as it does the interpretation of the Executive Department for a legal provision affecting the rights of subordinate officials. The above notwithstanding, we find appellants' claim for damages to be without merit because there is no evidence of any kind showing that appellee had acted maliciously and in bad faith in bringing this suit for mandamus, nor is there sufficient evidence in the record to prove the damages claimed. WHEREFORE, the decision appealed from is reversed insofar as it grants the writ of mandamus, and is affirmed insofar as it dismisses the counterclaim of appellants. Without costs.

G.R. No. 129584 December 3, 1998 TRIPLE EIGHT INTEGRATED SERVICES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER POTENCIANO S. CANIZARES, JR. and ERLINDA OSDANA, respondents. ROMERO, J.: In this petition for certiorari now before us, petitioner Triple Eight Integrated Services Inc. seeks to annul the decision of public respondent National Labor Relations Commission (First Division, Quezon City) dated March 11, 1997 affirming the August 20, 2 1996 decision of Labor Arbiter Potenciano Canizares. Petitioner was ordered to pay private respondent Erlinda Osdana her salaries for the unexpired portion of her employment contract, unpaid salaries, salary differential, moral and exemplary 3 damages, as well as attorney's fees. On April 28, 1997, the NLRC denied petitioner's motion for reconsideration. The antecedent facts follow. Sometime in August 1992, private respondent Osdana was recruited by petitioner for employment with the latter's principal, Gulf Catering Company (GCC), a firm based in the Kingdom of Saudi Arabia. Under the original employment contract, Osdana was engaged to work as "Food Server" for a period of thirty-six (36) months with a salary of five hundred fifty Saudi rials (SR550). Osdana claims she was required by petitioner to pay a total of eleven thousand nine hundred fifty pesos (P11,950.00) in placement fees and other charges, for which no receipt was issued. She was likewise asked to undergo a medical examination conducted by the Philippine Medical Tests System, a duly accredited clinic for overseas workers, which found her to be "Fit of Employment." Subsequently, petitioner asked Osdana to sign another "Contractor 4 Employee Agreement" which provided that she would be employed as a waitress for twelve (12) months with a salary of two hundred eighty US dollars ($280). It was this employment agreement which was approved by the Philippine Overseas Employment Administration (POEA). On September 16, 1992, Osdana left for Riyadh, Saudi Arabia, and commenced working for GCC. She was assigned to the College of Public Administration of the Oleysha University and, contrary to the terms and conditions of the employment contract, was made to wash dishes, cooking pots, and utensils, perform janitorial work and other tasks which were unrelated to her job designation as waitress. Making matters worse was the fact that she was made to work a gruelling twelve-hour shift, from six o'clock in the morning to six o'clock in the evening, without overtime pay. Because of the long hours and the strenuous nature of her work, Osdana suffered from numbness and pain in her arms. The pain was such that she had to be confined at the Ladies Villa, a housing facility of GCC, from June 18 to August 22, 1993, during which period, she was not paid her salaries. After said confinement, Osdana was allowed to resume work, this time as Food Server and Cook at the Hota Bani Tameem Hospital, where she worked seven days a week from August 22 to October 5, 1993. Again, she was not compensated. Then, from October 6 to October 23, 1993, Osdana was again confined at the Ladies Villa for no apparent reason. During this period, she was still not paid her salary. On October 24, 1993, she was re-assigned to the Oleysha University to wash dishes and do other menial tasks. As with her previous assignment at the said University, Osdana worked long hours and under harsh conditions. Because of this, she was diagnosed as having Bilateral Carpal Tunnel Syndrome, a condition precipitated by activities requiring "repeated flexion, 5 pronation, and supination of the wrist and characterized by excruciating pain and numbness in the arms." As the pain became unbearable, Osdana had to be hospitalized. She underwent two surgical operations, one in January 1994, another on April 23, 1994. Between these operations, she was not given any work assignments even if she was willing and able to do light work in accordance with her doctor's advice. Again, Osdana was not paid any compensation for the period between February to April 22, 1994. After her second operation, Osdana was discharged From the hospital on April 25, 1994. The medical report stated that "she had very good improvement of the symptoms and she was discharged on the second day of the 6 operation. Four days later, however, she was dismissed from work, allegedly or, the ground of illness. She was not given any separation pay nor was she paid her salaries for the periods when she was not allowed to work. Upon her return to the Philippines, Osdana sought the help of petitioner, but to no avail. She was thus constrained to file a complaint before the POEA against petitioner, praying for unpaid and underpaid salaries, salaries for the unexpired portion of the employment contract, moral and exemplary damages and attorney's fees, as well as the revocation, cancellation, suspension and/or imposition of administrative sanctions against petitioner. Pursuant to Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, the case was transferred to the arbitration branch of the NLRC and assigned to Labor Arbiter Canizares.
1

In a decision dated August 20, 1996, the labor arbiter ruled in favor of Osdana. The dispositive portion of the decision follows: Wherefore, the respondent is hereby ordered to pay the complainant US$2,499.00 as salaries for the unexpired portion of the contract, and US$1,076.00 as unpaid salary and salary differential, or its equivalent in Philippine Peso. The respondent is likewise ordered to pay the complainant P50,000 moral damages, and P20,000 exemplary damages. The respondent is further ordered to pay the complainant 10% of the monetary award as attorney's fee. Other claims are hereby dismissed for lack of sufficient evidence. SO ORDERED. Aggrieved by the labor arbiter's decision, petitioner appealed to the NLRC, which affirmed the decision in question on March 11, 1997. Petitioner's motion for reconsideration was likewise denied by the NLRC in its order dated April 28, 1997. Hence, this petition for certiorari. Petitioner alleges grave abuse of discretion on the part of the public respondents for the following reasons: (a) ruling in favor of Osdana even if there was no factual or legal basis for the award and, (b) holding petitioner solely liable for her claims despite the fact that its liability is joint and several with its principal, GCC. At the outset, petitioner argues that "public respondent Labor Arbiter gravely abused his discretion when he rendered the 7 questioned decision dated August 20, 1996 without stating the facts and the law where he derived his conclusions." In support of this argument, petitioner cites the first paragraph of Article VIII, Section 14 of the Constitution: "No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based." On this point, it is enough to note that the decisions of both the labor arbiter and the NLRC were based mainly on the facts and allegations in Osdana's position paper and supporting documents. We find these sufficient to constitute substantial evidence to support the questioned decisions. Generally, findings of facts of quasi-judicial agencies like the NLRC are accorded great respect and, at times, even finality if supported by substantial evidence. "Substantial evidence" is such amount of relevant 8 evidence which a reasonable mind might accept as adequate to justify a conclusions. Moreover, well-settled is the rule that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. Thus, in controversies between a worker and her employer, doubts reasonably arising from the evidence or in the interpretation of agreements should be resolved in favor of the former. Petitioner, for its part, was given the same opportunity to file its own position paper but instead, it opted to file a two-page 9 Answer With Special And Affirmative Defenses, denying generally the allegations of the complaint. As observed by the labor arbiter, "The record shows the complainant fled complaint (sic), position paper, and supporting documents, and prosecuted her case diligently; while the respondent merely tried to settle the case amicably, failing even to file 10 its position paper." The present case being one for illegal dismissal, it was incumbent upon petitioner employer to show by substantial evidence that the termination was validly made. In termination cases, the burden of proof rests on the employer to 11 show that the dismissal is for a just cause. Having failed to file its position paper and to support its denials and affirmative defenses in its answer, petitioner cannot now fault the labor arbiter and the NLRC for relying on the facts as laid down by Osdana in her position paper and supported by other documents. The essence of due process is that a party be afforded 12 reasonable opportunity to be heard and to submit any evidence he may have in support of his defense, and this is exactly what petitioner was accorded, although it chose not to fully avail thereof. This Court, therefore, upholds the finding of herein public respondents that the facts and the evidence on record adduced by Osdana and taken in relation to the answer of petitioner show that indeed there was breach of the employment contract and illegal dismissal committed by petitioner's principal. Petitioner claims that public respondents committed grave abuse of discretion when they ruled that Osdana had been illegally dismissed by GCC. It maintains that the award for salaries for the unexpired portion of the contract was improper because Osdana was validly dismissed on the ground of illness. The argument must fail. In its Answer, Memorandum of Appeal, Petition for Certiorari, and Consolidated Reply, petitioner consistently asserted that Osdana was validly repatriated for medical reasons, but it failed to substantiate its claim that such repatriation was justified and done in accordance with law. Art. 284 of the Labor Code is clear on the matter of termination by reason of disease or illness, viz: Art. 284. Disease as a ground for termination An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or prejudicial to his health as well as the health of his co-employees: . . . .
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Specifically, Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code provides: Sec. 8. Disease as a ground for dismissal Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by competent public authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six 6 months with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health. (Emphasis supplied). Viewed in the light of the foregoing provisions, the manner by which Osdana was terminated was clearly in violation of the Labor Code and its implementing rules and regulations. In the first place, Osdana's continued employment despite her illness was not prohibited by law nor was it prejudicial to her health, as well as that of her co-employees. In fact, the medical report issued after her second operation stated that "she had very good improvement of the symptoms." Besides, "Carpal Tunnel Syndrome" is not a contagious disease. Petitioner attributes good faith on the part of its principal, claiming that "It was the concern for the welfare and physical well being (sic) of private respondent that drove her employer to take the painful decision of terminating her from the service and having her repatriated to the Philippines at its expense. The employer did not want to risk the aggravation of the illness of private 16 respondent which could have been the logical consequence were private respondent allowed to continue with her job." The Court notes, however, that aside from these bare allegations, petitioner has not presented any medical certificate or similar document from a competent public health authority in support of its claims. On the medical certificate requirement, petitioner erroneously argues that "private respondent was employed in Saudi Arabia and not here in the Philippines. Hence, there was a physical impossibility to secure from a Philippine public health authority the 17 alluded medical certificate that public respondent's illness will not be cured within a period of six months." Petitioner entirely misses the point, as counsel for private respondent states in the Comment. "certification by a competent public health authority" and not a "Philippine public health authority."
18

The rule simply prescribes a

If, indeed, Osdana was physically unfit to continue her employment, her employer could have easily obtained a certification to that effect from a competent public health authority in Saudi Arabia, thereby heading off any complaint for illegal dismissal. The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employee's illness and thus 19 defeat the public policy on the protection of labor. As the Court observed in Prieto v. NLRC, "The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract, maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of debasement, are only a few of the inhumane acts to which they are subjected by their foreign employers, who probably feel they can do as they please in their country. While these workers may indeed have relatively little defense against exploitation while they are abroad, that disadvantage must not continue to burden them when they return to their own territory to voice their muted complaint. There is no reason why, in their own land, the protection of our own laws cannot be extended to them in full measure for the redress of their grievances." Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since Osdana was working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia do not require any certification by a competent public health authority in the dismissal of employees due to illness. Again, petitioner's argument is without merit. First, established is the rule that lex loci contactus (the law of the place where the contract is made) governs in this jurisdiction. There is no question that the contract of employment in this case was perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor apply in this case. Furthermore, settled is the rule 20 that the courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy. Here in the Philippines, employment agreements are more than contractual in nature. The Constitution itself, in Article XIII Section 3, guarantees the special protection of workers, to wit: The State shall afford fill protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. xxx xxx xxx

This public policy should be borne in mind in this case because to allow foreign employers to determine for and by themselves whether an overseas contract worker may be dismissed on the ground of illness would encourage illegal or arbitrary pretermination of employment contracts. As regards the monetary award of salaries for the unexpired portion of the employment contract, unpaid salaries and salary differential granted by public respondents to Osdana, petitioner assails the same for being contrary to law, evidence and existing jurisprudence, all of which therefore constitutes grave abuse of discretion. Although this contention is without merit, the award for salaries for the unexpired portion of the contract must, however, be reduced. Paragraph 5, Section 10 of R.A. No. 8042, applies in this case, thus: In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. In the case at bar, while it would appear that the employment contract approved by the POEA was only for a period of twelve months, Osdana's actual stint with the foreign principal lasted for one year and seven-and-a-half months. It may be inferred, therefore, that the employer renewed her employment contract for another year. Thus, the award for the unexpired portion of the contract should have been US$1,260 (US$280 x 4 1/2 months) or its equivalent in Philippine pesos, not US$2,499 as adjudged by the labor arbiter and affirmed by the NLRC. As for the award for unpaid salaries and differential amounting to US$ 1,076 representing seven months' unpaid salaries and one month underpaid salary, the same is proper because, as correctly pointed out by Osdana, the "no work, no pay" rule relied upon by petitioner does not apply in this case. In the first place, the fact that she had not worked from June 18 to August 22, 1993 and then from January 24 to April 29, 1994, was due to her illness which was clearly work-related. Second, from August 23 to October 5, 1993, Osdana actually worked as food server and cook for seven days a week at the Hota Bani Tameem Hospital, but was not paid any salary for the said period. Finally, from October 6 to October 23, 1993, she was confined to quarters and was not given any work for no reason at all. Now, with respect to the award of moral and exemplary damages, the same is likewise proper but should be reduced. Worth reiterating is the rule that moral damages are recoverable where the dismissal of the employee was attended by bad faith or 21 fraud or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. 22 Likewise, exemplary damages may be awarded if the dismissal was effected in a wanton, oppressive or malevolent manner. According to the facts of the case as stated by public respondent, Osdana was made to perform such menial chores, as dishwashing and janitorial work, among others, contrary to her job designation as waitress. She was also made to work long hours without overtime pay. Because of such arduous working conditions, she developed Carpal Tunnel Syndrome. Her illness was such that she had to undergo surgery twice. Since her employer determined for itself that she was no longer fit to continue working, they sent her home posthaste without as much as separation pay or compensation for the months when she was unable to work because of her illness. Since the employer is deemed to have acted in bad faith, the award for attorney's fees is likewise upheld. Finally, petitioner alleges save abuse of discretion on the part of public respondents for holding it solely liable for the claims of Osdana despite the fact that its liability with the principal is joint and several. Petitioner misunderstands the decision in question. It should be noted that contrary to petitioner's interpretation, the decision of the labor arbiter which was affirmed by the NLRC did not really absolve the foreign principal. Petitioner was the only one held liable for Osdana's monetary claims because it was the only respondent named in the complaint and it does not appear that petitioner took steps to have its principal included as co-respondent. Thus, the POEA, and later the labor arbiter, did not acquire jurisdiction over the foreign principal. This is not to say, however, that GCC may not be field liable at all. Petitioner can still claim reimbursement or contribution from it for the amounts awarded to the illegally-dismissed employee. WHEREFORE, in view of the foregoing, the instant petition is DISMISSED. Accordingly, the decisions of the labor arbiter dated August 20, 1996, and of the NLRC dated March 11, 1997, are AFFIRMED with the MODIFICATION that the award to private respondent Osdana should be one thousand two hundred sixty US dollars (US$1,260), or its equivalent in Philippine pesos, as salaries for the unexpired portion of the employment contract, and one thousand seventy six US dollars (US$1,076), or its equivalent in Philippine pesos, representing unpaid salaries for seven (7) months and underpaid salary for one (1) month, plus interest. Petitioner is likewise ordered to pay private respondent P30,000.00 in moral damages, P10,000.00 in exemplary damages and 10% attorney's fees. This decision is without prejudice to any remedy or claim for reimbursement or contribution petitioner may institute against its foreign principal, Gulf Catering Company. No pronouncement as to costs. SO ORDERED.

G.R. No. 134784

December 9, 2002

CARLOS ARCONA y MOBAN, petitioner, vs. THE COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents. YNARES-SANTIAGO, J.: Petitioner Carlos Arcona y Moban and his brother Benito Arcona y Moban were charged with Murder and Frustrated Murder in separate information which read: Criminal Case No. 6408 (Murder) That on or about the 27th day of June, 1986 at Barangay Labog, Municipality of Brookes Point, Province of Palawan, Philippines, and within the jurisdiction of this Honorable Court the above-named accused conspiring, confederating together and mutually helping one another, with intent to kill and with evident premeditation and treachery, did then and there willfully, unlawfully and feloniously attack, assault and stab one NAPOLEON ONG with a bladed weapon to wit; a knife hitting him in vital part of his body and inflicting upon him injury which was the direct and immediate cause of his death shortly thereafter. Criminal Case No. 6409 (Frustrated Murder) That on or about the 27th day of June 1986 at Barangay Labog, Municipality of Brookes Point, Province of Palawan, Philippines, and within the jurisdiction of this Honorable Court the above-named accused conspiring, confederating together and mutually helping one another, with evident premeditation and treachery and with intent to kill did then and there willfully, unlawfully and feloniously attack, assault, strike and beat with a bamboo pole one EDGARDO TALANQUINES hitting him on different parts of his body and inflicting upon him injuries which would have caused his death thru performing all the acts of execution which would have produced the crime of murder as a consequence but nevertheless did not produce it by reason of causes independent of the will of the accused that is EDGARDO TALANQUINES have parried the blows, escape away from his assailant and by the timely and able medical assistance rendered to said Edgardo Talanquines which prevented his death. On arraignment both accused pleaded "not guilty". Thereafter, the cases were jointly tried. It appears that at around 7:30 in the evening of June 27, 1986, Napoleon Ong and Edgardo Talanquines were walking along the national highway at Barangay Labog, Brookes Point, Palawan, on their way home after coming from a birthday party. When they were near the house of Jerry Boston, Edgardo heard a loud thud. He turned around saw Napoleon slump to the ground. Suddenly, someone hit Edgardo from behind with a piece of bamboo, causing him to fall. He saw no one in the immediate premises except petitioner. Edgardo then stood up and ran towards the house of Cesar Umapas to ask for help. Prosecution witness Leo Zaragoza testified that he was standing in front of Jerry Boston house, about seven (7) meters away, when he saw petitioner stab Napoleon. Napoleon expired on the way to the hospital. Dr. Joaquin Fabellon, who conducted the autopsy on Napoleons body, certified that the cause of death was the stab wound sustained at the stomach area just above the waistline. Petitioner voluntarily surrendered to T/Sgt. Romeo Laging at the PC Detachment Command in Barangay Lugod. In his defense, petitioner alleged that in the evening of June 27, 1986, he was walking alone when he met Napoleon Ong and 3 Edgardo Talanquines. Without any provocation, Napoleon suddenly drew his bolo and shouted, "Caloy, I will kill you!" Napoleon swung the bolo at him twice but missed him. Petitioner then drew out his knife and stabbed Napoleon. When he saw Edgardo Talanquines rushing towards him, he grabbed a piece of bamboo from the newly constructed culvert and hit the former on the left arm. Talanquines ran away. Petitioner also left the premises and went home. On the way, he met his brother, Benito, and 4 together they proceeded to their house. After trial, the court a quo rendered judgment in Criminal Case No. 6408 convicting petitioner of Homicide and acquitting Benito Arcona. In Criminal Case No. 6409, the trial court convicted Benito Arcona of Slight Physical Injuries and acquitted petitioner. 5 The dispositive portion of the decision reads: WHEREFORE, premises considered, the Court renders judgment in Criminal Case No. 6408 finding Carlos Arcona y Moban GUILTY beyond reasonable doubt of the crime of Homicide under Art. 249 of the Revised Penal Code, with the mitigating circumstance of voluntary surrender to authorities and no aggravating circumstances. He is hereby sentenced to suffer the indeterminate penalty of SIX (6) YEARS and ONE (1) DAY of PRISION MAYOR as MINIMUM to FOURTEEN (14) YEARS and ONE (1) DAY OF RECLUSION TEMPORAL as MAXIMUM, and to indemnify the heirs of Napoleon Ong the sum of THIRTY THOUSAND PESOS (P30,000.00) for his death, TEN THOUSAND PESOS (P10,000.00) as actual damages and TEN THOUSAND PESOS (P10,000.00) as moral damages. Benito Arcona is acquitted of the crime charged, for failure of Prosecution to prove his guilt beyond reasonable doubt. In Criminal Case No. 6409, Benito Arcona is found GUILTY beyond reasonable doubt of the crime of Slight Physical injuries and is sentenced to suffer imprisonment of TWENTY (20) DAYS of ARRESTO MENOR and to indemnify Edgardo Talanquines the sum of TEN THOUSAND PESOS (P 10,000.00) as actual damages. Carlos Arcona is ACQUITTED of the crime charged for failure of Prosecution to prove his guilt beyond reasonable doubt.
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Only petitioner appealed to the Court of Appeals, assailing his conviction for Homicide in Criminal Case No. 6408. On January 28, 1997, the Court of Appeals affirmed the findings of the trial court but increased the civil indemnity to P50,000.00, thus: WHEREFORE, for all the foregoing, the decision of the trial court finding appellant Carlos Arcona guilty of Homicide mitigated by his voluntary surrender to the authorities is hereby AFFIRMED, with the sole modification that the civil indemnity Carlos Arcona 6 shall pay to the heirs of Napoleon Ong is hereby increased to Fifty Thousand Pesos (P50,000.00). Petitioner filed the instant petition for review. He maintains that he acted in self-defense when he stabbed Napoleon and hit Edgardo with a bamboo stick. He contends that Napoleon committed unlawful aggression when drew an unsheathed bolo and attempted to hack him with it twice. Moreover, petitioner invokes the testimony of Jerry Boston, to the effect that before the 7 stabbing incident he heard somebody shout, "Caloy, patayon kita." (Caloy, I will kill you!) We are not persuaded. It is settled jurisprudence that when an accused invokes self-defense, the onus probandi to show that the killing was justified shifts to him. Even if the prosecution evidence was weak, it could not be readily dismissed considering that 8 the accused had openly admitted his responsibility for the killing. To prove self-defense, the accused must show with clear and convincing evidence that: (1) he is not the unlawful aggressor; (2) there was lack of sufficient provocation on his part; and (3) he employed reasonable means to prevent or repel the aggression. Self-defense, like alibi, is a defense easy to concoct. It is axiomatic that once an accused had admitted that he inflicted fatal injuries on the deceased, it is incumbent upon him, in order to avoid criminal liability, to prove the justifying circumstance claimed 9 by him with clear, satisfactory and convincing evidence. The question whether accused-appellant acted in self-defense is essentially a question of fact. In self-defense, unlawful 10 aggression is a primordial element. In the case at bar, the trial court was evidently not satisfied and convinced with petitioners claim that Napoleon was the unlawful aggressor, thus: It has been established that a bolo identified as belonging to Napoleon Ong was found at the scene of the crime. The Court is also convinced that the stabbing incident was preceded by the sounds of a scuffle or fight because it was these unusual noises which led Leo Zaragosa and Benito Arcona to go out of the house of Jerry Boston in order to investigate what had happened. However, the presence of the bolo of Napoleon Ong, and the shout of "Caloy, I will kill you" allegedly uttered by the deceased are circumstantial evidence and not sufficient to conclude that the deceased had committed acts of unlawful aggression which 11 justified the stabbing by accused Carlos Arcona. We agree with the findings of the trial court. The presence of Napoleons unsheathed bolo at the crime scene and the scattered bamboo sticks suggest a number of scenarios. While the physical evidence may suggest that Napoleon drew the bolo from its scabbard, such fact alone would not in any way satisfactorily support the conclusion that, indeed, Napoleon was the unlawful aggressor. Likewise, the trial court was correct in refusing to give any weight to the shout, "Caloy, I will kill you!" which Jerry Boston allegedly heard immediately prior to the actual stabbing incident. Indeed, Jerry Boston testified that "somebody" shouted those words. He did not categorically say that it was Napoleon. Even granting that Napoleon uttered those words, it was still possible that he said it while being assaulted by petitioner. Significantly, Jerry only heard the shouted words but never saw the sequence of events preceding the stabbing incident, thereby rendering doubtful the contention that Napoleon was the unlawful aggressor. Simply, these circumstances are insufficient to conclusively establish that Napoleon was the unlawful aggressor.lavvphil.net Parenthetically, the Court of Appeals concurred with the findings of the trial court and even concluded that the physical evidence only made petitioners claim improbable, thus: Accused-appellant miserably failed to convince the trial court that the stabbing was indeed in self-defense. Accused-appellants version that he was waylaid by Edgardo Talanquines and the deceased Napoleon Ong is highly improbable because he escaped the alleged ambush without a single scratch considering that there were allegedly two (2) attackers and one was even armed with a bolo (TSN, March 27, 1990, pp. 3, 7 and 9). Moreover, accused-appellants claim that Edgardo Talanquines rushed him is also questionable because appellant who was then already armed with a knife was purportedly attacked by Mr. 12 Talanquines who was not at all armed (Ibid, p. 10). In fine, the plea of self-defense cannot be justifiably entertained where it is not only uncorroborated by any separate competent evidence but also extremely doubtful in itself. Accused-appellant having failed to discharge the burden proving his defense, his 13 conviction shall of necessity follow, on the basis of his admission to the killing. We have consistently ruled that the trial judge is the best person to evaluate the veracity of a witnesss testimony as he is in the most ideal position to see the demeanor, actuation and countenance of a witness. Hence, we do not generally disturb the 14 findings of the trial court except in cases where the judge acted arbitrarily. In the case at bar, petitioner failed to point out any arbitrariness on the part of the trial court. Thus, we find that the court a quo was correct in convicting petitioner of Homicide attended by the mitigating circumstance of voluntary surrender and no aggravating circumstance. The penalty prescribed by law for Homicide, reclusion temporal, shall be imposed in its minimum period, pursuant to Article 64 (2) of the Revised Penal Code. Under the Indeterminate Sentence Law, petitioner shall be entitled to a minimum term of imprisonment to be taken from the penalty next lower in degree, prision mayor.

Therefore, the indeterminate sentence imposed on him by the trial court, ranging from six (6) years and one (1) day of prision mayor, as minimum, to fourteen (14) years and one (1) day of reclusion temporal, as maximum, is affirmed. Likewise, the Court of Appeals was correct in increasing the amount of civil indemnity to P50,000.00, in line with existing 15 jurisprudence. In cases of murder, homicide, parricide and rape, civil indemnity in the amount of P50,000.00 is automatically granted to the offended party or his heirs in case of his death, without need of further evidence other than the fact of the 16 commission of the crime. On the other hand, the award of moral damages in the sum of P 10,000.00 must be increased to P50,000.00. As borne out by human nature and experience, a violent death invariably and necessarily brings about emotional pain and anguish on the part of the victims family. It is inherently human to suffer sorrow, torment, pain and anger when a loved one becomes the victim of a violent or brutal killing. Such violent death or brutal killing not only steals from the family of the deceased his precious life, deprives them forever of his love, affection and support, but often leaves them with the gnawing feeling that an injustice has been done to them. For this reason, moral damages must be awarded even in the absence of any allegation and proof of the 17 heirs emotional suffering. Finally, the award of actual damages in the amount of P10,000.00 does not appear to have been substantiated. Only those expenses which are duly proven, or those that appear to have been genuinely incurred in connection with the death, wake or 18 burial of the victim, will be recognized in court. Hence, the same must be deleted.1awph!l.net WHEREFORE, in view of the foregoing, the petition for review is DENIED. The decision of the Court of Appeals, finding petitioner Carlos Arvuna y Morban guilty beyond reasonable doubt of Homicide, attended by the mitigating circumstance of voluntary surrender, and sentencing him to suffer the indeterminate penalty of six (6) years and one (1) day of prision mayor, as minimum, to fourteen (14) years and one (1) day of reclusion temporal, as maximum, and to pay the heirs of the deceased Napoleon Ong the sum of P50,000.00 as civil indemnity, is AFFIRMED with MODIFICATION. As modified, petitioner is further ordered to pay the heirs of the deceased moral damages in the increased amount of P50,000.00. The award of actual damages is deleted for lack of factual and legal basis. SO ORDERED.

G.R. No. 120262 July 17, 1997 PHILIPPINE AIRLINES, INC., petitioner, vs. COURT OF APPEALS and LEOVIGILDO A. PANTEJO, respondents. REGALADO, J.: In this appeal by certiorari, petitioner Philippine Airlines, Inc. (PAL) seeks to set aside the decision of respondent Court of 1 Appeals, promulgated on December 29, 1994, which affirmed the award for damages made by the trial court in favor of herein private respondent Leovegildo A. Pantejo. On October 23, 1988, private respondent Pantejo, then City Fiscal of Surigao City, boarded a PAL plane in Manila and disembarked in Cebu City where he was supposed to take his connecting flight to Surigao City However, due to typhoon Osang, the connecting flight to Surigao City was cancelled. To accommodate the needs of its stranded passengers, PAL initially gave out cash assistance of P100.00 and, the next day, P200.00, for their expected stay of two days in Cebu. Respondent Pantejo requested instead that he be billeted in a hotel at PAL's expense because he did not have cash with him at that time, but PAL refused. Thus, respondent Pantejo was forced to seek and accept the generosity of a co-passenger, an engineer named Andoni Dumlao, and he shared a room with the latter at Sky View Hotel with the promise to pay his share of the expenses upon reaching Surigao. On October 25, 1988 when the flight for Surigao was resumed, respondent Pantejo came to know that the hotel expenses of his co-passengers, one Superintendent Ernesto Gonzales and a certain Mrs. Gloria Rocha, an auditor of the Philippine National Bank, were reimbursed by PAL. At this point, respondent Pantejo informed Oscar Jereza, PAL's Manager for Departure Services at Mactan Airport and who was in charge of cancelled flights, that he was going to sue the airline for discriminating against him. It was only then that Jereza offered to pay respondent Pantejo P300.00 which, due to the ordeal and anguish he had undergone, the latter decline. On March 18, 1991, the Regional Trial Court of Surigao City, Branch 30, rendered judgment in the action for damages filed by respondent Pantejo against herein petitioner, Philippine Airlines, Inc., ordering the latter to pay Pantejo P300.00 for actual damages, P150,000.00 as moral damages, P100,000.00 as exemplary damages, P15,000.00 as attorney's fees, and 6% 2 interest from the time of the filing of the complaint until said amounts shall have been fully paid, plus costs of suit. On appeal, respondent court affirmed the decision of the court a quo, but with the exclusion of the award of attorney's fees and litigation expenses. The main issue posed for resolution is whether petitioner airlines acted in bad faith when it failed and refused to provide hotel accommodations for respondent Pantejo or to reimburse him for hotel expenses incurred by reason of the cancellation of its connecting flight to Surigao City due to force majeure. To begin with, it must be emphasized that a contract to transport passengers is quite different in kind and degree from any other contractual relation, and this is because of the relation which an air carrier sustain with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the carrier's employees naturally could give ground 3 for an action for damages. In ruling for respondent Pantejo, both the trial court and the Court of Appeals found that herein petitioner acted in bad faith in refusing to provide hotel accommodations for respondent Pantejo or to reimburse him for hotel expenses incurred despite and in contrast to the fact that other passengers were so favored. In declaring that bad faith existed, respondent court took into consideration the following factual circumstances: 1. Contrary to petitioner's claim that cash assistance was given instead because of non-availability of rooms in hotels where petitioner had existing tie-ups, the evidence shows that Sky View Hotel, where respondent Pantejo was billeted, had plenty of rooms available. 2. It is not true that the P300.00 Paid to Ernesto Gonzales, a co-passenger of respondent, was a refund for his plane ticket, the truth being that it was a reimbursement for hotel and meal expenses. 3. It is likewise not denied that said Gonzales and herein respondent came to know about the reimbursements only because another passenger, Mrs. Rocha, informed them that she was able to obtain the refund for her own hotel expenses. 4. Petitioner offered to pay P300.00 to private respondent only after he had confronted the airline's manager about the discrimination committed against him, which the latter realized was an actionable wrong. 5. Service Voucher No. 199351, presented by petitioner to prove that it gave cash assistance to its passengers, was based merely on the list of passengers already given cash assistance and was purportedly prepared at around 10:00 A.M. of October 23, 1988. This was two hours before respondent came to know of the cancellation of his flight to Surigao, hence private 4 respondent could not have possibly refused the same. It must be stressed that these factual findings, which are supported by substantial evidence, are binding, final and conclusive upon this Court absent any reason, and we find none, why this settled evidential rule should not apply.

Petitioner theorizes that the hotel accommodations or cash assistance given in case a flight is cancelled is in the nature of an amenity and is merely a privilege that may be extended at its own discretion, but never a right that may be demanded by its passengers. Thus, when respondent Pantejo was offered cash assistance and he refused it, petitioner cannot be held liable for whatever befell respondent Pantejo on that fateful day, because it was merely exercising its discretion when it opted to just give cash assistance to its passengers. Assuming arguendo that the airline passengers have no vested right to these amenities in case a flight is cancelled due to force majeure, what makes petitioner liable for damages in this particular case and under the facts obtaining herein is its blatant refusal to accord the so-called amenities equally to all its stranded passengers who were bound for Surigao City. No compelling or justifying reason was advanced for such discriminatory and prejudicial conduct. More importantly, it has been sufficiently established that it is petitioner's standard company policy, whenever a flight has been cancelled, to extend to its hapless passengers cash assistance or to provide them accommodations in hotels with which it has existing tie-ups. In fact, petitioner's Mactan Airport Manager for departure services, Oscar Jereza, admitted that PAL has an 5 existing arrangement with hotels to accommodate stranded passengers, and that the hotel bills of Ernesto Gonzales were 6 reimbursed obviously pursuant to that policy. Also, two witnesses presented by respondent, Teresita Azarcon and Nerie Bol, testified that sometime in November, 1988, when their flight from Cebu to Surigao was cancelled, they were billeted at Rajah Hotel for two nights and three days at the expense of 7 PAL. This was never denied by PAL. Further, Ernesto Gonzales, the aforementioned co-passenger of respondent on that fateful flight, testified that based on his previous experience hotel accommodations were extended by PAL to its stranded passengers either in Magellan or Rajah Hotels, or even in Cebu Plaza. Thus, we view as impressed with dubiety PAL's present attempt to represent such emergency assistance as being merely ex gratia and not ex debito. While petitioner now insists that the passengers were duly informed that they would be reimbursed for their hotel expenses, it miserably and significantly failed to explain why the other passengers were given reimbursement while private respondent was not. Although Gonzales was subsequently given a refund, this was only so because he came to know about it by accident through Mrs. Rocha, as earlier explained. Petitioner could only offer the strained and flimsy pretext that possibly the passengers were not listening when the announcement was made. This is absurd because when respondent Pantejo came to know that his flight had been cancelled, he immediately proceeded to petitioner's office and requested for hotel accommodations. He was not only refused accommodations, but he was not even informed that he may later on be reimbursed for his hotel expenses. This explains why his co-passenger, Andoni Dumlao, offered to answer for respondent's hotel bill and the latter promised to pay him when they arrive in Surigao. Had both know that they would be reimbursed by the airline, such arrangement would not have been necessary. Respondent Court of Appeals thus correctly concluded that the refund of hotel expenses was surreptitiously and discriminatorily made by herein petitioner since the same was not made known to everyone, except through word of mouth to a handful of passengers. This is a sad commentary on the quality of service and professionalism of an airline company, which is the country's flag carrier at that. On the bases of all the foregoing, the inescapable conclusion is that petitioner acted in bad faith in disregarding its duties as a common carrier to its passengers and in discriminating against herein respondent Pantejo. It was even oblivious to the fact that this respondent was exposed to humiliation and embarrassment especially because of his government position and social prominence, which altogether necessarily subjected him to ridicule, shame and anguish. It remains uncontroverted that at the time of the incident, herein respondent was then the City Prosecutor of Surigao City, and that he is a member of the Philippine Jaycee Senate, past Lt. Governor of the Kiwanis Club of Surigao, a past Master of the Mount Diwata Lodge of Free Masons of the Philippines, member of the Philippine National Red Cross, Surigao Chapter, 8 and past Chairman of the Boy Scouts of the Philippines, Surigao del Norte Chapter. It is likewise claimed that the moral and exemplary damages awarded to respondent Pantejo are excessive and unwarranted on the ground that respondent is not totally blameless because of his refusal to accept the P100.00 cash assistance which was inceptively offered to him. It bears emphasis that respondent Pantejo had every right to make such refusal since it evidently could not meet his needs and that was all that PAL claimed it could offer. His refusal to accept the P300.00 proffered as an afterthought when he threatened suit was justified by his resentment when he belatedly found out that his co-passengers were reimbursed for hotel expenses and he was not. Worse, he would not even have known about it were it not for a co-passenger who verbally told him that she was reimbursed by the airline for hotel and meal expenses. It may even be said that the amounts, the time and the circumstances under which those amounts were offered could not salve the moral wounds inflicted by PAL on private respondent but even approximated insult added to injury. The discriminatory act of petitioner against respondent ineludibly makes the former liable for moral damages under Article 21 in 9 10 relation to Article 2219 (10) of the Civil Code. As held in Alitalia Airways vs. CA, et al., such inattention to and lack of care by petitioner airline for the interest of its passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to the award of moral damages. Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to allow the former to obtain means, diversion, or amusements that will serve to alleviate the moral suffering he has undergone due 11 to the defendant's culpable action and must, perforce, be proportional to the suffering inflicted. However, substantial damages 12 do not translate into excessive damages. Except for attorney's fees and costs of suit, it will be noted that the Court of Appeals

affirmed point by point the factual findings of the lower court upon which the award of damages had been based. therefore, see no reason to modify the award of damages made by the trial court.

13

We,

Under the peculiar circumstances of this case, we are convinced that the awards for actual, moral and exemplary damages granted in the judgment of respondent court, for the reasons meticulously analyzed and thoroughly explained in its decision, are just and equitable. It is high time that the travelling public is afforded protection and that the duties of common carriers, long detailed in our previous laws and jurisprudence and thereafter collated and specifically catalogued in our Civil Code in 1950, be enforced through appropriate sanctions. We agree, however, with the contention that the interest of 6% imposed by respondent court should be computed from the date of rendition of judgment and not from the filing of the complaint. The rule has been laid down in Eastern Shipping Lines, Inc. vs. 14 Court of Appeals, et al. that: When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. This is because at the time of the filing of the complaint, the amount of damages to which plaintiff may be entitled remains unliquidated and not known, until it is definitely ascertained, assessed and determined by the court, and only after the 15 presentation of proof thereon. WHEREFORE, the challenged judgment of respondent Court of Appeals is hereby AFFIRMED, subject to the MODIFICATION regarding the computation of the 6% legal rate of interest on the monetary awards granted therein to private respondent SO ORDERED.

G.R. No. L-19407

November 23, 1966

JUANA SOBERANO and JOSE B. SOBERANO, plaintiffs-appellants, vs. MANILA RAILROAD COMPANY, through the Acting General Manager, Colonel Salvador T. Villa; THE BENGUET AUTO LINE, through the Superintendent, Mr. Casiano Rivera; and SANTIAGO CACCAM, Driver, defendants-appellees. CASTRO, J.: This is an appeal, purely on questions of law, from a decision of the Court of First Instance of Baguio City, ordering the defendant Manila Railroad Company to pay the plaintiffs Juana Soberano and her husband Jose Soberano the sum of P5,070.60, with legal interest from June 6, 1956, the date of the filing of the complaint, and to pay the costs. In the morning of March 8, 1955 in Cabugao, Ilocos Sur, Juana Soberano boarded bus No. 155, with plate No. TPU-5994, of the 1 Benguet Auto Line (BAL), a subsidiary of the Manila Railroad Co. (MRR), driven by Santiago Caccam, bound for Baguio City. In that trip, Juana brought with her 3,024 chicken eggs to be sold in Baguio City, and some personal belongings which she needed in that trip. About three kilometers away from Baguio City, along the Naguilian road, the bus hit a stone embankment, causing it to fall into a 65-foot deep precipice, resulting in death to two of its passengers and serious physical injuries to Juana and loss and destruction of all her belongings. From the scene of the accident, Juana was brought to the Baguio General Hospital. Radiologist Dr. Hector Lopez after examining her injuries, certified that she sustained comminuted fracture in the left mandible near the articulation, cracked fracture in the right temporal bone, crushed fractures, both scapular, and fracture in the 2nd, 3rd and 4th ribs. She was confined in that hospital until April 14, 1955, when she was transferred to the National Orthopedic Hospital, whereat she stayed until June 6, 1955 when she was discharged. She was also treated by Dr. Luis Martinez of the V. Luna Hospital, and Dr. J.V. de los Santos, both orthopedists, and late by Dr. J. O. Floirendo, an EENT specialist, for "visual and other defects." Santiago Caccam was thereafter charged in the Court of First Instance of Baguio City with the crime of double homicide and serious physical injuries thru reckless imprudence. He pleaded guilty to the crime of double homicide and serious physical injuries thru simple imprudence and was sentenced accordingly. Juana Soberano did not intervene in the criminal case because she filed a formal reservation to institute a separate civil action for damages and indemnity against the MRR and the BAL. Because of the loss of the eggs and the destruction of the personal effects that Juana brought with her in that trip, Jose Soberano, her husband, demanded from the defendant companies the value thereof amounting to P370.66 (exh. C-3), of which sum the MRR paid P300 (exh. 2). The MRR also paid the daily expenses, allowances, subsistence, hospitalization, medical fees and medicines of Juana Soberano, as well as the service fees of her caretaker. The MRR has paid a total sum of P4,219 (exhs. 3 & 4). Later the MRR offered to settle the case extrajudicially, tendering to the Soberanos the additional sum of P5,000. The offer was rejected, and the Soberanos filed the present action against the defendant companies and Caccam, to recover from 2 them damages in the total sum of P76,757.76. The defendant companies in due time filed their answer to the complaint with counterclaim for damages by way of attorney's fees, and praying that the complaint against them be dismissed, or, in the alternative, that the court approve their offer of settlement. The Soberanos filed a reply to the counterclaim and prayed for its dismissal. After due trial, the lower court rendered the decision appealed from, dismissing at the same time the complaint against Caccam. The Soberanos moved to have the decision reconsidered. The motion for reconsideration was denied; hence the present recourse. The nine errors imputed by the Soberanos to the lower court actually pose only two basic issues, namely, whether the dismissal of the complaint against Caccam is proper, and whether the amount of damages awarded is adequate. Upon the first issue it is the contention of the Soberanos that the lower court, instead of dismissing their complaint against Caccam, should have priorly declared him in default for failure to file an answer to the complaint. It is true that Caccam did not file any answer to the complaint; but it is also true that the plaintiffs did not move to declare him in default. And no default order may be issued against a defendant who fails to file a timely answer to a complaint except "upon motion of the plaintiff" (sec. 6, Rule 35, old Rules of Court, now sec. 1, Rule 18, Revised Rules of Court), and a court cannot issue a default order motu proprio (Viacrucis, et al. vs. Estenzo, etc., et al., L-18457, June 30, 1962). In spite of the lack of a formal motion to secure a default order against Caccam, however, the Soberanos contend that at the hearing held on July 11, 1959, their counsel, Atty. Marcos Vega, before closing his evidence, manifested to the lower court that because Caccam failed to file an answer to the complaint, he should "be declared in default and that we be allowed to present evidence against him in accordance with our complaint." This manifestation would nevertheless not have precluded the dismissal of the complaint against Caccam. In resolving this manifestation, the lower court asked Vega upon what basis the complaint is predicated, whether on culpa contractual or culpa aquiliana. Vega at first said, "It can be taken as both." But when the lower court pointedly declared that it "cannot allow you or give you both remedies," said counsel replied that the complaint is predicated upon culpa contractual. Because of this reply, the lower court ruled that the Soberanos cannot go against Caccam, because he cannot be held liable on culpa contractual. Vega was given another chance to make a choice, but he finally decided to proceed on the basis of "culpa contractual because we cannot get anything from Caccam", adding that we are ready to present evidence to sustain our allegations against Santiago Caccam, we will close because moral damages against him cannot be recovered just the same." That the complaint is in fact predicated on culpa contractual can be seen front a perusal thereof. While it names three defendants, the MRR the BAL, and Santiago Caccam, the prayer thereof shows that the action is directed against the first two only, "to declare the defendant companies Manila Railroad Company and Benguet Auto Line solidarily liable." And although paragraph 11 of the complaint recites that the incident was "due to the negligence and reckless imprudence of the defendant driver Santiago Caccam," it is significant that there is no prayer for declaration of liability against Caccam.

The complaint against Caccam was therefore properly dismissed. He was not a party to the contract; he was a mere employee of the BAL. The parties to that contract are Juana Soberano, the passenger, and the MRR and its subsidiary, the BAL, the bus owner and operator, respectively; and consequent to the inability of the defendant companies to carry Juana Soberano and her baggage and personal effects securely and safely to her destination as imposed by law (art. 1733, in relation to arts. 1736 and 1755, N.C.C.), their liability to her becomes direct and immediate. We now come to the question of damages. The Soberanos initially contend that the lower court erred in disallowing their claim of P200, representing the expenses of Juana Soberano in attending as a witness in the criminal case and attorney's fees incurred in connection therewith. This claim was correctly denied by the lower court, because these expenses were properly taxable in the criminal case. It may be argued that the Soberanos could not have recovered this sum in the criminal case because Juana Soberano expressly filed a formal reservation to institute a separate civil action for damages, but such reservation did not preserve whatever rights they had against Caccam on the basis of the latter's imprudence. The reservation is ineffective as to Caccam as it did not include him among those against whom their rights had been reserved. And the Soberanos not having intervened in the criminal case, this claim must be considered as having been impliedly adjudicated in the criminal case, and cannot therefore be ventilated in the present action. The Soberanos next contend that the lower court erred in denying their claim for moral damages in the sum of P15,000, for the physical suffering, mental anguish, serious anxiety and fright they suffered as a consequence of the mishap. The lower court denied this claim on the strength of the oft-reiterated ruling of this Court that moral damages cannot be recovered against the employer in actions based on a breach of contract of carriage in the absence of malice, fraud, or bad faith. The lower court rightly denied the claim for moral damages as far as Jose Soberano is concerned. In case of physical injuries, moral damages are recoverable only by the party injured and not by his next of kin, unless there is express statutory provision to the contrary (Strebel v. Figueras, L-4722, Dec. 29, 1954; Araneta et al. v. Arreglado, et al., L-11394, Sept. 9, 1958). In this case it was Juana Soberano, not her husband Jose, who sustained the bodily injuries. With respect to the claim of Juana Soberano for moral damages, the rule is well-settled in this jurisdiction that in cases of breach of contract of carriage, moral damages are recoverable only "where the defendant has acted fraudulently or in bad faith" (art. 2220, N.C.C.), and the terms fraud and bad faith have reference to "wanton, reckless, oppressive, malevolent conduct", or, in the very least, to "negligence so gross as to amount to malice." (Fores Miranda, L-12163, March 4, 1959; Necesito, etc. v. Paras,et al., L-10605-10606, June 30, 1958). To prove malice and bad faith on the part of the defendant companies, the Soberanos aver that the said defendants intentionally omitted the name of Juana as one of the offended parties in the information in criminal case 1086, and that her name was included therein only upon the intervention of the Soberanos themselves; that the defendant companies prevailed upon Caccam to plead guilty to the lesser crime of double homicide and serious physical injuries thru simple imprudence, purposely to prevent the introduction of evidence of gross negligence amounting to malice against the said companies; that the BAL physician, Dr. Nievera, disowned having been an attending physician of Juana Soberano, and, together with MRR physician Dr. Salvador, suppressed the introduction of the X-ray plates takenof Juana as evidence to prove the extent of the injuries suffered by the latter; and that the defendant companies exerted undue influence upon Dr. Fernandez, who treated Juana's dental injuries, not to testify to such matters or identify a medical certificate issued by him, describing the dental injuries suffered by Juana. These incidents, even if true, cannot be considered as acts committed fraudulently or in bad faith by the defendant companies in the operation of their transportation business which directly resulted in the mishap that caused the injuries to Juana. Moreover, the allegation in paragraph 11 of the complaint that the incident was "due to the negligence and reckless imprudence of the defendant driver Santiago Caccam", does not per se justify an inference of malice or bad faith on the part of the defendant companies (Rex Taxicab Co. v. Bautista, et al., L-15392, Sept. 30, 1962; Cachero v. Manila Yellow Taxicab Co., Inc., L-8721, May 23, 1957), for fraud, malice, or bad faith must be proved to support a claim for moral damages if only physical injuries are sustained (Lira vs. Mercado, L-13358, Sept. 29, 1961). The absence of fraud, malice, or bad faith on the part of the defendant companies justifies the denial of Juana Soberano's claim for moral damages as well as the denial of the claim for exemplary damages (art. 2232, N.C.C.). The third claim for attorney's fees was also properly denied by the lower court. The Soberanos aver that they were obliged to file a separate civil action for damages against the defendant companies. This claim is predicated upon paragraphs (2) and (5) of article 2208 of the New Civil Code, which provide that attorney's fees and expenses of litigation may be recovered when the defendant's act or omission has compelled the plaintiff to litigate with third persons or incur expenses to protect his interest, or when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim. It will be observed that the defendant companies offered to settle the case by offering to the Soberanos the additional sum of P5,000. The Soberanos, however, rejected the offer and proceeded to court to recover damages in the total sum of P76,757.76. It was not, therefore, the defendant companies that compelled the Soberanos to litigate, or to incur expenses in connection with the litigation instituted by them. The Soberanos went to court after rejecting the defendant companies' offer of settlement. The latter can not likewise be considered to have acted in gross and evident bad faith in not satisfying the claim of the Soberanos, because, as the lower court puts it, the Soberanos "have asked for too much", and the "defendant was justified in resisting this action." We are not without precedent on this point. In Globe Assn. vs. Arcache, L-12378, May 28, 1958, this Court observed that the refusal of the defendant therein to pay the amount claimed was due not to malice but to the fact that the plaintiff therein demanded more than it should, and consequently ruled that the defendant had the right to refuse it; and in the Cachero case, supra, this Court held that the plaintiff in that case cannot recover attorney's fees, because the litigation was caused not by the defendant's failure to pay but by the plaintiff's "exorbitant charge." We now come to the claim for additional unpaid allowances of Juana Soberano while she was undergoing medical and dental treatment in Manila and Quezon City, in the total sum of P600. In our view, this claim has merit.

The allowance of ten pesos for each day of stay in Quezon City of Juana Soberano was recommended for approval by the superintendent of the BAL, Mr. C. Rivera (exh. C-4) and by the MRR physician, Dr. Salgado, and appears to have been "OK" by the MRR administrative officer, Mr. F.C. Unson (exh. C-5). These exhibits C-4 and C-5 were admitted in evidence without objection from the Government Corporate Counsel who represented the defendant companies. The defendant companies have already paid to Jose Soberano the total sum of P600, covering Juana Soberano's stay for 60 days in a private house, from June 7 to July 5, 1955, and from July 7 to August 5, 1955 (exhs. 3-I and 3-J). As to the balance of P600, it was error for the lower court to include this sum in the assessment of loss of earning capacity, because this amount represents expenses for board and lodging, short order such as milk and fruit, laundry and transportation of Juana Soberano incurred during her stay in a private house in Quezon City, after her discharge from the National Orthopedic Hospital, which continued stay was upon the advice of her attending physician that she go to that hospital every other day for physical therapy (exh. C-3). It will be seen under exhibits C-4 and C-5 that the defendant companies agreed to pay the Soberanos the sum of P10.00 a day for her said stay beginning "June 7, 1955 not to exceed 60 days, depending upon the advice of the attending physician or other bone specialist." The deposition of, and a medical certificate issued by, Dr. Juan 0. Floirendo, in EENT specialist who treated Juana Soberano for "visual and other defects", show that he treated her for more than sixty days, from September 10, 1955 to February 2, 1956 (exh. L). The balance of P600 should, therefore, be paid to Juana Soberano. We come finally to the claim for loss of earning capacity in the total sum of P50,000, based upon the expectancy that Juana Soberano, who was 37 years old at the time of the accident, would live for 20 more years and be able to earn an average annual income of P2,500. On this point, the lower court found that "Juana Soberano suffered greatly and that her injuries left her permanently disfigured and partially disabled as she walks with a stiff neck and her arms have partly lost their full freedom." After finding however, that she is not altogether a helpless woman and can still engage in business, the lower court awarded to her P5,000 to compensate loss of earnings as a result of her partial disability. The appellants contend that the award is inadequate. We agree. This Court, in three cases, allowed in one, and increased in the two others, the amount of compensatory damages. In Borromeo v. Manila Electric Railroad and Light Co., 44 Phil. 165 (1922), this Court awarded P2,000 in future damages to the plaintiff therein, after finding that due to the accident, wherein Borromeo's left foot was passed over by the rear wheels of the electric car of the defendant company and had to be amputated, he had to use an artificial foot in order to be able to walk; that he could no longer be employed as a marine engineer which he had been for sixteen years; that at the time of the accident he was a chief engineer with a monthly salary of P375; and that because he knew of no other profession, his incapacity had put an end to his activities and had destroyed his principal source of professional earnings in the future. In Cariaga, et al. v. Laguna Tayabas Bus Co., et al., L-11037, Dec. 29, 1960, this Court increased the award of compensatory damages from P10,490 to P25,000, after finding that Edgardo Cariaga's right forehead was fractured, necessitating the removal of practically all of the right frontal lobe of his brain; that he had become a misfit for any kind of work; that he could hardly walk around without someone helping him and he had to use a brace on his left leg and foot; that he was a virtual invalid, physically and mentally; that at the time of the accident he was already a fourth-year student in medicine in a reputable university; that his scholastic record is sufficient to justify the assumption that had he continued his studies, he would have finished the course and would have passed the board examinations; and that he could possibly have earned as a medical practitioner the minimum monthly income of P300. And in Araneta, et al. v. Arreglado, et al., L-11394, September 9, 1958, this Court increased the award of compensatory damages from P1,000 to P18,000, after finding that Benjamin Araneta sustained "permanent deformity and something like an inferiority complex" as well as a "pathological condition on the left side of the jaw" caused by the defendant Dario Arreglado who inflicted the injury upon him voluntarily; that to arrest the degenerative process taking place in the mandible and to restore the injured boy to a nearly normal condition, surgical intervention was needed; that a repair, however skillfully conducted, is never equivalent to the original state; and that because of the injury, the boy had suffered greatly. In the case at bar, the nature and extent of the physical injuries suffered by Juana Soberano and thereafter effects upon her life and activities, are by three reputable physicians: Dr. Hector Lopes, a radiologist of the Baguio General Hospital; Dr. Angel Poblete, an orthopedist of the National Orthopedic Hospital; and Dr. Juan O. Floirendo, an EENT specialist. Dr. Lopez declared that Juana Soberano suffered comminuted fracture in the left mandible near the articulation, cracked fracture in the right temporal bone, crushed fractures both scapular, and fracture in the 2nd, 3rd and 4th ribs. As a result of these injuries, Dr. Poblete said that she suffered and would continue to suffer limitation of mouth opening, bad approximation of the jaw alignment which is drawn inside, limitation of neck and shoulder movements with numbness on the right side of the face and right and left side of the body, disturbance in vision, and poor mastication resulting in indigestion. Dr. Poblete further testified that she will be "abnormal and naturally she could not be expected to live a normal life." Dr. Floirendo declared that she suffers from pain along the cheeks on both sides of her face, double vision, and paralysis of the ocular muscles due to partial disequilibrium of the eye muscles. Juana Soberano herself categorically declared, and this was not contradicted, that prior to the accident, she had a complete and healthy set of teeth; that as a result of the accident she lost three of her teeth, and the remaining ones in the upper jaw had to be extracted because they were already loose and a denture had perforce to be made for her; and that her face is permanently disfigured (exhs. K & K-1). There is absolutely no doubt that the resultant physical handicaps would entail for Juana Soberano a loss of positive economic values. In fact, they will greatly adversely affect her occupation as a pending merchant which she has been since 1950 (exh. A), earning from 1950 to March 8, 1955, when the accident happened, an average annual net income of about P1,500 (exhs. B, B-1 to B-5, inclusive). It is to be assumed that had the interruption to her occupation through defendant's wrongful act not occurred, she would continue earning this average income. Considering all the facts detailed above, this Court is of the opinion that the sum of P5,000 in compensatory damages awarded to her for loss of earning capacity is inadequate; the amount should be increased to P15,000.

She should also be awarded the sum of P45.35, representing unrealized profits from the 3,024 chicken eggs which she brought with her in the trip and which were destroyed. She brought those eggs to be sold in Baguio City. She bought them at nine centavos each, was to sell them in Baguio City to definite customers at an agreed price of ten and a half centavos each, or with a profit of one and a half centavos per egg. Finally, all the awards to Juana Soberano should earn interest at the legal rate from the date the judgment a quo was rendered, on November 25, 1960, and not from the date of the filing of the complaint. ACCORDINGLY, the judgment appealed from is modified to read as follows: "Judgment is therefore rendered ordering the Manila Railroad Company to pay to the plaintiffs (1) P600 representing the balance of the unpaid allowances due to Juana Soberano in connection with her stay in a private house in Quezon City during the period of her medical treatment; (2) P15,000 for loss of earning capacity; and (3) P45.36 for unrealized profits, all of these sums to earn interest at the legal rate from November 25, 1960." Costs against the defendants-appellees.

G.R. No. 128690 January 21, 1999 ABS-CBN BROADCASTING CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP, VIVA PRODUCTION, INC., and VICENTE DEL ROSARIO, respondents. DAVIDE, JR., CJ.: In this petition for review on certiorari, petitioner ABS-CBN Broadcasting Corp. (hereafter ABS-CBN) seeks to reverse and set 1 2 aside the decision of 31 October 1996 and the resolution of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. 3 The former affirmed with modification the decision of 28 April 1993 of the Regional Trial Court (RTC) of Quezon City, Branch 80, in Civil Case No. Q-92-12309. The latter denied the motion to reconsider the decision of 31 October 1996. The antecedents, as found by the RTC and adopted by the Court of Appeals, are as follows: In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement (Exh. "A") whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva films. Sometime in December 1991, in accordance with paragraph 2.4 [sic] of said agreement stating that . 1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) Viva films for TV telecast under such terms as may be agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN from the actual offer in writing. Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo Santos-Concio, a list of three(3) film packages (36 title) from which ABS-CBN may exercise its right of first refusal under the aforesaid agreement (Exhs. "1" par, 2, "2," "2-A'' and "2-B"-Viva). ABS-CBN, however through Mrs. Concio, "can tick off only ten (10) titles" (from the list) "we can purchase" (Exh. "3" - Viva) and therefore did not accept said list (TSN, June 8, 1992, pp. 9-10). The titles ticked off by Mrs. Concio are not the subject of the case at bar except the film ''Maging Sino Ka Man." For further enlightenment, this rejection letter dated January 06, 1992 (Exh "3" - Viva) is hereby quoted: 6 January 1992 Dear Vic, This is not a very formal business letter I am writing to you as I would like to express my difficulty in recommending the purchase of the three film packages you are offering ABS-CBN. From among the three packages I can only tick off 10 titles we can purchase. Please see attached. I hope you will understand my position. Most of the action pictures in the list do not have big action stars in the cast. They are not for primetime. In line with this I wish to mention that I have not scheduled for telecast several action pictures in out very first contract because of the cheap production value of these movies as well as the lack of big action stars. As a film producer, I am sure you understand what I am trying to say as Viva produces only big action pictures. In fact, I would like to request two (2) additional runs for these movies as I can only schedule them in our nonprimetime slots. We have to cover the amount that was paid for these movies because as you very well know that non-primetime advertising rates are very low. These are the unaired titles in the first contract. 1. Kontra Persa [sic]. 2. Raider Platoon. 3. Underground guerillas 4. Tiger Command 5. Boy de Sabog 6. Lady Commando 7. Batang Matadero 8. Rebelyon I hope you will consider this request of mine. The other dramatic films have been offered to us before and have been rejected because of the ruling of MTRCB to have them aired at 9:00 p.m. due to their very adult themes.

As for the 10 titles I have choosen [sic] from the 3 packages please consider including all the other Viva movies produced last year. I have quite an attractive offer to make. Thanking you and with my warmest regards. (Signed) Charo Santos-Concio On February 27, 1992, defendant Del Rosario approached ABS-CBN's Ms. Concio, with a list consisting of 52 original movie titles (i.e. not yet aired on television) including the 14 titles subject of the present case, as well as 104 re-runs (previously aired on television) from which ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of which P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots (Exh. "4" to "4-C" Viva; "9" -Viva). On April 2, 1992, defendant Del Rosario and ABS-CBN general manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal of Viva. What transpired in that lunch meeting is the subject of conflicting versions. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that ABS-CRN was granted exclusive film rights to fourteen (14) films for a total consideration of P36 million; that he allegedly put this agreement as to the price and number of films in a "napkin'' and signed it and gave it to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8, 1992). On the other hand, Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied the existence of a napkin in which Lopez wrote something; and insisted that what he and Lopez discussed at the lunch meeting was Viva's film package offer of 104 films (52 originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising [sic]to make a counter proposal which came in the form of a proposal contract Annex "C" of the complaint (Exh. "1"- Viva; Exh. "C" - ABS-CBN). On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance discussed the terms and conditions of Viva's offer to sell the 104 films, after the rejection of the same package by ABS-CBN. On April 07, 1992, defendant Del Rosario received through his secretary, a handwritten note from Ms. Concio, (Exh. "5" - Viva), which reads: "Here's the draft of the contract. I hope you find everything in order," to which was attached a draft exhibition agreement (Exh. "C''- ABS-CBN; Exh. "9" - Viva, p. 3) a counter-proposal covering 53 films, 52 of which came from the list sent by defendant Del Rosario and one film was added by Ms. Concio, for a consideration of P35 million. Exhibit "C" provides that ABS-CBN is granted films right to 53 films and contains a right of first refusal to "1992 Viva Films." The said counter proposal was however rejected by Viva's Board of Directors [in the] evening of the same day, April 7, 1992, as Viva would not sell anything less than the package of 104 films for P60 million pesos (Exh. "9" - Viva), and such rejection was relayed to Ms. Concio. On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and meetings defendant Del Rosario and Viva's President Teresita Cruz, in consideration of P60 million, signed a letter of agreement dated April 24, 1992. granting RBS the exclusive right to air 104 Viva-produced and/or acquired films (Exh. "7-A" 4 - RBS; Exh. "4" - RBS) including the fourteen (14) films subject of the present case. On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with a prayer for a writ of preliminary 5 injunction and/or temporary restraining order against private respondents Republic Broadcasting Corporation (hereafter RBS ), Viva Production (hereafter VIVA), and Vicente Del Rosario. The complaint was docketed as Civil Case No. Q-92-12309. On 27 May 1992, RTC issued a temporary restraining order enjoining private respondents from proceeding with the airing, broadcasting, and televising of the fourteen VIVA films subject of the controversy, starting with the film Maging Sino Ka Man, which was scheduled to be shown on private respondents RBS' channel 7 at seven o'clock in the evening of said date. On 17 June 1992, after appropriate proceedings, the RTC issued an order directing the issuance of a writ of preliminary 8 injunction upon ABS-CBN's posting of P35 million bond. ABS-CBN moved for the reduction of the bond, while private 9 respondents moved for reconsideration of the order and offered to put up a counterbound. In the meantime, private respondents filed separate answers with counterclaim.
11 10 7 6

RBS also set up a cross-claim against VIVA..

On 3 August 1992, the RTC issued an order dissolving the writ of preliminary injunction upon the posting by RBS of a P30 million counterbond to answer for whatever damages ABS-CBN might suffer by virtue of such dissolution. However, it reduced petitioner's injunction bond to P15 million as a condition precedent for the reinstatement of the writ of preliminary injunction should private respondents be unable to post a counterbond. At the pre-trial on 6 August 1992, the parties, upon suggestion of the court, agreed to explore the possibility of an amicable settlement. In the meantime, RBS prayed for and was granted reasonable time within which to put up a P30 million counterbond in the event that no settlement would be reached. As the parties failed to enter into an amicable settlement RBS posted on 1 October 1992 a counterbond, which the RTC 13 approved in its Order of 15 October 1992.
12

On 19 October 1992, ABS-CBN filed a motion for reconsideration 15 opposed. On 29 October 1992, the RTC conducted a pre-trial.
16

14

of the 3 August and 15 October 1992 Orders, which RBS

Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of Appeals a petition challenging the RTC's Orders of 3 August and 15 October 1992 and praying for the issuance of a writ of preliminary injunction to enjoin the RTC from enforcing said orders. The case was docketed as CA-G.R. SP No. 29300. On 3 November 1992, the Court of Appeals issued a temporary restraining order televising of any or all of the films involved in the controversy.
19 18

17

to enjoin the airing, broadcasting, and

On 18 December 1992, the Court of Appeals promulgated a decision dismissing the petition in CA -G.R. No. 29300 for being premature. ABS-CBN challenged the dismissal in a petition for review filed with this Court on 19 January 1993, which was docketed as G.R. No. 108363. In the meantime the RTC received the evidence for the parties in Civil Case No. Q-192-1209. Thereafter, on 28 April 1993, it 20 rendered a decision in favor of RBS and VIVA and against ABS-CBN disposing as follows: WHEREFORE, under cool reflection and prescinding from the foregoing, judgments is rendered in favor of defendants and against the plaintiff. (1) The complaint is hereby dismissed; (2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following: a) P107,727.00, the amount of premium paid by RBS to the surety which issued defendant RBS's bond to lift the injunction; b) P191,843.00 for the amount of print advertisement for "Maging Sino Ka Man" in various newspapers; c) Attorney's fees in the amount of P1 million; d) P5 million as and by way of moral damages; e) P5 million as and by way of exemplary damages; (3) For defendant VIVA, plaintiff ABS-CBN is ordered to pay P212,000.00 by way of reasonable attorney's fees. (4) The cross-claim of defendant RBS against defendant VIVA is dismissed. (5) Plaintiff to pay the costs. According to the RTC, there was no meeting of minds on the price and terms of the offer. The alleged agreement between Lopez III and Del Rosario was subject to the approval of the VIVA Board of Directors, and said agreement was disapproved during the meeting of the Board on 7 April 1992. Hence, there was no basis for ABS-CBN's demand that VIVA signed the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal under the 1990 Film Exhibition Agreement had previously been exercised per Ms. Concio's letter to Del Rosario ticking off ten titles acceptable to them, which would have made the 1992 agreement an entirely new contract. On 21 June 1993, this Court denied ABS-CBN's petition for review in G.R. No. 108363, as no reversible error was committed by the Court of Appeals in its challenged decision and the case had "become moot and academic in view of the dismissal of the main action by the court a quo in its decision" of 28 April 1993. Aggrieved by the RTC's decision, ABS-CBN appealed to the Court of Appeals claiming that there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the exclusive right to exhibit the subject films. Private respondents VIVA and Del Rosario also appealed seeking moral and exemplary damages and additional attorney's fees. In its decision of 31 October 1996, the Court of Appeals agreed with the RTC that the contract between ABS-CBN and VIVA had not been perfected, absent the approval by the VIVA Board of Directors of whatever Del Rosario, it's agent, might have agreed with Lopez III. The appellate court did not even believe ABS-CBN's evidence that Lopez III actually wrote down such an agreement on a "napkin," as the same was never produced in court. It likewise rejected ABS-CBN's insistence on its right of first refusal and ratiocinated as follows: As regards the matter of right of first refusal, it may be true that a Film Exhibition Agreement was entered into between Appellant ABS-CBN and appellant VIVA under Exhibit "A" in 1990, and that parag. 1.4 thereof provides:
21

1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) VIVA films for TV telecast under such terms as may be agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN within a period of fifteen (15) days from the actual offer in writing (Records, p. 14). [H]owever, it is very clear that said right of first refusal in favor of ABS-CBN shall still be subject to such terms as may be agreed upon by the parties thereto, and that the said right shall be exercised by ABS-CBN within fifteen (15) days from the actual offer in writing. Said parag. 1.4 of the agreement Exhibit "A" on the right of first refusal did not fix the price of the film right to the twenty-four (24) films, nor did it specify the terms thereof. The same are still left to be agreed upon by the parties. In the instant case, ABS-CBN's letter of rejection Exhibit 3 (Records, p. 89) stated that it can only tick off ten (10) films, and the draft contract Exhibit "C" accepted only fourteen (14) films, while parag. 1.4 of Exhibit "A'' speaks of the next twenty-four (24) films. The offer of V1VA was sometime in December 1991 (Exhibits 2, 2-A. 2-B; Records, pp. 86-88; Decision, p. 11, Records, p. 1150), when the first list of VIVA films was sent by Mr. Del Rosario to ABS-CBN. The Vice President of ABS-CBN, Ms. Charo Santos-Concio, sent a letter dated January 6, 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its right of refusal by rejecting the offer of VIVA.. As aptly observed by the trial court, with the said letter of Mrs. Concio of January 6, 1992, ABS-CBN had lost its right of first refusal. And even if We reckon the fifteen (15) day period from February 27, 1992 (Exhibit 4 to 4-C) when another list was sent to ABSCBN after the letter of Mrs. Concio, still the fifteen (15) day period within which ABS-CBN shall exercise its right 22 of first refusal has already expired. Accordingly, respondent court sustained the award of actual damages consisting in the cost of print advertisements and the premium payments for the counterbond, there being adequate proof of the pecuniary loss which RBS had suffered as a result of the filing of the complaint by ABS-CBN. As to the award of moral damages, the Court of Appeals found reasonable basis therefor, holding that RBS's reputation was debased by the filing of the complaint in Civil Case No. Q-92-12309 and by the nonshowing of the film "Maging Sino Ka Man." Respondent court also held that exemplary damages were correctly imposed by way of example or correction for the public good in view of the filing of the complaint despite petitioner's knowledge that the contract with VIVA had not been perfected, It also upheld the award of attorney's fees, reasoning that with ABS-CBN's act of instituting Civil Case No, Q-92-1209, RBS was "unnecessarily forced to litigate." The appellate court, however, reduced the awards of moral damages to P2 million, exemplary damages to P2 million, and attorney's fees to P500, 000.00. On the other hand, respondent Court of Appeals denied VIVA and Del Rosario's appeal because it was "RBS and not VIVA which was actually prejudiced when the complaint was filed by ABS-CBN." Its motion for reconsideration having been denied, ABS-CBN filed the petition in this case, contending that the Court of Appeals gravely erred in I . . . RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN PETITIONER AND PRIVATE RESPONDENT VIVA NOTWITHSTANDING PREPONDERANCE OF EVIDENCE ADDUCED BY PETITIONER TO THE CONTRARY. II . . . IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS. III . . . IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS. IV . . . IN AWARDING ATTORNEY'S FEES IN FAVOR OF RBS. ABS-CBN claims that it had yet to fully exercise its right of first refusal over twenty-four titles under the 1990 Film Exhibition Agreement, as it had chosen only ten titles from the first list. It insists that we give credence to Lopez's testimony that he and Del Rosario met at the Tamarind Grill Restaurant, discussed the terms and conditions of the second list (the 1992 Film Exhibition Agreement) and upon agreement thereon, wrote the same on a paper napkin. It also asserts that the contract has already been effective, as the elements thereof, namely, consent, object, and consideration were established. It then concludes that the Court of Appeals' pronouncements were not supported by law and jurisprudence, as per our decision of 1 December 1995 in Limketkai 23 24 Sons Milling, Inc. v. Court of Appeals, which cited Toyota Shaw, Inc. v. Court of Appeals, Ang Yu Asuncion v. Court of 25 26 Appeals, and Villonco Realty Company v. Bormaheco. Inc. Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor. RBS spent for the premium on the counterbond of its own volition in order to negate the injunction issued by the trial court after the parties had ventilated their

respective positions during the hearings for the purpose. The filing of the counterbond was an option available to RBS, but it can hardly be argued that ABS-CBN compelled RBS to incur such expense. Besides, RBS had another available option, i.e., move for the dissolution or the injunction; or if it was determined to put up a counterbond, it could have presented a cash bond. Furthermore under Article 2203 of the Civil Code, the party suffering loss or injury is also required to exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission. As regards the cost of print advertisements, RBS had not convincingly established that this was a loss attributable to the non showing "Maging Sino Ka Man"; on the contrary, it was brought out during trial that with or without the case or the injunction, RBS would have spent such an amount to generate interest in the film. ABS-CBN further contends that there was no clear basis for the awards of moral and exemplary damages. The controversy involving ABS-CBN and RBS did not in any way originate from business transaction between them. The claims for such damages did not arise from any contractual dealings or from specific acts committed by ABS-CBN against RBS that may be characterized as wanton, fraudulent, or reckless; they arose by virtue only of the filing of the complaint, An award of moral and exemplary damages is not warranted where the record is bereft of any proof that a party acted maliciously or in bad faith in filing 27 an action. In any case, free resort to courts for redress of wrongs is a matter of public policy. The law recognizes the right of every one to sue for that which he honestly believes to be his right without fear of standing trial for damages where by lack of 28 sufficient evidence, legal technicalities, or a different interpretation of the laws on the matter, the case would lose ground. One 29 who makes use of his own legal right does no injury. If damage results front the filing of the complaint, it is damnum absque 30 injuria. Besides, moral damages are generally not awarded in favor of a juridical person, unless it enjoys a good reputation 31 that was debased by the offending party resulting in social humiliation. As regards the award of attorney's fees, ABS-CBN maintains that the same had no factual, legal, or equitable justification. In sustaining the trial court's award, the Court of Appeals acted in clear disregard of the doctrines laid down in Buan v. 32 Camaganacan that the text of the decision should state the reason why attorney's fees are being awarded; otherwise, the award should be disallowed. Besides, no bad faith has been imputed on, much less proved as having been committed by, ABSCBN. It has been held that "where no sufficient showing of bad faith would be reflected in a party' s persistence in a case other 33 than an erroneous conviction of the righteousness of his cause, attorney's fees shall not be recovered as cost." On the other hand, RBS asserts that there was no perfected contract between ABS-CBN and VIVA absent any meeting of minds between them regarding the object and consideration of the alleged contract. It affirms that the ABS-CBN's claim of a right of first refusal was correctly rejected by the trial court. RBS insist the premium it had paid for the counterbond constituted a pecuniary loss upon which it may recover. It was obliged to put up the counterbound due to the injunction procured by ABS-CBN. Since the trial court found that ABS-CBN had no cause of action or valid claim against RBS and, therefore not entitled to the writ of injunction, RBS could recover from ABS-CBN the premium paid on the counterbond. Contrary to the claim of ABS-CBN, the cash bond would prove to be more expensive, as the loss would be equivalent to the cost of money RBS would forego in case the P30 million came from its funds or was borrowed from banks. RBS likewise asserts that it was entitled to the cost of advertisements for the cancelled showing of the film "Maging Sino Ka Man" because the print advertisements were put out to announce the showing on a particular day and hour on Channel 7, i.e., in its entirety at one time, not a series to be shown on a periodic basis. Hence, the print advertisement were good and relevant for the particular date showing, and since the film could not be shown on that particular date and hour because of the injunction, the expenses for the advertisements had gone to waste. As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the case and secured injunctions purely for the purpose of harassing and prejudicing RBS. Pursuant then to Article 19 and 21 of the Civil Code, ABS-CBN must be held liable 34 for such damages. Citing Tolentino, damages may be awarded in cases of abuse of rights even if the act done is not illicit and there is abuse of rights were plaintiff institutes and action purely for the purpose of harassing or prejudicing the defendant. In support of its stand that a juridical entity can recover moral and exemplary damages, private respondents RBS cited People v. 35 Manero, where it was stated that such entity may recover moral and exemplary damages if it has a good reputation that is debased resulting in social humiliation. it then ratiocinates; thus: There can be no doubt that RBS' reputation has been debased by ABS-CBN's acts in this case. When RBS was not able to fulfill its commitment to the viewing public to show the film "Maging Sino Ka Man" on the scheduled dates and times (and on two occasions that RBS advertised), it suffered serious embarrassment and social humiliation. When the showing was canceled, late viewers called up RBS' offices and subjected RBS to verbal abuse ("Announce kayo nang announce, hindi ninyo naman ilalabas," "nanloloko yata kayo") (Exh. 3-RBS, par. 3). This alone was not something RBS brought upon itself. it was exactly what ABS-CBN had planned to happen. The amount of moral and exemplary damages cannot be said to be excessive. Two reasons justify the amount of the award. The first is that the humiliation suffered by RBS is national extent. RBS operations as a broadcasting company is [sic] nationwide. Its clientele, like that of ABS-CBN, consists of those who own and watch television. It is not an exaggeration to state, and it is a matter of judicial notice that almost every other person in the country watches television. The humiliation suffered by RBS is multiplied by the number of televiewers who had anticipated the showing of the film "Maging Sino Ka Man" on May 28 and November 3, 1992 but did not see it owing to the cancellation. Added to this are the advertisers who had placed commercial spots for the telecast and to whom RBS had a commitment in consideration of the placement to show the film in the dates and times specified.

The second is that it is a competitor that caused RBS to suffer the humiliation. The humiliation and injury are far greater in degree when caused by an entity whose ultimate business objective is to lure customers (viewers in 36 this case) away from the competition. For their part, VIVA and Vicente del Rosario contend that the findings of fact of the trial court and the Court of Appeals do not support ABS-CBN's claim that there was a perfected contract. Such factual findings can no longer be disturbed in this petition for review under Rule 45, as only questions of law can be raised, not questions of fact. On the issue of damages and attorneys fees, they adopted the arguments of RBS. The key issues for our consideration are (1) whether there was a perfected contract between VIVA and ABS-CBN, and (2) whether RBS is entitled to damages and attorney's fees. It may be noted that the award of attorney's fees of P212,000 in favor of VIVA is not assigned as another error. I. The first issue should be resolved against ABS-CBN. A contract is a meeting of minds between two persons whereby one binds 37 himself to give something or to render some service to another for a consideration. there is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject of the contract; and (3) cause of 38 the obligation, which is established. A contract undergoes three stages: (a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.
39

Contracts that are consensual in nature are perfected upon mere meeting of the minds, Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and terms of payment a contract is produced. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of the original offer. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any 40 modification or variation from the terms of the offer annuls the offer. When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at the Tamarind Grill on 2 April 1992 to discuss the package of films, said package of 104 VIVA films was VIVA's offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABSCBN, sent, through Ms. Concio, a counter-proposal in the form of a draft contract proposing exhibition of 53 films for a consideration of P35 million. This counter-proposal could be nothing less than the counter-offer of Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant. Clearly, there was no acceptance of VIVA's offer, for it was met by a counter-offer which substantially varied the terms of the offer. ABS-CBN's reliance in Limketkai Sons Milling, Inc. v. Court of 41 42 Appeals and Villonco Realty Company v. Bormaheco, Inc., is misplaced. In these cases, it was held that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance as long as "it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not." This 43 ruling was, however, reversed in the resolution of 29 March 1996, which ruled that the acceptance of all offer must be unqualified and absolute, i.e., it "must be identical in all respects with that of the offer so as to produce consent or meeting of the minds." On the other hand, in Villonco, cited in Limketkai, the alleged changes in the revised counter-offer were not material but merely 44 clarificatory of what had previously been agreed upon. It cited the statement in Stuart v. Franklin Life Insurance Co. that "a vendor's change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not 45 amount to a rejection of the offer and the tender of a counter-offer." However, when any of the elements of the contract is modified upon acceptance, such alteration amounts to a counter-offer. In the case at bar, ABS-CBN made no unqualified acceptance of VIVA's offer. Hence, they underwent a period of bargaining. ABS-CBN then formalized its counter-proposals or counter-offer in a draft contract, VIVA through its Board of Directors, rejected such counter-offer, Even if it be conceded arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bind VIVA, as there was no proof whatsoever that Del Rosario had the specific authority to do so. Under Corporation Code, unless otherwise provided by said Code, corporate powers, such as the power; to enter into contracts; are exercised by the Board of Directors. However, the Board may delegate such powers to either an executive committee or officials or contracted managers. The delegation, except for the executive committee, must be for specific 47 purposes, Delegation to officers makes the latter agents of the corporation; accordingly, the general rules of agency as to the bindings effects of their acts would 48 apply. For such officers to be deemed fully clothed by the corporation to exercise a power of the Board, the latter must specially authorize them to do so. That Del Rosario did not have the authority to accept ABS-CBN's counter-offer was best evidenced by his submission of the draft contract to VIVA's Board of Directors for the latter's approval. In any event, there was between Del Rosario and Lopez III no meeting of minds. The following findings of the trial court are instructive:
46

A number of considerations militate against ABS-CBN's claim that a contract was perfected at that lunch meeting on April 02, 1992 at the Tamarind Grill. FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind Grill referred to the price and the number of films, which he wrote on a napkin. However, Exhibit "C" contains numerous provisions which, were not discussed at the Tamarind Grill, if Lopez testimony was to be believed nor could they have been physically written on a napkin. There was even doubt as to whether it was a paper napkin or a cloth napkin. In short what were written in Exhibit "C'' were not discussed, and therefore could not have been agreed upon, by the parties. How then could this court compel the parties to sign Exhibit "C" when the provisions thereof were not previously agreed upon? SECOND, Mr. Lopez claimed that what was agreed upon as the subject matter of the contract was 14 films. The complaint in fact prays for delivery of 14 films. But Exhibit "C" mentions 53 films as its subject matter. Which is which If Exhibits "C" reflected the true intent of the parties, then ABS-CBN's claim for 14 films in its complaint is false or if what it alleged in the complaint is true, then Exhibit "C" did not reflect what was agreed upon by the parties. This underscores the fact that there was no meeting of the minds as to the subject matter of the contracts, so as to preclude perfection thereof. For settled is the rule that there can be no contract where there is no object which is its subject matter (Art. 1318, NCC). THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony (Exh. "D") states: We were able to reach an agreement. VIVA gave us the exclusive license to show these fourteen (14) films, and we agreed to pay Viva the amount of P16,050,000.00 as well as grant Viva commercial slots worth P19,950,000.00. We had already earmarked this P16, 050,000.00. which gives a total consideration of P36 million (P19,950,000.00 plus P16,050,000.00. equals P36,000,000.00). On cross-examination Mr. Lopez testified: Q. What was written in this napkin? A. The total price, the breakdown the known Viva movies, the 7 blockbuster movies and the other 7 Viva movies because the price was broken down accordingly. The none [sic] Viva and the seven other Viva movies and the sharing between the cash portion and the concerned spot portion in the total amount of P35 million pesos. Now, which is which? P36 million or P35 million? This weakens ABS-CBN's claim. FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she transmitted Exhibit "C" to Mr. Del Rosario with a handwritten note, describing said Exhibit "C" as a "draft." (Exh. "5" - Viva; tsn pp. 23-24 June 08, 1992). The said draft has a well defined meaning. Since Exhibit "C" is only a draft, or a tentative, provisional or preparatory writing prepared for discussion, the terms and conditions thereof could not have been previously agreed upon by ABS-CBN and Viva Exhibit "C'' could not therefore legally bind Viva, not having agreed thereto. In fact, Ms. Concio admitted that the terms and conditions embodied in Exhibit "C" were prepared by ABS-CBN's lawyers and there was no discussion on said terms and conditions. . . . As the parties had not yet discussed the proposed terms and conditions in Exhibit "C," and there was no evidence whatsoever that Viva agreed to the terms and conditions thereof, said document cannot be a binding contract. The fact that Viva refused to sign Exhibit "C" reveals only two [sic] well that it did not agree on its terms and conditions, and this court has no authority to compel Viva to agree thereto. FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario agreed upon at the Tamarind Grill was only provisional, in the sense that it was subject to approval by the Board of Directors of Viva. He testified: Q. Now, Mr. Witness, and after that Tamarind meeting ... the second meeting wherein you claimed that you have the meeting of the minds between you and Mr. Vic del Rosario, what happened? A. Vic Del Rosario was supposed to call us up and tell us specifically the result of the discussion with the Board of Directors. Q. And you are referring to the so-called agreement which you wrote in [sic] a piece of paper? A. Yes, sir. Q. So, he was going to forward that to the board of Directors for approval? A. Yes, sir. (Tsn, pp. 42-43, June 8, 1992) Q. Did Mr. Del Rosario tell you that he will submit it to his Board for approval?

A. Yes, sir. (Tsn, p. 69, June 8, 1992). The above testimony of Mr. Lopez shows beyond doubt that he knew Mr. Del Rosario had no authority to bind Viva to a contract with ABS-CBN until and unless its Board of Directors approved it. The complaint, in fact, alleges that Mr. Del Rosario "is the Executive Producer of defendant Viva" which "is a corporation." (par. 2, complaint). As a mere agent of Viva, Del Rosario could not bind Viva unless what he did is ratified by its Board of Directors. (Vicente vs. Geraldez, 52 SCRA 210; Arnold vs. Willets and Paterson, 44 Phil. 634). As a mere agent, recognized as such by plaintiff, Del Rosario could not be held liable jointly and severally with Viva and his inclusion as party defendant has no legal basis. (Salonga vs. Warner Barner [sic] , COLTA , 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556). The testimony of Mr. Lopez and the allegations in the complaint are clear admissions that what was supposed to have been agreed upon at the Tamarind Grill between Mr. Lopez and Del Rosario was not a binding agreement. It is as it should be because corporate power to enter into a contract is lodged in the Board of Directors. (Sec. 23, Corporation Code). Without such board approval by the Viva board, whatever agreement Lopez and Del Rosario arrived at could not ripen into a valid contract binding upon Viva (Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763). The evidence adduced shows that the Board of Directors of Viva rejected Exhibit "C" 49 and insisted that the film package for 140 films be maintained (Exh. "7-1" - Viva ). The contention that ABS-CBN had yet to fully exercise its right of first refusal over twenty-four films under the 1990 Film Exhibition Agreement and that the meeting between Lopez and Del Rosario was a continuation of said previous contract is untenable. As observed by the trial court, ABS-CBN right of first refusal had already been exercised when Ms. Concio wrote to VIVA ticking off ten films, Thus: [T]he subsequent negotiation with ABS-CBN two (2) months after this letter was sent, was for an entirely different package. Ms. Concio herself admitted on cross-examination to having used or exercised the right of first refusal. She stated that the list was not acceptable and was indeed not accepted by ABS-CBN, (TSN, June 8, 1992, pp. 8-10). Even Mr. Lopez himself admitted that the right of the first refusal may have been already exercised by Ms. Concio (as she had). (TSN, June 8, 1992, pp. 71-75). Del Rosario himself knew and understand [sic] that ABS-CBN has lost its rights of the first refusal when his list of 36 titles were rejected (Tsn, 50 June 9, 1992, pp. 10-11) II However, we find for ABS-CBN on the issue of damages. We shall first take up actual damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific law on actual or compensatory damages. Except as provided by law or by stipulation, one is 51 entitled to compensation for actual damages only for such pecuniary loss suffered by him as he has duly proved. The indemnification shall comprehend not only the value of the loss suffered, but also that of the profits that the obligee failed to 52 obtain. In contracts and quasi-contracts the damages which may be awarded are dependent on whether the obligor acted with good faith or otherwise, It case of good faith, the damages recoverable are those which are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time of the constitution of the obligation. If the obligor acted with fraud, bad faith, malice, or wanton attitude, he shall be responsible 53 for all damages which may be reasonably attributed to the non-performance of the obligation. In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of, 54 whether or not such damages has been foreseen or could have reasonably been foreseen by the defendant. Actual damages may likewise be recovered for loss or impairment of earning capacity in cases of temporary or permanent 55 personal injury, or for injury to the plaintiff's business standing or commercial credit. The claim of RBS for actual damages did not arise from contract, quasi-contract, delict, or quasi-delict. It arose from the fact of filing of the complaint despite ABS-CBN's alleged knowledge of lack of cause of action. Thus paragraph 12 of RBS's Answer with Counterclaim and Cross-claim under the heading COUNTERCLAIM specifically alleges: 12. ABS-CBN filed the complaint knowing fully well that it has no cause of action RBS. As a result thereof, RBS 56 suffered actual damages in the amount of P6,621,195.32. Needless to state the award of actual damages cannot be comprehended under the above law on actual damages. RBS could only probably take refuge under Articles 19, 20, and 21 of the Civil Code, which read as follows: Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for tile same. Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. It may further be observed that in cases where a writ of preliminary injunction is issued, the damages which the defendant may 57 suffer by reason of the writ are recoverable from the injunctive bond. In this case, ABS-CBN had not yet filed the required bond; as a matter of fact, it asked for reduction of the bond and even went to the Court of Appeals to challenge the order on the matter, Clearly then, it was not necessary for RBS to file a counterbond. Hence, ABS-CBN cannot be held responsible for the premium RBS paid for the counterbond.

Neither could ABS-CBN be liable for the print advertisements for "Maging Sino Ka Man" for lack of sufficient legal basis. The RTC issued a temporary restraining order and later, a writ of preliminary injunction on the basis of its determination that there existed sufficient ground for the issuance thereof. Notably, the RTC did not dissolve the injunction on the ground of lack of legal and factual basis, but because of the plea of RBS that it be allowed to put up a counterbond. As regards attorney's fees, the law is clear that in the absence of stipulation, attorney's fees may be recovered as actual or 58 compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code. The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should 59 be placed on the right to litigate. They are not to be awarded every time a party wins a suit. The power of the court to award 60 attorney's fees under Article 2208 demands factual, legal, and equitable justification. Even when claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorney's fees may not be awarded where no sufficient showing of bad faith could be reflected in a party's persistence in a case other than erroneous conviction of the righteousness of 61 his cause. As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil Code. Article 2217 thereof defines what are included in moral damages, while Article 2219 enumerates the cases where they may be recovered, Article 2220 provides that moral damages may be recovered in breaches of contract where the defendant acted fraudulently or in bad faith. RBS's claim for moral damages could possibly fall only under item (10) of Article 2219, thereof which reads: (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. Moral damages are in the category of an award designed to compensate the claimant for actual injury suffered. and not to 62 impose a penalty on the wrongdoer. The award is not meant to enrich the complainant at the expense of the defendant, but to enable the injured party to obtain means, diversion, or amusements that will serve to obviate then moral suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and should be 63 proportionate to the suffering inflicted. Trial courts must then guard against the award of exorbitant damages; they should exercise balanced restrained and measured objectivity to avoid suspicion that it was due to passion, prejudice, or corruption on 64 the part of the trial court. The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore, experience physical 65 suffering and mental anguish, which call be experienced only by one having a nervous system. The statement in People v. 66 67 Manero and Mambulao Lumber Co. v. PNB that a corporation may recover moral damages if it "has a good reputation that is debased, resulting in social humiliation" is an obiter dictum. On this score alone the award for damages must be set aside, since RBS is a corporation. The basic law on exemplary damages is Section 5, Chapter 3, Title XVIII, Book IV of the Civil Code. These are imposed by way 68 of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. They are recoverable in criminal cases as part of the civil liability when the crime was committed with one or more aggravating 69 70 circumstances; in quasi-contracts, if the defendant acted with gross negligence; and in contracts and quasi-contracts, if the 71 defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. It may be reiterated that the claim of RBS against ABS-CBN is not based on contract, quasi-contract, delict, or quasi-delict, Hence, the claims for moral and exemplary damages can only be based on Articles 19, 20, and 21 of the Civil Code. The elements of abuse of right under Article 19 are the following: (1) the existence of a legal right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or injuring another. Article 20 speaks of the general sanction for all other provisions of law which do not especially provide for their own sanction; while Article 21 deals with acts contra bonus mores, and has the following elements; (1) there is an act which is legal, (2) but which is contrary to morals, good custom, public order, or 72 public policy, and (3) and it is done with intent to injure. Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith implies a conscious and intentional 73 74 design to do a wrongful act for a dishonest purpose or moral obliquity. Such must be substantiated by evidence. There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was honestly convinced of the merits of its cause after it had undergone serious negotiations culminating in its formal submission of a draft contract. Settled is the rule that the adverse result of an action does not per se make the action wrongful and subject the actor to damages, for the law could not have meant to impose a penalty on the right to litigate. If damages result from a person's exercise of a right, it is damnum 75 absque injuria. WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R. CV No, 44125 is hereby REVERSED except as to unappealed award of attorney's fees in favor of VIVA Productions, Inc.1wphi1.nt No pronouncement as to costs. SO ORDERED.

G.R. No. L-41093 October 30, 1978 ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION, petitioner, vs. COURT OF FIRST INSTANCE OF RIZAL (BRANCH XXXIV), and LOLITA MILLAN, respondents. MUOZ PALMA, J.: This is a direct appeal on questions of law from a decision of the Court of First Instance of Rizal, Branch XXXIV, presided by the Honorable Bernardo P. Pardo, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered commanding the defendant to register the deed of absolute sale it had executed in favor of plaintiff with the Register of Deeds of Caloocan City and secure the corresponding title in the name of plaintiff within ten (10) days after finality of this decision; if, for any reason, this not possible, defendant is hereby sentenced to pay plaintiff the sum of P5,193.63 with interest at 4% per annum from June 22, 1972 until fully paid. In either case, defendant is sentenced to pay plaintiff nominal damages in the amount of P20,000.00 plus attorney's fee in the amount of P5,000.00 and costs. SO ORDERED. Caloocan City, February 11, 1975. (rollo, p. 21) Petitioner corporation questions the award for nominal damages of P20,000.00 and attorney's fee of P5,000.00 which are allegedly excessive and unjustified. In the Court's resolution of October 20, 1975, We gave due course to the Petition only as regards the portion of the decision 1 awarding nominal damages. The following incidents are not in dispute: In May 1962 Robes-Francisco Realty & Development Corporation, now petitioner, agreed to sell to private respondent Lolita Millan for and in consideration of the sum of P3,864.00, payable in installments, a parcel of land containing an area of approximately 276 square meters, situated in Barrio Camarin, Caloocan City, known as Lot No. 20, Block No. 11 of its Franville 2 Subdivision. Millan complied with her obligation under the contract and paid the installments stipulated therein, the final payment having been made on December 22, 1971. The vendee made a total payment of P5,193.63 including interests and expenses for registration 3 of title. Thereafter, Lolita Millan made repeated demands upon the corporation for the execution of the final deed of sale and the issuance to her of the transfer certificate of title over the lot. On March 2, 1973, the parties executed a deed of absolute sale of the aforementioned parcel of land. The deed of absolute sale contained, among others, this particular provision: That the VENDOR further warrants that the transfer certificate of title of the above-described parcel of land shall be transferred in the name of the VENDEE within the period of six (6) months from the date of full payment and in case the VENDOR fails to issue said transfer certificate of title, it shall bear the obligation to refund to the VENDEE the total amount already paid for, plus an interest at the rate of 4% per annum. (record on appeal, p. 9) Notwithstanding the lapse of the above-mentioned stipulated period of six (6) months, the corporation failed to cause the issuance of the corresponding transfer certificate of title over the lot sold to Millan, hence, the latter filed on August 14, 1974 a complaint for specific performance and damages against Robes-Francisco Realty & Development Corporation in the Court of 4 First Instance of Rizal, Branch XXXIV, Caloocan City, docketed therein as Civil Case No. C-3268. The complaint prayed for judgment (1) ordering the reformation of the deed of absolute sale; (2) ordering the defendant to deliver to plaintiff the certificate of title over the lot free from any lien or encumbrance; or, should this be not possible, to pay plaintiff the value of the lot which should not be less than P27,600.00 (allegedly the present estimated value of the lot); and (3) 5 ordering the defendant to pay plaintiff damages, corrective and actual in the sum of P15 000.00. The corporation in its answer prayed that the complaint be dismissed alleging that the deed of absolute sale was voluntarily executed between the parties and the interest of the plaintiff was amply protected by the provision in said contract for payment of 6 interest at 4% per annum of the total amount paid, for the delay in the issuance of the title. At the pretrial conference the parties agreed to submit the case for decision on the pleadings after defendant further made 7 certain admissions of facts not contained in its answer. Finding that the realty corporation failed to cause the issuance of the corresponding transfer certificate of title because the parcel of land conveyed to Millan was included among other properties of the corporation mortgaged to the GSIS to secure an obligation of P10 million and that the owner's duplicate certificate of title of the subdivision was in the possession of the Government Service Insurance System (GSIS), the trial court, on February 11, 1975, rendered judgment the dispositive portion

of which is quoted in pages 1 and 2 of this Decision. We hold that the trial court did not err in awarding nominal damages; however, the circumstances of the case warrant a reduction of the amount of P20,000.00 granted to private respondent Millan. There can be no dispute in this case under the pleadings and the admitted facts that petitioner corporation was guilty of delay, amounting to nonperformance of its obligation, in issuing the transfer certificate of title to vendee Millan who had fully paid up her installments on the lot bought by her. Article 170 of the Civil Code expressly provides that 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. Petitioner contends that the deed of absolute sale executed between the parties stipulates that should the vendor fail to issue the transfer certificate of title within six months from the date of full payment, it shall refund to the vendee the total amount paid for with interest at the rate of 4% per annum, hence, the vendee is bound by the terms of the provision and cannot recover more than what is agreed upon. Presumably, petitioner in invoking Article 1226 of the Civil Code which provides that in obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. The foregoing argument of petitioner is totally devoid of merit. We would agree with petitioner if the clause in question were to be considered as a penal clause. Nevertheless, for very obvious reasons, said clause does not convey any penalty, for even without it, pursuant to Article 2209 of the Civil Code, the vendee would be entitled to recover the amount paid by her with legal 7 rate of interest which is even more than the 4% provided for in the clause. -A It is therefore inconceivable that the aforecited provision in the deed of sale is a penal clause which will preclude an award of damages to the vendee Millan. In fact the clause is so worded as to work to the advantage of petitioner corporation. Unfortunately, the vendee, now private respondent, submitted her case below without presenting evidence on the actual damages suffered by her as a result of the nonperformance of petitioner's obligation under the deed of sale. Nonetheless, the facts show that the right of the vendee to acquire title to the lot bought by her was violated by petitioner and this entitles her at the very least to nominal damages. The pertinent provisions of our Civil Code follow: Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has been invaded. Under the foregoing provisions nominal damages are not intended for indemnification of loss suffered but for the vindication or recognition of a right violated or invaded. They are recoverable where some injury has been done the amount of which the evidence fails to show, the assessment of damages being left to the discretion of the court according to the circumstances of the 8 case. It is true as petitioner claims that under American jurisprudence nominal damages by their very nature are small sums fixed by the court without regard to the extent of the harm done to the injured party. It is generally held that a nominal damage is a substantial claim, if based upon the violation of a legal right; in such case, the law presumes a damage, although actual or compensatory damages are not proven; in truth nominal damages are damages in name only and not in fact, and are allowed, not as an equivalent of a wrong inflicted, but simply in recogniton of the existence of a technical injury. (Fouraker v. Kidd Springs Boating and 9 Fishing Club, 65 S. W. 2d 796-797, citing 17 C.J. 720, and a number of authorities). In this jurisdiction, in Vda. de Medina, et al. v. Cresencia, et al. 1956, which was an action for damages arising out of a vehicular accident, this Court had occasion to eliminate an award of P10,000.00 imposed by way of nominal damages, the Court stating 10 inter alia that the amount cannot, in common sense, be demeed "nominal". In a subsequent case, viz: Northwest Airlines, Inc. v. Nicolas L. Cuenca, 1965, this Court, however, through then Justice Roberto Concepcion who later became Chief Justice of this Court, sustained an award of P20,000.00 as nominal damages in favor of respnodent Cuenca. The Court there found special reasons for considering P20,000.00 as "nominal". Cuenca who was the holder of a first class ticket from Manila to Tokyo was rudely compelled by an agent of petitioner Airlines to move to the tourist class notwithstanding its knowledge that Cuenca as Commissioner of Public Highways of the Republic of the Philippines was 11 travelling in his official capacity as a delegate of the country to a conference in Tokyo." Actually, as explained in the Court's decision in Northwest Airlines, there is no conflict between that case and Medina, for in the latter, the P10,000.00 award for nominal damages was eliminated principally because the aggrieved party had already been awarded P6,000.00 as compensatory damages, P30,000.00 as moral damages and P10,000.00 as exemplary damages, and "nominal damages cannot coexist with compensatory damages," while in the case of Commissioner Cuenca, no such 12 compensatory, moral, or exemplary damages were granted to the latter. At any rate, the circumstances of a particular case will determine whether or not the amount assessed as nominal damages is within the scope or intent of the law, more particularly, Article 2221 of the Civil Code.

In the situation now before Us, We are of the view that the amount of P20,000.00 is excessive. The admitted fact that petitioner corporation failed to convey a transfer certificate of title to respondent Millan because the subdivision property was mortgaged to the GSIS does not in itself show that there was bad faith or fraud. Bad faith is not to be presumed. Moreover, there was the expectation of the vendor that arrangements were possible for the GSIS to make partial releases of the subdivision lots from the overall real estate mortgage. It was simply unfortunate that petitioner did not succeed in that regard. For that reason We cannot agree with respondent Millan Chat the P20,000.00 award may be considered in the nature of exemplary damages. In case of breach of contract, exemplary damages may be awarded if the guilty party acted in wanton, fraudulent, reckless, 13 oppressive or malevolent manner. Furthermore, exemplary or corrective damages are to be imposed by way of example or correction for the public good, only if the injured party has shown that he is entitled to recover moral, temperate or compensatory damages." Here, respondent Millan did not submit below any evidence to prove that she suffered actual or compensatory damages.
14

To conclude, We hold that the sum of Ten Thousand Pesos (P10,000.00) by way of nominal damages is fair and just under the following circumstances, viz: respondent Millan bought the lot from petitioner in May, 1962, and paid in full her installments on December 22, 1971, but it was only on March 2, 1973, that a deed of absolute sale was executed in her favor, and notwithstanding the lapse of almost three years since she made her last payment, petitioner still failed to convey the corresponding transfer certificate of title to Millan who accordingly was compelled to file the instant complaint in August of 1974. PREMISES CONSIDERED, We modify the decision of the trial court and reduce the nominal damages to Ten Thousand Pesos (P10,000.00). In all other respects the aforesaid decision stands. Without pronouncement as to costs. SO ORDERED.

G.R. No. 142029

February 28, 2001

ERLINDA FRANCISCO, doing business in the name and style of Cebu Fountainhead Bakeshop and JULIANA PAMAONG, petitioners, vs. RICARDO FERRER, JR., ANNETTE FERRER, ERNESTO LO AND REBECCA LO, respondents. PARDO, J.: Appeal via certiorari taken by petitioners from the decision of the Court of Appeals increasing the trial court's award of moral damages to Ricardo Ferrer, Jr., Annette Ferrer, Ernesto Lo and Rebecca Lo to two hundred fifty thousand pesos (P250,000.00) and awarding exemplary damages in the amount of one hundred thousand pesos (P100,000.00), in addition to the following: "1. The cost of the wedding cake in the amount of P3,175.00; "2. Attorney's fees in the amount of P10,000.00; and "3. Cost of litigation." The facts, as found by the Court of Appeals, are as follows: "On November 19, 1992 Mrs. Rebecca Lo and her daughter Annette Ferrer ordered a three-layered cake from Fountainhead Bakeshop, Mango Avenue Branch. It was then agreed that the wedding cake shall be delivered at 5:00 o'clock in the afternoon at the Cebu Country Club, Cebu City, stating clearly that the wedding is scheduled on December 14, 1992. "Plaintiffs made their first deposit in the amount of P1,000.00 on November 19, 1992 and two weeks thereafter made a full payment on the remaining balance. "On the day of the wedding, December 14, 1992, plaintiffs arrived at the Cebu Country Club around 6:00 o'clock in the evening. They immediately notice the absence of the wedding cake. "At 7:00 o'clock in the evening they made a follow-up call to Fountainhead Bakeshop and was informed that it was probably late because of the traffic. "At 8:00 o'clock they were informed that no wedding cake will be delivered because the order slip got lost. Plaintiffs were then compelled to buy the only available cake at the Cebu Country Club which was a sans rival. Even though they felt that it was a poor substitute to a wedding cake, the cutting of the cake is always a part of the ceremony. "At 10:00 o'clock in the evening, the wedding cake arrived but plaintiffs declined to accept it, besides their order was a three-layered cake and what was actually delivered was a two-layered one. "Subsequently, defendant Erlinda Francisco sent a letter of apology accompanied with a P5,000.00 check, however, the same was declined by plaintiffs because they felt it was inadequate. "Two weeks after the wedding, defendant Erlinda Francisco called Mrs. Rebecca Lo and apologized. "Ricardo Ferrer, son-in-law of Rebecca Lo corroborated the latter's testimony, stating that two weeks after the wedding, as a result of the non-delivery of the wedding cake, Ramon Montinola, the son-in-law of Erlinda Francisco, went to 4 Rebecca Lo's residence and offered the sum of P5,000.00 to indemnify for the damage done, but it was rejected." On March 12, 1993, respondents filed with the Regional Trial Court, Cebu City an action for breach of contract with damages 5 against petitioners. After due trial, on May 19, 1995, the trial court rendered a decision in favor of plaintiffs [herein defendants], the dispositive portion of which reads as follows: "THE FOREGOING CONSIDERED, judgment is hereby rendered in favor of the plaintiffs and against Erlinda Francisco. "Directing the latter to pay the former the following: "1. The cost of the wedding cake in the amount of P3,175.00; "2. Moral damages in the amount of P30,000.00; "3. Attorney's fees in the amount of P10,000.00; and "4. Cost of litigation. "SO ORDERED."
6 3 1 2

On May 25, 1995, petitioners appealed to the Court of Appeals.

After due proceedings, on July 05, 1999, the Court of Appeals promulgated its decision modifying the appealed decision as set 8 out in the opening paragraph of this opinion. Hence, this appeal.
9

The issues raised are (1) whether the Court of Appeals erred in affirming the trial court's award of moral damages and increasing the amount from thirty thousand (30,000.00) to two hundred fifty thousand pesos (P250,000.00); and (2) whether the Court of Appeals was justified in awarding in addition to moral damages, exemplary damages of one hundred thousand pesos (P100,000.00).1wphi1.nt Petitioners submit that the Court of Appeals and the trial court erred in awarding moral damages in favor of respondents because moral damages are recoverable in breach of contract cases only where the breach was palpably wanton, reckless, 10 malicious, in bad faith, oppressive or abusive. We agree. "To recover moral damages in an action for breach of contract, the breach must be palpably wanton, reckless, 11 malicious, in bad faith, oppressive or abusive." "Under the provisions of this law, in culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of his contractual 13 obligation and, exceptionally, when the act of breach of contract itself is constitutive of tort resulting in physical injuries." "Moral damages may be awarded in breaches of contracts where the defendant acted fraudulently or in bad faith."
14 12

"Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or interest or ill will that partakes of the nature of 15 fraud." In this case, "[w]e find no such fraud or bad faith."
16

"Moral damages are in the category of an award designed to compensate the claimant for actual injury suffered and not to 17 impose a penalty on the wrongdoer." "The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes good faith. It is not enough that one merely suffered sleepless nights, mental anguish, serious anxiety as the result of 18 the actuations of the other party. Invariably such action must be shown to have been willfully done in bad faith or will ill motive." "Mere allegations of besmirched reputation, embarrassment and sleepless nights are insufficient to warrant an award for moral damages. It must be shown that the proximate cause thereof was the unlawful act or omission of the [private respondent] 19 petitioners." "An award of moral damages would require certain conditions to be met, to wit: (1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be culpable act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the 21 claimant; and (4) fourth, the award of damages is predicated on any of the cases stated in Article 2219" of the Civil Code. "It must again be stressed that moral damages are emphatically not intended to enrich a plaintiff at the expense of the 22 defendant." "When awarded, moral damages must not be palpably and scandalously excessive as to indicate that it was the 23 24 result of passion, prejudice or corruption on the part of the trial court judge" or appellate court justices. In the same fashion, to warrant the award of exemplary damages, "[t]he wrongful act must be accompanied by bad faith, and an 25 award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner." "The requirements of an award of exemplary damages are: (1) they may be imposed by way of example in addition to compensatory damages, and only after the claimant's right to them has been established; (2) that they can not be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the 26 claimant; (3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner." Nevertheless, the facts show that when confronted with their failure to deliver on the wedding day the wedding cake ordered and paid for, petitioners gave the lame excuse that delivery was probably delayed because of the traffic, when in truth, no cake could be delivered because the order slip got lost. For such prevarication, petitioners must be held liable for nominal damages for insensitivity, inadvertence or inattention to their customer's anxiety and need of the hour. "Nominal damages are 'recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or 27 can be shown.'" Nominal damages may be awarded "to a plaintiff whose right has been violated or invaded by the defendant, 28 for the purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss suffered." WHEREFORE, the Court GRANTS the petition. The Court REVERSES the decision of the Court of Appeals in CA-G. R. CV No. 50894, and in lieu thereof, sentences petitioners to pay respondents, as follows: 1. The cost of the wedding cake in the amount of P3,175.00;

2. Nominal damages in the amount of P10,000.00; 3. Attorney's fees in the amount of P10,000.00; and 4. Costs of litigation. No costs in this instance. SO ORDERED.

G.R. No. L-56505 May 9, 1988 MAXIMO PLENO, petitioner, vs. THE HONORABLE COURT OF APPEALS, PHILIPPINE PAPER PRODUCTS, INC., and FLORANTE DE LUNA respondents. GUTTIERREZ, JR., J.: This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 64497 which modified the decision of the Court of First Instance of Rizal in a vehicular accident case and reduced by one-half the award for temperate damages, moral damages, and attorney's fees from a total of P430,000.00 to P215,000.00. The awards for actual damages in the amount of P48,244.08 and exemplary damages in the amount of P50,000.00 were affirmed. The facts of the case are summarized as follows: On April 11, 1972, plaintiff commenced an action for damages in the Court of First Instance of Rizal (Pasig) against defendants Philippine Paper Products, Inc., and Florante de Luna. The material allegations of the complaint are to the following effect. That the Philippine Paper Products, Inc., is the owner of a delivery truck (Ford Stake) with Plate No. 30-51 Y/Y T-Rizal '71, having in its regular employ in conducting business several motor vehicle drivers, one of them being Florante de Luna who, on December 21, 1971, at about 12:45 P.M., was in charge of and driving said delivery truck (Ford Stake) on the right lane of the South Super Highway in Taguig, Rizal, in a careless, reckless and imprudent manner, by driving the vehicle at a speed greater than what is reasonable and proper at the time without taking necessary precaution to avoid accident to persons and damage to property, that as a consequence of the said driver's reckless and imprudent driving, said vehicle of the defendant Philippine Paper Products, Inc., hit, bumped and sideswiped plaintiffs Volkswagen Delivery Van, with Plate No. 52-50 Y/Y, Manila '71, driven by said plaintiff causing the Volkswagen Delivery Van to swerve to the right that it rammed into the rear part of a truck with Plate No. 8157W T-Manila '71 parked at the shoulder of the road; that as a result of the vehicular accident, plaintiff suffered various serious injuries, was hospitalized, and because he suffered injuries affecting his brain, he acted beyond normalcy at times, that as a consequence he suffered actual and compensatory damages of approximately P100,000.00; moral damages of P500,000.00 for suffering from bodily pain, mental anguish, serious anxiety for Florante de Luna's wanton and brazen disregard of traffic laws and regulations aggravated by his running away from the scene of the accident, without rendering aid to the victim, plaintiff should be adjudged as exemplary or corrective damages of P 300,000.00 as an example to all, owners, operators and drivers of motor vehicles and in the interest of public safety and welfare, as well as the sum of P100,000.00 for the payment of attorney's fees. Plaintiff prays that defendants be jointly and severally ordered to pay him P100,000.00 for actual and compensatory damages; for moral damages P500,000.00; P300,000.00 as exemplary damages; for attorney's fees P100,000.00, interest at the rate of 6% on the actual and moral damage ages and loss of earnings computed from the filing of the complaint until the P100,000.00 and the P500,000.00 are fully paid and the costs of suit. On May 19, 1972, defendant Philippine Paper Products., Inc., filed its answer with counterclaim. While it admits the allegation of paragraph 1 of the complaint pertaining to it, the Id defendant denies the substantial allegations of the complaint and alleges as defenses that it exercises and continues to exercise the requisite diligence in the employment and supervision of its employees and laborers as well as in keeping in constant repair and in good condition all its vehicles; and that plaintiff is the one grossly negligent, careless and imprudent in driving and operating his vehicle who has neither the license nor the permit to drive the said vehicle. It prays that plaintiffs complaint be dismissed with cost against him; and on the counterclaim, that plaintiff be ordered to pay to the herein defendant actual damages and other expenses of litigation as shall be proved in the course of the proceedings as well as exemplary damages sufficient for the purposes sought to be attained thereby apart from reasonable attorney's fees. On May 24, 1972, plaintiff filed his Answer to Counterclaim denying the allegations of the counterclaim of defendant. On May 25, 1972, defendant Florante de Luna filed his answer with counterclaim. While he admits the allegations of paragraphs 1, 2 and 3 of the complaint, he denies the substantial allegations of the same and, as affirmative and/or special defenses, avers that plaintiff without proper license to drive a Volkswagen Kombi delivery van drove said vehicle along a portion of the east service road of the South Super Highway in Taguig, Rizal in a reckless and imprudent manner by operating and driving said kombi delivery van at a speed very much more than reasonable without taking the precautions to prevent injury to persons and damage to property and without considering the traffic condition at the place and time that as a consequence the delivery van titled to its left side of the road following its travel direction that somewhere in the front part of the vehicle being driven by him made a slight contact with the rear left side of the vehicle driven by plaintiff and despite the same, plaintiff did not bother to put to a stop his vehicle instead and continued to drive that his vehicle smashed against another vehicle driven by a certain Ruben Rivera and that in view of the circumstance plaintiff is not entitled from defendant even if only attorney's fees. As counterclaim, he avers that as a result of the filing of the unwarranted complaint he suffered mental anguish, serious anxiety besides forcing himself to retain the services of counsel. He prays for the dismiss of the complaint in addition for payment for moral damages and attorney's fees and costs of suit.

On June 1, 1972, plaintiff filed his answer to defendant Florante de Luna's counterclaim by denying the substantial allegations of said counterclaim with the averment that the complaint was initiated and filed for a just cause. After due trial, on August 30, 1977, the Court a quo rendered its decision sentencing jointly and severally defendants to pay plaintiff (1) P 48,244.08 actual damages: (2) temperate or moderate damage of P200,000.00; (3) moral damages of P200,000.00; (4) exemplary damages of P50,000.00; (5) attorney's fees of P30,000.00; and (6) costs of suit. The facts, as related by the trial court and as borne out by the records, are as follows: As brought out in the trial, the incident which is the basis of this complaint involves a three vehicle collision which happened about past noon of December 21,1971 at the South Super Highway in the portion of Taguig, Rizal. At about 12:45 in the afternoon of said date, a snubnosed volkswagen kombi with plate No. 52-50, Manila '71, was cruising towards Manila along the asphalt pavement of the service road of the South Super Highway. The kombi had two passengers, Maximo Pleno who was at the wheel, and, a New Zealander, James Arthur Longley, who was sitting beside Mr. Pleno on the front seat. The volkswagen was suddenly and without warning hit on its left rear corner by a red colored cargo truck. Due to the impact, the volkswagen moved faster veering to the right and smashing unto the right rear portion of a truck with plate No. 81-87, T-Manila '71, parked along the shoulder of the road in front of the National Manpower Building. The parked truck was also moved forward when it was hit on its back by the Volkswagen and the driver of the parked truck, Ruben Rivera who was at that time standing in front of his parked truck urinating was bumped by his own truck. Witness to all these was Diego Orca, a gardener, who at such time, was watering his plants in front of the National Manpower Building. Having been hit from behind by the red colored cargo truck and having smashed into the rear portion of the parked truck, the right front portion of the volkswagen on the driver's side was reduced to a pulp. At impact, the front door on the right side burst open and Langley, who was seated on that side, was thrown out of the vehicle and landed on a ditch. Pleno, the driver of the volkswagen was crushed in the driver's seat since the kombi's front portion offered no protection, being the snub-nosed type, with the motor at the back. His legs were trapped in the wreckage. The red cargo truck stopped for a while and then spead away. Ruben Rivera, the driver of the parked truck, was brought by a passing jeepney to the hospital. Langley who was thrown out of the volkswagen but was not seriously hurt, with the help of a few persons nearby, extricated Pleno from the volkswagen after pushing the truck away and thereafter took him to the Makati Medical Center. Pleno suffered extensive injuries on his head and legs and affected his eyesight and stayed in the hospital for almost five (5) months. The hit and run incident was reported to the Taguig Police Department several hours later or about 3:15 in the afternoon of the same day by Manuel Pleno, son of plaintiff Maximo Pleno. An investigator was sent by the Taguig Police Department at the scene of the incident where an initial report was submitted containing a description of the suspect vehicle as a delivery truck colored red all over with yellow, canvass at the top. A team to investigate this hit and run incident was formed thereafter by Patrolman Maximo de Guzman of the Taguig Police Department. Days later or on January 8, 1972, a certain Atty. Tagumpay Eusebio, who is connected with the Philippine Paper Products, Inc., went to Pat. de Guzman's precinct at Taguig, Rizal inquiring why one of the Taguig's Police Traffic Officers at the service road of the South Super Highway stopped and investigated Florante de Luna, driver of the said company. Pat. de Guzman told Atty. Eusebio that De Luna was stopped and investigated because the delivery truck he was driving matched the description of the delivery truck in a hit and run incident which occured at about 12:45 p.m. of December 21, 1971. Atty. Eusebio promised to bring De Luna to the police precinct. After receiving such information, Pat. de Guzman and his team proceeded to the compound of the Philippine Paper Products, Inc., at Sun Valley Subdivision, South Super Highway, Paranaque, Rizal on the same day, January 8, 1972. Pat. de Guzman and his team made further visits at said compound and during these visits, they discovered that the suspect vehicle exmbited plate No. 3- 51 Taguig, Rizal, T-Manila '71 and was painted red all over. The team also discovered a'dented'or'depressed'portion of the right front portion of the vehicle. The distance from the ground to the 'denied' or 'depressed' portion of the truck was three feet and 3 inches, the same distance from the ground to the depressed portion of the volkswagen on its left rear portion. The paint was scratched off and there were blue colored stains. The volkswagen was blue colored. On one of the visits by Pat. de Guzman, he brought with him Dr. Diego Orca, the gardener who, at the time of the incident on December 21, 1971, was tending to his plants in front of the National Manpower Corporation and who witnessed the 3 vehicle collision, Orca positively Identified the vehicle of the defendant corporation as the one involved in the incident. Also brought along the team in one of their visits was a photographer, Bernardo Beduya who took photographs of the suspect vehicle (Exhibits "D-l" to "D- 2").<re||an1w> Pat. de Guzman was also able to look into the logbook of the Philippine Paper Products, Inc., which showed that the suspect vehicle with Florante de Luna driving it, left the compound of the company on December 21, 1971 at 12:00 p.m. or barely 25 minutes before the incident. A photograph of the log book with a finger pointing at the above entry was taken by photographer Beduya (Exh. "F-a").

On January 12, 1972, while Patrolman de Guzman and his team were in the compound of the Philippine Paper Products, Inc., they met Atty. Eusebio with two companions who later turned out to be Florante de Luna and an insurance adjuster. Atty. Eusebio invited Pat. de Guzman in Ms office and asked him about the progress of the investigation to which de Guzman informed him that 99% of the evidence in their hands pointed to the delivery truck of the defendant company as the vehicle involved in the accident. Atty. Eusebio then took Pat. de Guzman aside and revealed to him that it was only sometime that their driver, Florante de Luna, admitted to him the involvement of the company truck in the incident and that was the reason why a representative or adjuster of the insurance company was with them so that they can settle the case. Thereafter, Pat. de Guzman, together with Atty. Eusebio, Florante de Luna and the adjuster, went to De Guzman's precinct where De Luna executed a written statement (Exhibits "G" and "G-l"). De Luna's statement, although admitting that the delivery truck of the company was involved in the incident, however, claimed that the fault lay in Mr. Pleno because while a truck was moving on its way to the main road, Pleno who was driving the volkswagen applied his brakes and his left rear portion veered towards the right and came in contact with the delivery truck being driven by De Luna. Thereafter, the volkswagen accelerated and went out of control veering further towards the right and hitting the truck which was then moving towards the direction of the highway. In other words, De Guzman claimed that the braked track was no longer parked at the time of the collision but that it was already moving, and the fault in the collision was on the part of Mr. Maximo Pleno. Before the written statement of Pleno was subscribed before the mayor of Taguig, Rizal, an incident transpired as testified by Pat. De Guzman: WITNESS (Pat. de Guzman) A. Before you went to the Municipal Building of Taguig, Rizal, for the subscription of the statement of Mr. de Luna, while I was along inside your investigation room, Atty. Eusebio with a certain adjuster of the insurance company approached me and offered me something. ATTY. OBEN: Q. What is that something? A. He told me in vernacular, to wit ; Tsip, iyon pala naman ay hindi pa nalalaman ng pamilya ng victim ang pagkakadeskobre ninyo nito tungkol sa involvement ni De Luna sa kasong ito. Kung maari ay pag-usapan na lang natin ito.' And I answered: Ano ang ibig mong sabihin ng pagusapan? Q. What did Atty. Eusebio tell you? A. He told me that if you will not divulge this incident to the family of the victim, we will just give you the amount, all the expenses that may be incurred by the Philippine Paper Products, Inc., in this case. Q. If Atty. Eusebio is in the courtroom, can you point to him up in the courtroom? A. He is in the middle. (witness pointing to Atty. Eusebio who is seated in the courtroom). (TSN., Nov. 21, 1972, pp. 5-9). As regards the injuries suffered by Maximo Pleno, it may be seen from the exhibits shown particularly the photographs of the volkswagen that it is the driver's side which was severely damaged considering that the vehicle is the snub-nosed type with its motor at the back. Due to the impact, Pleno's head was dashed and he lost consciousness with his legs trapped in the wreckage. It took several persons to extricate him therefrom. And they have to push the parked truck away before they could do so. Pleno was brought to the Makati Medical Center in the afternoon of December 21, 1971 and he left the hospital almost five (5) months later or on May 9, 1972. The orthopedic surgeon who treated Pleno at the emergency room of the Makati Medical Hospital testified that Pleno sustained multiple fractures of both thigh bones and the left shin bone or tibia He sustained multiple lacerations in his forehead and left thigh. There was evidence of head injury, according to the surgeon. Pleno was incoherent in pain and disabled, Pleno had to undergo about five surgical operations of his thighs one of which involving the insertion of these many operations, he still finds it difficult to stand up even with the aid of crutches or a cane. He walks with a limp and his left is shorter than the right. As regards his eyesight, Pleno complained that his left eye suffers from double vision so that whenever he looks to the left, he sees two objects of the same thing The injuries above mentioned affected his social and business life for he could not longer attend social gatherings nor could he concentrate on his business ventures.'(at pp. 30-39, Panted Amended Joint Record on Appeal). (pp. 39-47) Upon appeal, the Court of Appeals affirmed the factual findings of the lower court, to wit:

We find the findings of the lower court after hearing the parties to be more in consonance to the truth and what actually occurred. We fully agree that the Kombi delivery panel was hit by the cargo truck driven by the driver at the left rear corner when the cargo truck of the driver was overtaking it. Naturally, when one overtakes another vehicle the overtaking vehicle must run faster than the vehicle to be overtaken. The impact caused the Kombi delivery panel upon being hit to swerve to the light at the same time due to the force and suddenness of impact Pleno lost control of his vehicle, as it happened in this case it accelerated towards the parked cargo truck with chairs. A table re-enactment of the incident convinces us that the claim of the driver that he saw a cargo truck moving out from the curve into the road a moment before the collision is false. It is a fact that the driver appellant was about to overtake the Kombi delivery panel momentt before the accident. Therefore, he must have been only about 2 to 5 meters to the left behind the Kombi delivery panel. At this position and distance, it is impossible for the driver to see the cargo truck with chairs he claimed to be moving out of the curve as his vision or view to the right is covered by the Kombi delivery panel which he was about to overtake. We likewise refuse to behave the driver's claim that the Kombi delivery panel swerved to the left towards his (driver's) lane to avoid the cargo truck with chairs then moving out of the shoulder of the road. Ruben Rivera, driver of the cargo truck with chairs, testified that his truck was parked and was not about to move out of the showder. Rivera testified that he was standing in front of his truck. Witness Diego Orca corroborated Ruben Rivera. Efforts of appellants to discredit Rivera notwithstanding, we are convinced that the driver hitting the left rear corner of the Kombi delivery panel in the manner to overtake it was the proximate cause of the accident. It is also unbelievable that the driver did not feel or notice any contact between his cargo truck and the Kombi delivery panel. After all, it has been established and admitted after police investigation that the protruding front right edge of the loading platform of the cargo truck, establishrd by the telltale marks and measurement, hit the left rear corner of the Kombi delivery panel. Considering the accelerated speed of the cargo truck of the driver in attempting to overtake the Kombi delivery panel, in all probability upon contact there would have emitted an impact sound similar to a sound of a hard object hit by another hard object. This kind of sound one cannot miss to feel or notice. We are not, therefore, persuaded by the pretense of the driver. We are in full accord with the Court a quo when it said: Having been hit from behind by the red colored cargo truck and having smashed unto the rear portion of the parked car the right front portion of the volkswagen on the driver's truck side was reduced to a pulp. At impact, the front door on the right side burst open and Langley, who was seated on that side, was thrown out of the vehicle and landed on a ditch. Pleno, the driver of the volkswagen was crushed in the driver's seat since the Kombi's front portion offered no protection being the snub-nosed type, with the motor at the back. His legs were trapped in the wreckage. The red cargo truck stopped for a while and then sped away. Ruben Rivera, the driver of the parked truck, was brought by a passing jeepney to the hospital. Langley who was thrown out of the volkswagen but was not seriously hurt, with the help of a few persons nearby, extricated Pleno from the volkswagen after pushing the truck away and thereafter took him to the Makati Medical Center. Pleno suffered extensive injuries on his head and legs and affected his eyesight and stayed in the hospital for almost five (5) months. (at pp. 31-32, Printed Record on Appeal). The immediately preceding discussion disposes of the second, third, fourth, and fifth errors assigned by appellant driver. From the reconstruction of the incident, we find the driver the one negligent and not the plaintiff-appellee as assailed by the appellants. Neither do we find any contributory negligence attributable to plaintiff-appellee. The proximate cause as hereintofore discussed above was the recklessness of the driver De Luna in miscalculate his distance to and from the Kombi delivery panel on overtaking. So much so that the front right edge of his loading platform hit the left rear corner of the Kombi delivery panel Causing the Kombi delivery panel to swerve to the right forcing it to run smack into the parked cargo truck with chairs. Having been found negligent, which negligence resulted to serious injuries, the lower court did not err in sentencing defendant driver De Luna to pay actual, moral, temperate and exemplary damages, likewise to pay attorney's fees. To justify these awards, we consider the established fact that it is beyond dispute, despite driver's protestation that he did not hit the Kombi delivery panel at the left rear corner; that he did not attempt to evade responsibility; even knowingly realizing that he caused the accident, he merely stopped a while (which we doubt if he did); and, upon seeing the extensiveness of the resulting damage and the seriousness of the injury, left the scene of the accident and kept quiet all about it until discovered thru police investigation thus making it a hit and run case, pure and simple. Appellant chiver De Luna's seventh, eight and ninth errors will be treated together with the errors assigned by appellant corporation.

Appellant Corporation asserts that it exercised due diligence in the selection and supervision of its employees. Therefore, it claimed it was error for the trial court not to so hold and further claimed that it erred in holding the Corporation able to plaintiff appellee. Contending that at the time of the accident its employee driver De Luna, a duly licensed professional driver, had been driving for five years before his employment with the Corporation in 1970; that he was given examination in driving and found fit; that he was assigned to drive small vehicles before being assigned to drive cargo trucks for two months and after being tested for his driving ability, appellant Corporation professes that it had exercised the due diligence of a good father of a family in the selection and supervision of its employee driver De Luna. One of the overriding circumstances considered by the court a quo in disregarding the defense of exercise of due diligence interposed by appellant Corporation is the record of defendant driver De Luna that he was once accused of serious physical injuries thru reckless imprudence. Appellant Corporation argued that in that case driver De Luna was acquitted. True. But the records did not show that his acquittal was in a trial on the merits. The case may have been dismissed and he was acquitted for failure of the prosecution to prosecute thru desistance of the aggrieved party. his innocence was not therefore proven. It is not enough that defendant Corporation hold high and waves driver's acquittal of that charge but Corporation should have presented evidence that in the trial on the merits his employed defendant driver was declared innocent. A diligent and thorough inquiry of the background of driver De Luna was not undertaken. Otherwise, defendant-appellant Corporation should not have hired De Luna had it exercised the due diligence it is required by law in hiring the driver, the accident would not have occurred in the manner it happened and would have been avoided. The lower court, as we are, was not satisfied with the testimonies of Manuel Zurbano and Benjamin Francisco, both employees of appellant Corporation. Their testimonies, aside from dealing merely on generalities and mere observations on defendant driver De Luna's driving were not thorough. It war, not enough. They should have declared on the different company procedures in hiring its employees, particularly its drivers. There are steps, manual of procedures to be followed strictly by employers before hiring its employees. In the case at bar, evidence has it that there was unexcusable laxity in the supervision of its driver by the Corporation. Proof of this is that the accident happened on December 21, 1972 and not until January 8, 1972 when the defendantappellant Corporation, thru Atty. Tagumpay Eusebio, came to know that one of its vehicles was involved in an accident. Indeed, if there was close supervision exercised by the defendant-appellant Corporation on its employees and proper care of its equipments, it would have known of the involvement of its driver De Luna in the accident in question. As it was lax in its supervision, it did not know until confronted that its cargo truck met an accident and caused the damage and injury in question. It is very difficult for us to believe the claim of the appellant that it did not report the accident because no one in its company knew about the accident. That even De Luna himself did not realize that the truck he was driving came in contact with the plaintiffs Kombi delivery panel. We have discarded driver De Luna's pretense that he did not realize that his truck came in contact with the Kombi delivery panel of plaintiff. His pretense is contrary to human and factual experience. A carefull driver can even detect a small pebble hitting his vehicle. Even a slight nudge becomes discernible. How much more with the contact and impact which have been established beyond doubt and ultimately admitted by driver De Luna that his truck, after all, hit the Kombi at its rear left corner which sent the Kombi delivery panel careening to the right smack against the parked cargo truck with chairs. Not only did the defendant-appellant corporation not report the accident to the authorities, but we are convinced by the conclusion arrived at by the trial court that defendant-appellant Corporation thru its representative and counsel, Atty. Eusebio, attempted to cover up the involvement of its driver and truck in the accident from the victim's family (Testimony of Pat. de Guzman). (pp. 49-54, Rollo) The court, however, modified the award on damages such that temperate damages were reduced from P200,000.00 to P100,000.00; moral damages were reduced from P200,000.00 to Pl00,000.00; and attorney's fees were reduced from P30,000.00 to P15,000.00. It further ruled that the employer's ability is subsidiary. All the parties assailed the decision by filing two separate petitions before us. Philippine Paper Products, Inc., sought the reversal of the factual findings of the appellate court as regards their lialibility The case was docketed as G.R. No. 56511. On the other hand, Maximo Pleno filed G.R. No. 56505 questioning the reduction of the damages awarded to him and the court's ruling that the ability of Philippine Paper Products, Inc., as employer is only subsidiary. On May 20, 1981, we issued a resolution in both petitions. G.R. No. 56511 was denied, "the questions raised being factual and for insufficient showing that findings of facts by respondent court are unsupported by substantial evidence." G.R. No. 56505, was given due course and it is the petition which we now resolve. In this same resolution, we declared "that with respect to the affirmed judgment of the Court of Appeals ordering respondents to pay jointly and severally the petitioner P48,244.08, actual damages, P100,000.00 temperate or moderate damages, P100,000.00 moral damages, P50,000.00 exemplary damages, and P15,000.00 attorney's fees, and the costs of suit, (with reduction of a total of P215,000.00) wherein the petition for review in G.R. No. 56511 has been herein DENIED, execution may issue immediately by the court a quo upon receipt of this resolution." (p. 79, Rollo) The resolution became final and executory on September 7, 1981 and an entry of judgment was made. The issues raised in this petition are two-fold. They are: (1) whether or not the employer's liability in quasi-delict is subsidiary, and (2) whether or not the appellant court was correct in reducing the amount of damages awarded to the petitioner. We sustain the view of the petitioner that the ability of an employer in quasi-delict is primary and solidary and not subsidiary. This, we have ruled in a long line of cases. (See Bachrach Motor Co. v. Gamboa, L-110296, May 21, 1957; Malipol v. Tan, 55 SCRA 202; Barredo v. Garcia and Almario, 73 Phil. 607; Vinluan v. Court of Appeals, et al., 16 SCRA 742; Anuran, et al. v. Buno, et al., 17 SCRA 224; Poblete v. Fabros, 93 SCRA 20; Lanuzo v. Ping, 100 SCRA 205; Prudenciado v. Alliance Transport System, Inc., 148 SCRA 440)

The Court of Appeals affirmed the awards of damages based on its findings, as follows: Both appellants assailed the awards of damages. Appellant Corporation claims that damages were not alleged in the complaint nor competent evidence adduced to prove the damages awarded. This is a sweeping statement. We find on record sufficient evidence supporting the adjudication of damages in favor of the plaintiffappellee. Maximo Pleno is a mechanical engineer, a topnotcher, and at the time of the accident was a director, vice-president and general manager of Mayon Ceramics Corporation. He was confined from the date of the accident up to May, 1972. He could not work immediately. He sustained serious wounds on his forehead and legs. In short, he became an invalid. According to Dr. Ramon Borromeo, plaintiff-appellee Maximo Pleno sustained multiple fractures involving both thigh bones and the left shin bone or tibia and there is evidence of head imjury. Dr. Borromeo conducted a series of operations. In order to be more detailed, we quote from the brief of the appellee the condition of the plaintiff-appellee Mr. Pleno, borne by the records and remained unrefuted as follows: Dr. Ramon Borromeo, the orthopedic surgeon who treated Mr. Pleno and saw him at the emergency room of the Makati Medical Center on the day of the accident, testified that Mr. Pleno sustained multiple fractures involving both thigh bones and the left shin bone or tibia multiple laceration involving wound in his forehead and left thigh; and, evidence of head injury (t.s.n. Borromeo, February 22, 1974, p. 10 and 11). Mr. Pleno was incoherent when he first saw him (ibid, p. 11). He was in pain (ibid); limited in leg motion because of the fractures and disabled (ibid, pp. 11-12). On that same day, Mr. Pleno's wound in the thighs were cleaned followed by skeletal traction to both legs by which a wire is inserted to the bone to obtain more or less sittisfactory ent a temporary procedure, Dr. Borromeo explained, to relieved swelling and spasm of the muscles (ibid, pp. 13 and 14). Two weeks thereafter, Dr. Borromeo conducted another operation, this time what he described to be an open surgery on the left thigh bone, the purpose of which was to obtain an accurate alignment of the fractures (ibid, p. 15). Dr. Borromeo performed still another operation three weeks thereafter, this time on the right thigh bone (ibid, p. 16). This was not to be the last of the operations Mr. Pleno underwent. A year later, Mr. Pleno developed foreign body reaction, which according to Dr. Borromeo, necessitated another surgery, this time the action of the metallic appliance (Exh. I) on both thighs (ibid, P. 16). Then, again, several months later he developed rejection of the metallic appliance with secondary infection of the bones which required another operation (ibid, p. 17).<re||an1w> The metallic appliance, the surgeon explained, is inserted throughout the whole canal of the thigh bone to obtain adequate alignment and in the case of Mr. Pleno, the appliance was inserted on both thigh bones (ibid, p. 18). Mr. Pleno had to use crutches because the fracture was not just an ordinary fracture; it was what the doctor called 'comminute fractures,' meaning the bone was broken up into several fragments, multiple fragments which naturally would prolong the healing period (ibid, p. 19). After Identifying the various x-ray Films presented (Exhibits M, M-1, M-2 and M-4), Dr. Borromeo testified that definitely there is shortening of oneleg of Mr. Pleno, the left leg, despite the surgery (ibid, pp. 23 and 24). Mr. Pleno had complained of defective eyesight (t.s.n., Pleno, July 13,1973, pp. 28 and 29). On the witness stand, an eye specialist, Dr. Reynaldo Bordador testified that Mr. Pleno was suffering from horizontal deplopia or double vision of the left eye which can be caused by injury resulting from a blunt instrument hitting the forehead or any part of the head (t.s.n. Bordador, April looks to the left, he would be seeing two objects (ibid, p. 8). Prolonged reading Will result in headache (ibid). Dr. Bordador described Mr. Pleno's eye condition as one which resulted from paralysis of one of the occular musde (ibid, p. 9). While surgery could be performed, the outcome is not guaranteed there will also be double vision no matter how good the surgery is, the doctor concluded (ibid, p. 9). (at pp. 14-17) There is clear and convinced evidence establishing actual and compensatory damages. The gravity of the injuries Mr. Pleno received and the result pain and mental suffer is very much evident from the medical diaganosis and prognosis initated above. pp. 54-57, Rollo) Nevertheless, as stated earlier, the appellate court reduced the amount of temperate and moral damages as well as the amount of attorney's fees on the ground that the awards were "too high" .The award of temperate damages was reduced by the appellate court on the ground that the amount of P200,000.00 is rather "too high" especially considering the fact that the driver De Luna is a mere driver and defendant-appellant Corporation is only subsidiarily liable thereof. The award was reduced to P100,000.00. The petitioner now assails the reduction of the damages as without justification. It specifically mentions the findings of the trial court which were affirmed by the appellate court regarding the gravity of the injuries suffered by the petitioner, the effect of the injuries upon him as a person, and his business as well as his standing in society. And yet, it reduced the amount of damages. As stated earlier, the employer's liability in quasi-delict is primary and solidary. The award of temperate, moral, and exemplary damages as well as attorney's fees lies upon the discretion of the court based on the facts and circumstances of each case. (See Magbanua v. Intermediate Appellate Court, 137 SCRA 328; Siquenza v. Court of Appeals, 137 SCRA 570; San Andres v. Court of Appeals, 116 SCRA 81; Sarkies Tours Phil., Inc. v. Intermediate Appellate Court, 124 SCRA 588; Prudenciado v. Alliance Transport System, Inc., supra.). The court's discretion is, of course, subject to the condition that the award for damages is not excessive under the attendant facts and circumstance of the case.

Temperate damages are included within the context of compensatory damages (Radio Communications of the Philippines, Inc. (RCPI) v. Court of Appeals, supra.). In arriving at a reasonable level of temperate damages to be awarded, trial courts are guided by our ruling that: ... There are cases where from the nature of the case, defenite proof of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. For instance, injury to one's commercial credit or to the goodwill of a business firm is often hard to show certainty in terms of money. Should damages be denied for that reason? The judge should be empowered to calculate moderate damages in such cases, rather than that the plaintiff should suffer, without redress from the defendant's wrongful act. (Araneta v. Bank of America, 40 SCRA 144,145) In the case of moral damages, the yardstick shaould be that the "amount awarded should not be palpably and scandalously excessive" so as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court (Gerada v. Warner Barnes & Co., Inc., 57 O.G. (4) 7347, 7358; Sadie v. Bachrach Motor Co., Inc., 57 O.G. (4) 636; Adone v. Bachrach Motor Co., Inc., 656 cited in Prudenciado v. Alliance Transport System, Inc., supra.).<re||an1w> Moreover, the actual losses sustained by the aggrieved parties and the gravity of the injuries must be considered in arriving at reasonable levels (Siquenza v. Court of Appeals, supra, cited in Prudenciado v. Alliance Transport System, Inc., supra.). The trial court based the amounts of damages awarded to the petitioner on the following circumstances: Coming now to the damages suffered by plaintiff Maximo Pleno, it is not controverted that Pleno was hospitalized for about five months beginning December 21, 1971, the day of the incident, up to May 9, 1972. While in the hospital, he underwent several major operations on his legs and in spite of Id operations, a deformity still resulted and that his left leg is shorter than the right. The medical expenses, hospital bills and doctor's fees were properly exhibited and not rebutted by defendants. This being the case, actual expenses of P48,244.08 may be awarded. As to the loss or impairment of earning capacity, there is no doubt that Pleno is an enterpreneur and the founder of his own corporation, the Mayon Ceramics Corporation. It appears also that he is an industrious and resourceful person with several projects in line and were it not for the incident, might have pushed them through. On the day of the incident, Pleno was driving homeward with geologist Langley after an ocular inspection of the site of the Mayon Ceramics Corporation. His actual income however has not been sufficiently established so that this Court cannot award actual damages, but, an award of temperate or moderate damages may still be made on loss or impairment of earning capacity. That Pleno sustained a permanent deformity due to a shortened left leg and that he also suffers from double vision in his left eye is also established. Because of this, he suffers from some inferiority complex and is no longer active in business as well as in social life. In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Cordage, et al. v. LTB Co., et al., L-11037, Dec. 29,1960, and in Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were given. There is also no doubt that due to the incident, Pleno underwent physical suffering, mental anguish, fight, severe arudety and that he also underwent several major operations. As previously stated, Pleno is the founder of Mayon Ceramics Corporation, manufacturer of the now famous Crown Lynn ceramic wares. He is a mechanical engineer and the topnotcher of the professional examination for mechanical engineering in 1938. From the record, most if not all of his children excelled in academic studies here and abroad. The suffering, both mental and physical, which he experienced, the anxiety and fright that he underwent are sufficiently proved, if not patent. He is therefore entitled to moral damages. Pleno is also entitled to exemplary damages since it appears that gross negligence was committed in the hiring of driver de Luna. In spite of his past record, he was still hired by the corporation. As regards de Luna, the very fact that he left the scene of the incident without assisting the victims and without reporting to the authorities entitles an award of exemplary damages, so as to serve as an example that in cases of accidents of this kind, the drivers involved should not leave their victims behind but should stop to assist the victims or if this is not possible, to report the matter immediately to the authorities. That the corporation did not also report the matter to the authorities and that their lawyer would attempt to bribe the police officers in order that the incident would be kept a secret shows that the corporation ratified the act of their employees and such act also shows bad faith. Hence, Id corporation is able to pay exemplary damages. The award of attorney's fees is also proper in this case considering the circumstances and that it took more than five years of trial to finish this case. Also, plaintiffs counsel prepared lengthy and exhausive memorandum. (pp48-50, Amended Joint Record on Appeal) We rule that the lower court's awards of damages are more consonant with the factual circumstances of the instant case. The trial court's findings of facts are clear and well-developed. Each item of damages is adequately supported by evidence on record. On the other hand, there are no substantial reasons and no references to any misimpressions of facts in the appellate decision. The Court of Appeals has shown no sufficient reasons for altering factual findings which appear correct. We, therefore, affirm the lower court's awards of damages and hold that the appellate court's reduction of the amounts of temperate and moral damages is not justified. However, we modify the award of attorney's fees to P20,000.00 which we deem to be just and equitable under the circumstances of the case. WHEREFORE, the instant petition is GRANTED. The questioned decision is REVERSED and SET ASIDE. The decision of the Court of First Instance of Rizal (Pasig) in Civil Case No. 16024 is AFFIRMED in all respects, except for the award of attorney's fees which is reduced to P20,000.00. SO ORDERED.

G.R. No. 124354 December 29, 1999 ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS and RON RAYMOND RAMOS, petitioners, vs. COURT OF APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and DRA. PERFECTA GUTIERREZ, respondents. KAPUNAN, J.: The Hippocratic Oath mandates physicians to give primordial consideration to the health and welfare of their patients. If a doctor fails to live up to this precept, he is made accountable for his acts. A mistake, through gross negligence or incompetence or plain 1 human error, may spell the difference between life and death. In this sense, the doctor plays God on his patient's fate. In the case at bar, the Court is called upon to rule whether a surgeon, an anesthesiologist and a hospital should be made liable 2 for the unfortunate comatose condition of a patient scheduled for cholecystectomy. Petitioners seek the reversal of the decision of the Court of Appeals, dated 29 May 1995, which overturned the decision of the Regional Trial Court, dated 30 January 1992, finding private respondents liable for damages arising from negligence in the performance of their professional duties towards petitioner Erlinda Ramos resulting in her comatose condition. The antecedent facts as summarized by the trial court are reproduced hereunder: Plaintiff Erlinda Ramos was, until the afternoon of June 17, 1985, a 47-year old (Exh. "A") robust woman (TSN, October 19, 1989, p. 10). Except for occasional complaints of discomfort due to pains allegedly caused by the presence of a stone in her gall bladder (TSN, January 13, 1988, pp. 4-5), she was as normal as any other woman. Married to Rogelio E. Ramos, an executive of Philippine Long Distance Telephone Company, she has three children whose names are Rommel Ramos, Roy Roderick Ramos and Ron Raymond Ramos (TSN, October 19, 1989, pp. 5-6). Because the discomforts somehow interfered with her normal ways, she sought professional advice. She was advised to undergo an operation for the removal of a stone in her gall bladder (TSN, January 13, 1988, p. 5). She underwent a series of examinations which included blood and urine tests (Exhs. "A" and "C") which indicated she was fit for surgery. Through the intercession of a mutual friend, Dr. Buenviaje (TSN, January 13, 1988, p. 7), she and her husband Rogelio met for the first time Dr. Orlino Hozaka (should be Hosaka; see TSN, February 20, 1990, p. 3), one of the defendants in this case, on June 10, 1985. They agreed that their date at the operating table at the DLSMC (another defendant), would be on June 17, 1985 at 9:00 A.M.. Dr. Hosaka decided that she should undergo a "cholecystectomy" operation after examining the documents (findings from the Capitol Medical Center, FEU Hospital and DLSMC) presented to him. Rogelio E. Ramos, however, asked Dr. Hosaka to look for a good anesthesiologist. Dr. Hosaka, in turn, assured Rogelio that he will get a good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00, which was to include the anesthesiologist's fee and which was to be paid after the operation (TSN, October 19, 1989, pp. 14-15, 22-23, 31-33; TSN, February 27, 1990, p. 13; and TSN, November 9, 1989, pp. 3-4, 10, 17). A day before the scheduled date of operation, she was admitted at one of the rooms of the DLSMC, located along E. Rodriguez Avenue, Quezon City (TSN, October 19,1989, p. 11). At around 7:30 A.M. of June 17, 1985 and while still in her room, she was prepared for the operation by the hospital staff. Her sister-in-law, Herminda Cruz, who was the Dean of the College of Nursing at the Capitol Medical Center, was also there for moral support. She reiterated her previous request for Herminda to be with her even during the operation. After praying, she was given injections. Her hands were held by Herminda as they went down from her room to the operating room (TSN, January 13, 1988, pp. 9-11). Her husband, Rogelio, was also with her (TSN, October 19, 1989, p. 18). At the operating room, Herminda saw about two or three nurses and Dr. Perfecta Gutierrez, the other defendant, who was to administer anesthesia. Although not a member of the hospital staff, Herminda introduced herself as Dean of the College of Nursing at the Capitol Medical Center who was to provide moral support to the patient, to them. Herminda was allowed to stay inside the operating room. At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka who was not yet in (TSN, January 13, 1988, pp. 11-12). Dr. Gutierrez thereafter informed Herminda Cruz about the prospect of a delay in the arrival of Dr. Hosaka. Herminda then went back to the patient who asked, "Mindy, wala pa ba ang Doctor"? The former replied, "Huwag kang mag-alaala, darating na iyon" (Ibid.). Thereafter, Herminda went out of the operating room and informed the patient's husband, Rogelio, that the doctor was not yet around (id., p. 13). When she returned to the operating room, the patient told her, "Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor." So, she went out again and told Rogelio about what the patient said (id., p. 15). Thereafter, she returned to the operating room. At around 10:00 A.M., Rogelio E. Ramos was "already dying [and] waiting for the arrival of the doctor" even as he did his best to find somebody who will allow him to pull out his wife from the operating room (TSN, October 19, 1989, pp. 19-20). He also thought of the feeling of his wife, who was inside the operating room waiting for
3 4

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, 2930). At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the patient, heard somebody say that "Dr. Hosaka is already here." She then saw people inside the operating room "moving, doing this and that, [and] preparing the patient for the operation" (TSN, January 13, 1988, p. 16). As she held the hand of Erlinda Ramos, she then saw Dr. Gutierrez intubating the hapless patient. She thereafter heard Dr. Gutierrez say, "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan" (id., p. 17). Because of the remarks of Dra. Gutierrez, she focused her attention on what Dr. Gutierrez was doing. She thereafter noticed bluish discoloration of the nailbeds of the left hand of the hapless Erlinda even as Dr. Hosaka approached her. She then heard Dr. Hosaka issue an order for someone to call Dr. Calderon, another anesthesiologist (id., p. 19). After Dr. Calderon arrived at the operating room, she saw this anesthesiologist trying to intubate the patient. The patient's nailbed became bluish and the patient was placed in a trendelenburg position a position where the head of the patient is placed in a position lower than her feet which is an indication that there is a decrease of blood supply to the patient's brain (Id., pp. 19-20). Immediately thereafter, she went out of the operating room, and she told Rogelio E. Ramos "that something wrong was . . . happening" (Ibid.). Dr. Calderon was then able to intubate the patient (TSN, July 25, 1991, p. 9). Meanwhile, Rogelio, who was outside the operating room, saw a respiratory machine being rushed towards the door of the operating room. He also saw several doctors rushing towards the operating room. When informed by Herminda Cruz that something wrong was happening, he told her (Herminda) to be back with the patient inside the operating room (TSN, October 19, 1989, pp. 25-28). Herminda Cruz immediately rushed back, and saw that the patient was still in trendelenburg position (TSN, January 13, 1988, p. 20). At almost 3:00 P.M. of that fateful day, she saw the patient taken to the Intensive Care Unit (ICU). About two days thereafter, Rogelio E. Ramos was able to talk to Dr. Hosaka. The latter informed the former that something went wrong during the intubation. Reacting to what was told to him, Rogelio reminded the doctor that the condition of his wife would not have happened, had he (Dr. Hosaka) looked for a good anesthesiologist (TSN, October 19, 1989, p. 31). Doctors Gutierrez and Hosaka were also asked by the hospital to explain what happened to the patient. The doctors explained that the patient had bronchospasm (TSN, November 15, 1990, pp. 26-27). Erlinda Ramos stayed at the ICU for a month. About four months thereafter or on November 15, 1985, the patient was released from the hospital. During the whole period of her confinement, she incurred hospital bills amounting to P93,542.25 which is the subject of a promissory note and affidavit of undertaking executed by Rogelio E. Ramos in favor of DLSMC. Since that fateful afternoon of June 17, 1985, she has been in a comatose condition. She cannot do anything. She cannot move any part of her body. She cannot see or hear. She is living on mechanical means. She suffered brain damage as a result of the absence of oxygen in her brain for four to five minutes (TSN, November 9, 1989, pp. 21-22). After being discharged from the hospital, she has been staying in their residence, still needing constant medical attention, with her husband Rogelio incurring a monthly expense ranging from P8,000.00 to P10,000.00 (TSN, October 19, 1989, pp. 32-34). She was also diagnosed to be suffering from "diffuse cerebral parenchymal damage" (Exh. "G"; see also TSN, December 21, 1989, 5 p. 6). Thus, on 8 January 1986, petitioners filed a civil case 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.
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The evidence further shows that the hapless patient suffered brain damage because of the absence of oxygen in her (patient's) brain for approximately four to five minutes which, in turn, caused the patient to become comatose. On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of Dr. Perfecta Gutierrez whom he had chosen to administer anesthesia on the patient as part of his obligation to provide the patient a good anesthesiologist', and for arriving for the scheduled operation almost three (3) hours late. On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of negligence of the doctors in their "practice of medicine" in the operating room. Moreover, the hospital is liable for failing through its responsible officials, to cancel the scheduled operation after Dr. Hosaka inexcusably failed to arrive on time. In having held thus, this Court rejects the defense raised by defendants that they have acted with due care and prudence in rendering medical services to plaintiff-patient. For if the patient was properly intubated as claimed by them, the patient would not have become comatose. And, the fact that another anesthesiologist was called to try to intubate the patient after her (the patient's) nailbed turned bluish, belie their claim. Furthermore, the defendants should have rescheduled the operation to a later date. This, they should have done, if defendants acted with due care and prudence as the patient's case was an elective, not an emergency case. xxx xxx xxx WHEREFORE, and in view of the foregoing, judgment is rendered in favor of the plaintiffs and against the defendants. Accordingly, the latter are ordered to pay, jointly and severally, the former the following sums of money, to wit: 1) the sum of P8,000.00 as actual monthly expenses for the plaintiff Erlinda Ramos reckoned from November 15, 1985 or in the total sum of P632,000.00 as of April 15, 1992, subject to its being updated; 2) the sum of P100,000.00 as reasonable attorney's fees; 3) the sum of P800,000.00 by way of moral damages and the further sum of P200,000,00 by way of exemplary damages; and, 4) the costs of the suit. SO ORDERED.
7

Private respondents seasonably interposed an appeal to the Court of Appeals. The appellate court rendered a Decision, dated 29 May 1995, reversing the findings of the trial court. The decretal portion of the decision of the appellate court reads: WHEREFORE, for the foregoing premises the appealed decision is hereby REVERSED, and the complaint below against the appellants is hereby ordered DISMISSED. The counterclaim of appellant De Los Santos Medical Center is GRANTED but only insofar as appellees are hereby ordered to pay the unpaid hospital bills amounting to P93,542.25, plus legal interest for justice must be tempered with mercy. SO ORDERED.
8

The decision of the Court of Appeals was received on 9 June 1995 by petitioner Rogelio Ramos who was mistakenly addressed as "Atty. Rogelio Ramos." No copy of the decision, however, was sent nor received by the Coronel Law Office, then counsel on record of petitioners. Rogelio referred the decision of the appellate court to a new lawyer, Atty. Ligsay, only on 20 June 1995, or four (4) days before the expiration of the reglementary period for filing a motion for reconsideration. On the same day, Atty. Ligsay, filed with the appellate court a motion for extension of time to file a motion for reconsideration. The motion for reconsideration was submitted on 4 July 1995. However, the appellate court denied the motion for extension of time in its 9 Resolution dated 25 July 1995. Meanwhile, petitioners engaged the services of another counsel, Atty. Sillano, to replace Atty. Ligsay. Atty. Sillano filed on 7 August 1995 a motion to admit the motion for reconsideration contending that the period to file the appropriate pleading on the assailed decision had not yet commenced to run as the Division Clerk of Court of the Court of Appeals had not yet served a copy thereof to the counsel on record. Despite this explanation, the appellate court still denied the motion to admit the motion for reconsideration of petitioners in its Resolution, dated 29 March 1996, primarily on the ground that the fifteen-day (15) period for filing a motion for reconsideration had already expired, to wit: We said in our Resolution on July 25, 1995, that the filing of a Motion for Reconsideration cannot be extended; precisely, the Motion for Extension (Rollo, p. 12) was denied. It is, on the other hand, admitted in the latter Motion that plaintiffs/appellees received a copy of the decision as early as June 9, 1995. Computation wise, the period to file a Motion for Reconsideration expired on June 24. The Motion for Reconsideration, in turn, was received by the Court of Appeals already on July 4, necessarily, the 15-day period already passed. For that alone, the latter should be denied. Even assuming admissibility of the Motion for the Reconsideration, Comment/Opposition, the former, for lack of merit, is hereby DENIED. SO ORDERED.
10

but

after

considering

the

A copy of the above resolution was received by Atty. Sillano on 11 April 1996. The next day, or on 12 April 1996, Atty. Sillano filed before this Court a motion for extension of time to file the present petition for certiorari under Rule 45. The Court granted the motion for extension of time and gave petitioners additional thirty (30) days after the expiration of the fifteen-day (15) period counted from the receipt of the resolution of the Court of Appeals within which to submit the petition. The due date fell on 27 May 1996. The petition was filed on 9 May 1996, well within the extended period given by the Court. Petitioners assail the decision of the Court of Appeals on the following grounds: I IN PUTTING MUCH RELIANCE ON THE TESTIMONIES OF RESPONDENTS DRA. GUTIERREZ, DRA. CALDERON AND DR. JAMORA; II IN FINDING THAT THE NEGLIGENCE OF THE RESPONDENTS DID NOT CAUSE THE UNFORTUNATE COMATOSE CONDITION OF PETITIONER ERLINDA RAMOS; III IN NOT APPLYING THE DOCTRINE OF RES IPSA LOQUITUR.
11

Before we discuss the merits of the case, we shall first dispose of the procedural issue on the timeliness of the petition in relation to the motion for reconsideration filed by petitioners with the Court of Appeals. In their 12 Comment, private respondents contend that the petition should not be given due course since the motion for reconsideration of the petitioners on the decision of the Court of Appeals was validly dismissed by the appellate court for having been filed beyond the reglementary period. We do not agree. A careful review of the records reveals that the reason behind the delay in filing the motion for reconsideration is attributable to the fact that the decision of the Court of Appeals was not sent to then counsel on record of petitioners, the Coronel Law Office. In fact, a copy of the decision of the appellate court was instead sent to and received by petitioner Rogelio Ramos on 9 June 1995 wherein he was mistakenly addressed as Atty. Rogelio Ramos. Based on the other communications received by petitioner Rogelio Ramos, the appellate court apparently mistook him for the counsel on record. Thus, no copy of the decision of the counsel on record. Petitioner, not being a lawyer and unaware of the prescriptive period for filing a motion for reconsideration, referred the same to a legal counsel only on 20 June 1995. It is elementary that when a party is represented by counsel, all notices should be sent to the party's lawyer at his given address. With a few exceptions, notice to a litigant without notice to his counsel on record is no notice at all. In the present case, since a copy of the decision of the appellate court was not sent to the counsel on record of petitioner, there can be no sufficient notice to speak of. Hence, the delay in the filing of the motion for reconsideration cannot be taken against petitioner. Moreover, since the Court of Appeals already issued a second Resolution, dated 29 March 1996, which superseded the earlier resolution issued on 25 July 1995, and denied the motion for reconsideration of petitioner, we believed that the receipt of the former should be considered in determining the timeliness of the filing of the present petition. Based on this, the petition before us was submitted on time. After resolving the foregoing procedural issue, we shall now look into the merits of the case. For a more logical presentation of the discussion we shall first consider the issue on the applicability of the doctrine of res ipsa loquitur to the instant case. Thereafter, the first two assigned errors shall be tackled in relation to the res ipsa loquitur doctrine. Res ipsa loquitur is a Latin phrase which literally means "the thing or the transaction speaks for itself." The phrase "res ipsa loquitur'' is a maxim for the rule that the fact of the occurrence of an injury, taken with the surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiff's prima facie case, and present a question of 13 fact for defendant to meet with an explanation. 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 14 defendant, that the accident arose from or was caused by the defendant's want of care. 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 15 instrumentality causing the injury in the absence of some explanation by the defendant who is charged with negligence. It is grounded in the superior logic of ordinary human experience and on the basis of such experience or common knowledge, 16 negligence may be deduced from the mere occurrence of the accident itself. 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 17 an independent or separate ground of liability. Instead, it is considered as merely evidentiary or in the nature of a procedural 18 rule. It is regarded as a mode of proof, or a mere procedural of convenience since it furnishes a substitute for, and relieves a 19 plaintiff of, the burden of producing specific proof of negligence. 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 20 with the proof. 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 21 eliminated. In the above requisites, the fundamental element is the "control of instrumentality" which caused the damage. Such 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 23 doctrine were present in a particular incident. Medical malpractice 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 25 of that harm. The application of res ipsa loquitur in medical negligence cases presents a question of law since it is a judicial 26 function to determine whether a certain set of circumstances does, as a matter of law, permit a given inference. 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, 27 the need for expert medical testimony is dispensed with because the injury itself provides the proof of negligence. The reason is that the general rule on the necessity of expert testimony applies only to such matters clearly within the domain of medical science, and not to matters that are within the common knowledge of mankind which may be testified to by anyone familiar with 28 the facts. Ordinarily, only physicians and surgeons of skill and experience are competent to testify as to whether a patient has been treated or operated upon with a reasonable degree of skill and care. However, testimony as to the statements and acts of physicians and surgeons, external appearances, and manifest conditions which are observable by any one may be given by 29 non-expert witnesses. Hence, in cases where the res ipsa loquitur is applicable, the court is permitted to find a physician negligent upon proper proof of injury to the patient, without the aid of expert testimony, where the court from its fund of common 30 knowledge can determine the proper standard of care. Where common knowledge and experience teach that a resulting injury would not have occurred to the patient if due care had been exercised, an inference of negligence may be drawn giving rise to an application of the doctrine of res ipsa loquitur without medical evidence, which is ordinarily required to show not only what 31 occurred but how and why it occurred. When the doctrine is appropriate, all that the patient must do is prove a nexus between the particular act or omission complained of and the injury sustained while under the custody and management of the defendant without need to produce expert medical testimony to establish the standard of care. Resort to res ipsa 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 32 the patient after an operation, injuries sustained on a healthy part of the body which was not under, or in the area, of 33 34 treatment, removal of the wrong part of the body when another part was intended, knocking out a tooth while a patient's jaw 35 was under anesthetic for the removal of his tonsils, and loss of an eye while the patient plaintiff was under the influence of 36 anesthetic, during or following an operation for appendicitis, among others. Nevertheless, despite the fact that the scope of res ipsa loquitur has been measurably enlarged, it does not automatically apply to all cases of medical negligence as to mechanically shift the burden of proof to the defendant to show that he is not guilty of the ascribed negligence. Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon the circumstances of each case. It is generally restricted to situations in malpractice cases where a layman is able to say, as a matter of common knowledge and observation, that the consequences of professional care were not as such as would ordinarily have followed if due care had been 37 exercised. A distinction must be made between the failure to secure results, and the occurrence of something more unusual and not ordinarily found if the service or treatment rendered followed the usual procedure of those skilled in that particular practice. It must be conceded that the doctrine of res ipsa loquitur can have no application in a suit against a physician or 38 surgeon which involves the merits of a diagnosis or of a scientific treatment. The physician or surgeon is not required at his peril to explain why any particular diagnosis was not correct, or why any particular scientific treatment did not produce the 39 desired result. Thus, res ipsa loquitur is not available in a malpractice suit if the only showing is that the desired result of an 40 operation or treatment was not accomplished. 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 41 man as the negligent cause or causes of the untoward consequence. 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 42 could. We find the doctrine of res ipsa loquitur appropriate in the case at bar. As will hereinafter be explained, the damage sustained by Erlinda in her brain prior to a scheduled gall bladder operation presents a case for the application of res ipsa loquitur. A case strikingly similar to the one before us is Voss vs. Bridwell, loquitur stated:
43 24 22

where the Kansas Supreme Court in applying the res ipsa

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 44 under the doctrine of res ipsa loquitur. Indeed, the principles enunciated in the aforequoted case apply with equal force here. In the present case, Erlinda submitted herself for cholecystectomy and expected a routine general surgery to be performed on her gall bladder. On that fateful day she delivered her person over to the care, custody and control of private respondents who exercised complete and exclusive control over her. At the time of submission, Erlinda was neurologically sound and, except for a few minor discomforts, was likewise physically fit in mind and body. However, during the administration of anesthesia and prior to the performance of cholecystectomy she suffered irreparable damage to her brain. Thus, without undergoing surgery, she went out of the operating room already decerebrate and totally incapacitated. Obviously, brain damage, which Erlinda sustained, is an injury which does not normally occur in the process of a gall bladder operation. In fact, this kind of situation does not in the absence of negligence of someone in the administration of anesthesia and in the use of endotracheal tube. Normally, a person being put under anesthesia is not rendered decerebrate as a consequence of administering such anesthesia if the proper procedure was followed. Furthermore, the instruments used in the administration of anesthesia, including the endotracheal tube, were all under the exclusive control of private respondents, who are the physicians-in-charge. Likewise, petitioner Erlinda could not have been guilty of contributory negligence because she was under the influence of anesthetics which rendered her unconscious. Considering that a sound and unaffected member of the body (the brain) is injured or destroyed while the patient is unconscious and under the immediate and exclusive control of the physicians, we hold that a practical administration of justice dictates the application of res ipsa loquitur. Upon these facts and under these circumstances the Court would be able to say, as a matter of common knowledge and observation, if negligence attended the management and care of the patient. Moreover, the liability of the physicians and the hospital in this case is not predicated upon an alleged failure to secure the desired results of an operation nor on an alleged lack of skill in the diagnosis or treatment as in fact no operation or treatment was ever performed on Erlinda. Thus, upon all these initial determination a case is made out for the application of the doctrine of res ipsa loquitur. Nonetheless, in holding that res ipsa loquitur is available to the present case we are not saying that the doctrine is applicable in any and all cases where injury occurs to a patient while under anesthesia, or to any and all anesthesia cases. Each case must be viewed in its own light and scrutinized in order to be within the res ipsa loquitur coverage. Having in mind the applicability of the res ipsa loquitur doctrine and the presumption of negligence allowed therein, the Court now comes to the issue of whether the Court of Appeals erred in finding that private respondents were not negligent in the care of Erlinda during the anesthesia phase of the operation and, if in the affirmative, whether the alleged negligence was the proximate cause of Erlinda's comatose condition. Corollary thereto, we shall also determine if the Court of Appeals erred in relying on the testimonies of the witnesses for the private respondents. In sustaining the position of private respondents, the Court of Appeals relied on the testimonies of Dra. Gutierrez, Dra. Calderon and Dr. Jamora. In giving weight to the testimony of Dra. Gutierrez, the Court of Appeals rationalized that she was candid 45 enough to admit that she experienced some difficulty in the endotracheal intubation of the patient and thus, cannot be said to be covering her negligence with falsehood. The appellate court likewise opined that private respondents were able to show that the brain damage sustained by Erlinda was not caused by the alleged faulty intubation but was due to the allergic reaction of the patient to the drug Thiopental Sodium (Pentothal), a short-acting barbiturate, as testified on by their expert witness, Dr. Jamora. On the other hand, the appellate court rejected the testimony of Dean Herminda Cruz offered in favor of petitioners that the cause of the brain injury was traceable to the wrongful insertion of the tube since the latter, being a nurse, was allegedly not knowledgeable in the process of intubation. In so holding, the appellate court returned a verdict in favor of respondents physicians and hospital and absolved them of any liability towards Erlinda and her family. We disagree with the findings of the Court of Appeals. We hold that private respondents were unable to disprove the presumption of negligence on their part in the care of Erlinda and their negligence was the proximate cause of her piteous condition. In the instant case, the records are helpful in furnishing not only the logical scientific evidence of the pathogenesis of the injury but also in providing the Court the legal nexus upon which liability is based. As will be shown hereinafter, private respondents' own testimonies which are reflected in the transcript of stenographic notes are replete of signposts indicative of their negligence in the care and management of Erlinda. With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during the anesthesia phase. As borne by the records, respondent Dra. Gutierrez failed to properly intubate the patient. This fact was attested to by Prof. Herminda Cruz, Dean of the Capitol Medical Center School of Nursing and petitioner's sister-in-law, who was in the operating room right beside the patient when the tragic event occurred. Witness Cruz testified to this effect: ATTY. PAJARES:

Q: In particular, what did Dra. Perfecta Gutierrez do, if any on the patient? A: In particular, I could see that she was intubating the patient. Q: Do you know what happened to that intubation process administered by Dra. Gutierrez? ATTY. ALCERA: She will be incompetent Your Honor. COURT: Witness may answer if she knows. A: As have said, I was with the patient, I was beside the stretcher holding the left hand of the patient and all of a sudden heard some remarks coming from Dra. Perfecta Gutierrez herself. She was saying "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan. xxx xxx xxx ATTY. PAJARES: Q: From whom did you hear those words "lumalaki ang tiyan"? A: From Dra. Perfecta Gutierrez. xxx xxx xxx Q: After hearing the phrase "lumalaki ang tiyan," what did you notice on the person of the patient? A: I notice (sic) some bluish discoloration on the nailbeds of the left hand where I was at. Q: Where was Dr. Orlino Ho[s]aka then at that particular time? A: I saw him approaching the patient during that time. Q: When he approached the patient, what did he do, if any? A: He made an order to call on the anesthesiologist in the person of Dr. Calderon. Q: Did Dr. Calderon, upon being called, arrive inside the operating room? A: Yes sir. Q: What did [s]he do, if any? A: [S]he tried to intubate the patient. Q: What happened to the patient? A: When Dr. Calderon try (sic) to intubate the patient, after a while the patient's nailbed became bluish and I saw the patient was placed in trendelenburg position. xxx xxx xxx Q: Do you know the reason why the patient was placed in that trendelenburg position? A: As far as I know, when a patient is in that position, there is a decrease of blood supply to the 46 brain. 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 47 from lack of sufficient factual bases. 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, 48 external appearances, and manifest conditions which are observable by any one. 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 49 knowledge, or where the lack of skill or want of care is so obvious as to render expert testimony unnecessary. 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 50 Dean of the Capitol Medical Center School of Nursing. Reviewing witness Cruz' statements, we find that the same were delivered in a straightforward manner, with the kind of detail, clarity, consistency and spontaneity which would have been difficult to fabricate. With her clinical background as a nurse, the Court is satisfied that she was able to demonstrate through her testimony what truly transpired on that fateful day. Most of all, her testimony was affirmed by no less than respondent Dra. Gutierrez who admitted that she experienced difficulty in inserting the tube into Erlinda's trachea, to wit: ATTY. LIGSAY: Q: In this particular case, Doctora, while you were intubating at your first attempt (sic), you did not immediately see the trachea? DRA. GUTIERREZ: A: Yes sir. Q: Did you pull away the tube immediately? A: You do not pull the . . . Q: Did you or did you not? A: I did not pull the tube. Q: When you said "mahirap yata ito," what were you referring to? A: "Mahirap yata itong i-intubate," that was the patient. Q: So, you found some difficulty in inserting the tube? A: Yes, because of (sic) my first attempt, I did not see right away.
51

Curiously in the case at bar, respondent Dra. Gutierrez made the haphazard defense that she encountered hardship in the insertion of the tube in the trachea of Erlinda because it was positioned more anteriorly (slightly deviated from the normal 52 anatomy of a person) 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 53 patient's medical records and visits with the patient, traditionally, the day before elective surgery. It includes taking the 54 patient's medical history, review of current drug therapy, physical examination and interpretation of laboratory data. The physical examination performed by the anesthesiologist is directed primarily toward the central nervous system, cardiovascular

system, lungs and upper airway. 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 56 uvula and the thyromental distance. Thus, physical characteristics of the patient's upper airway that could make tracheal 57 intubation difficult should be studied. 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 59 bronchospasm 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 60 encephalopathy, was due to an unpredictable drug reaction to the short-acting barbiturate. We find the theory of private respondents unacceptable. First of all, Dr. Jamora cannot be considered an authority in the field of anesthesiology simply because he is not an anesthesiologist. Since Dr. Jamora is a pulmonologist, he could not have been capable of properly enlightening the court about anesthesia practice and procedure and their complications. Dr. Jamora is likewise not an allergologist and could not therefore properly advance expert opinion on allergic-mediated processes. Moreover, he is not a pharmacologist and, as such, could not have been capable, as an expert would, of explaining to the court the pharmacologic and toxic effects of the supposed culprit, Thiopental Sodium (Pentothal). The inappropriateness and absurdity of accepting Dr. Jamora's testimony as an expert witness in the anesthetic practice of Pentothal administration is further supported by his own admission that he formulated his opinions on the drug not from the practical experience gained by a specialist or expert in the administration and use of Sodium Pentothal on patients, but only from reading certain references, to wit: ATTY. LIGSAY:

55

Q: In your line of expertise on pulmonology, did you have any occasion to use pentothal as a method of management? DR. JAMORA: A: We do it in conjunction with the anesthesiologist when they have to intubate our patient. Q: But not in particular when you practice pulmonology? A: No. Q: In other words, your knowledge about pentothal is based only on what you have read from books and not by your own personal application of the medicine pentothal? A: Based on my personal experience also on pentothal. Q: How many times have you used pentothal? A: They used it on me. I went into bronchospasm during my appendectomy. Q: And because they have used it on you and on account of your own personal experience you feel that you can testify on pentothal here with medical authority? A: No. That is why I used references to support my claims. 61 An anesthetic accident caused by a rare drug-induced bronchospasm properly falls within the fields of anesthesia, internal medicine-allergy, and clinical pharmacology. The resulting anoxic encephalopathy belongs to the field of neurology. While admittedly, many bronchospastic-mediated pulmonary diseases are within the expertise of pulmonary medicine, Dr. Jamora's field, the anesthetic drug-induced, allergic mediated bronchospasm alleged in this case is within the disciplines of anesthesiology, allergology and pharmacology. On the basis of the foregoing transcript, in which the pulmonologist himself admitted that he could not testify about the drug with medical authority, it is clear that the appellate court erred in giving weight to Dr. Jamora's testimony as an expert in the administration of Thiopental Sodium. The provision in the rules of evidence
62

regarding expert witnesses states:

Sec. 49. Opinion of expert witness. The opinion of a witness on a matter requiring special knowledge, skill, experience or training which he is shown to possess, may be received in evidence. Generally, to qualify as an expert witness, one must have acquired special knowledge of the subject matter about which he or 63 she is to testify, either by the study of recognized authorities on the subject or by practical experience. 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 64 cause, produces injury, and without which the result would not have occurred. An injury or damage is proximately caused by an act or a failure to act, whenever it appears from the evidence in the case, that the act or omission played a substantial part in bringing about or actually causing the injury or damage; and that the injury or damage was either a direct result or a reasonably 65 probable consequence of the act or omission. 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 66 showed signs of cyanosis. As stated in the testimony of Dr. Hosaka, the lack of oxygen became apparent only after he noticed 67 that the nailbeds of Erlinda were already blue. 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, 68 Erlinda already suffered brain damage as a result of the inadequate oxygenation of her brain for about four to five minutes. The above conclusion is not without basis. Scientific studies point out that intubation problems are responsible for one-third (1/3) 69 of deaths and serious injuries associated with anesthesia. Nevertheless, ninety-eight percent (98%) or the vast majority of 70 difficult intubations may be anticipated by performing a thorough evaluation of the patient's airway prior to the operation. As stated beforehand, respondent Dra. Gutierrez failed to observe the proper pre-operative protocol which could have prevented this unfortunate incident. Had appropriate diligence and reasonable care been used in the pre-operative evaluation, respondent physician could have been much more prepared to meet the contingency brought about by the perceived anatomic variations in the patient's neck and oral area, defects which would have been easily overcome by a prior knowledge of those variations 71 together with a change in technique. In other words, an experienced anesthesiologist, adequately alerted by a thorough pre72 operative evaluation, would have had little difficulty going around the short neck and protruding teeth. Having failed to observe common medical standards in pre-operative management and intubation, respondent Dra. Gutierrez' negligence resulted in cerebral anoxia and eventual coma of Erlinda. We now determine the responsibility of respondent Dr. Orlino Hosaka as the head of the surgical team. As the so-called "captain 73 of the ship," 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 74 filling up specialist staff with attending and visiting "consultants," who are allegedly not hospital employees, presents problems in apportioning responsibility for negligence in medical malpractice cases. However, the difficulty is 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 75 administration or by a review committee set up by the hospital who either accept or reject the application. This is particularly true with respondent hospital. After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinico-pathological conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and patient audits and perform other tasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the privilege of admitting patients into the hospital. In addition to these, the physician's performance as a specialist is generally evaluated by a peer review committee on the basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or a consultant who regularly falls short of the minimum standards acceptable to the hospital or its peer review committee, is normally politely terminated. In other words, private hospitals, hire, fire and exercise real control over their attending and visiting "consultant" staff. While "consultants" are not, technically employees, a point which respondent hospital asserts in denying all responsibility for the patient's condition, the control exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians. This being the case, the question now arises as to whether or not respondent hospital is 76 solidarily liable with respondent doctors for petitioner's condition. 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 77 responsibility under a relationship of patria potestas. Such responsibility ceases when the persons or entity concerned prove 78 that they have observed the diligence of a good father of the family to prevent damage. 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 79 of negligence. Upon these disquisitions we hold that private respondents are solidarily liable for damages under Article 2176 of the Civil Code. We now come to the amount of damages due petitioners. The trial court awarded a total of P632,000.00 pesos (should be P616,000.00) in compensatory damages to the plaintiff, "subject to its being updated" covering the period from 15 November 1985 up to 15 April 1992, based on monthly expenses for the care of the patient estimated at P8,000.00. At current levels, the P8000/monthly amount established by the trial court at the time of its decision would be grossly inadequate to cover the actual costs of home-based care for a comatose individual. The calculated amount was not even arrived at by looking at the actual cost of proper hospice care for the patient. What it reflected were the actual expenses incurred and proved by the petitioners after they were forced to bring home the patient to avoid mounting hospital bills. And yet ideally, a comatose patient should remain in a hospital or be transferred to a hospice specializing in the care of the chronically ill for the purpose of providing a proper milieu adequate to meet minimum standards of care. In the instant case for instance, Erlinda has to be constantly turned from side to side to prevent bedsores and hypostatic pneumonia. Feeding is done by nasogastric tube. Food preparation should be normally made by a dietitian to provide her with the correct daily caloric requirements and vitamin supplements. Furthermore, she has to be seen on a regular basis by a physical therapist to avoid muscle atrophy, and by a pulmonary therapist to prevent the accumulation of secretions which can lead to respiratory complications. Given these considerations, the amount of actual damages recoverable in suits arising from negligence should at least reflect the correct minimum cost of proper care, not the cost of the care the family is usually compelled to undertake at home to avoid bankruptcy. However, the provisions of the Civil Code on actual or compensatory damages present us with some difficulties. Well-settled is the rule that actual damages which may be claimed by the plaintiff are those suffered by him as he has duly proved. The Civil Code provides: Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Our rules on actual or compensatory damages generally assume that at the time of litigation, the injury suffered as a consequence of an act of negligence has been completed and that the cost can be liquidated. However, these provisions neglect to take into account those situations, as in this case, where the resulting injury might be continuing and possible future complications directly arising from the injury, while certain to occur, are difficult to predict. In these cases, the amount of damages which should be awarded, if they are to adequately and correctly respond to the injury caused, should be one which compensates for pecuniary loss incurred and proved, up to the time of trial; and one which would 80 meet pecuniary loss certain to be suffered but which could not, from the nature of the case, be made with certainty. In other words, temperate damages can and should be awarded on top of actual or compensatory damages in instances where the injury is chronic and continuing. And because of the unique nature of such cases, no incompatibility arises when both actual and temperate damages are provided for. The reason is that these damages cover two distinct phases. As it would not be equitable and certainly not in the best interests of the administration of justice for the victim in such cases to constantly come before the courts and invoke their aid in seeking adjustments to the compensatory damages previously awarded temperate damages are appropriate. The amount given as temperate damages, though to a certain extent speculative, should take into account the cost of proper care. In the instant case, petitioners were able to provide only home-based nursing care for a comatose patient who has remained in that condition for over a decade. Having premised our award for compensatory damages on the amount provided by petitioners at the onset of litigation, it would be now much more in step with the interests of justice if the value awarded for temperate damages would allow petitioners to provide optimal care for their loved one in a facility which generally specializes in such care. They should not be compelled by dire circumstances to provide substandard care at home without the aid of professionals, for anything less would be grossly inadequate. Under the circumstances, an award of P1,500,000.00 in temperate damages would 81 therefore be reasonable. In Valenzuela vs. Court of Appeals, 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
82

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, 83 sleeplessness, psychological injury, mental and physical pain are inestimable. 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 84 damage and injury suffered by the victim or those actually affected by the victim's condition. The husband and the children, all petitioners in this case, will have to live with the day to day uncertainty of the patient's illness, knowing any hope of recovery is close to nil. They have fashioned their daily lives around the nursing care of petitioner, altering their long term goals to take into account their life with a comatose patient. They, not the respondents, are charged with the moral responsibility of the care of the victim. The family's moral injury and suffering in this case is clearly a real one. For the foregoing reasons, an award of P2,000,000.00 in moral damages would be appropriate. Finally, by way of example, exemplary damages in the amount of P100,000.00 are hereby awarded. Considering the length and nature of the instant suit we are of the opinion that attorney's fees valued at P100,000.00 are likewise proper. Our courts face unique difficulty in adjudicating medical negligence cases because physicians are not insurers of life and, they rarely set out to intentionally cause injury or death to their patients. However, intent is immaterial in negligence cases because where negligence exists and is proven, the same automatically gives the injured a right to reparation for the damage caused. Established medical procedures and practices, though in constant flux are devised for the purpose of preventing complications. A physician's experience with his patients would sometimes tempt him to deviate from established community practices, and he may end a distinguished career using unorthodox methods without incident. However, when failure to follow established procedure results in the evil precisely sought to be averted by observance of the procedure and a nexus is made between the deviation and the injury or damage, the physician would necessarily be called to account for it. In the case at bar, the failure to observe pre-operative assessment protocol which would have influenced the intubation in a salutary way was fatal to private respondents' case. WHEREFORE, the decision and resolution of the appellate court appealed from are hereby modified so as to award in favor of petitioners, and solidarily against private respondents the following: 1) P1,352,000.00 as actual damages computed as of the date of promulgation of this decision plus a monthly payment of P8,000.00 up to the time that petitioner Erlinda Ramos expires or miraculously survives; 2) P2,000,000.00 as moral damages, 3) P1,500,000.00 as temperate damages; 4) P100,000.00 each as exemplary damages and attorney's fees; and, 5) the costs of the suit. SO ORDERED.

G.R. No. 108630 April 2, 1996 PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and LORETO TAN, respondents. ROMERO, J.:p Petitioner Philippine National Bank (PNB) questions the decision of the Court of Appeals partially affirming the judgment of the Regional Trial Court, Branch 44, Bacolod City. The dispositive portion of the trial court's decision states: WHEREFORE, premises considered, the Court hereby renders judgment in favor of the plaintiff and against the defendants as follows: 1) Ordering defendants to pay plaintiff jointly and severally the sum of P32,480.00, with legal rate of interest to be computed from May 2, 1979, date of filing of this complaint until fully paid; 2) Ordering defendants to pay plaintiff jointly and severally the sum of P5,000.00 as exemplary damages; 3) Ordering defendants to pay plaintiff jointly and severally the sum of P5,000.00 as attorney's fees; and 4) To pay the costs of this suit. SO ORDERED. The facts are the following: Private respondent Loreto Tan (Tan) is the owner of a parcel of land abutting the national highway in Mandalagan, Bacolod Cit y. Expropriation proceedings were instituted by the government against private respondent Tan and other property owners before the then Court of First Instance of Negros Occidental, Branch IV, docketed as Civil Case No. 12924. Tan filed a motion dated May 10, 1978 requesting issuance of an order for the release to him of the expropriation price of P32,480.00. On May 22, 1978, petitioner PNB (Bacolod Branch) was required by the trial court to release to Tan the amount of P32,480.00 deposited with it by the government. On May 24, 1978, petitioner, through its Assistant Branch Manager Juan Tagamolila, issued a manager's check for P32,480.00 and delivered the same to one Sonia Gonzaga without Tan's knowledge, consent or authority. Sonia Gonzaga deposited it in her account with Far East Bank and Trust Co. (FEBTC) and later on withdrew the said amount. Private respondent Tan subsequently demanded payment in the amount of P32,480.00 from petitioner, but the same was refused on the ground that petitioner had already paid and delivered the amount to Sonia Gonzaga on the strength of a Special Power of Attorney (SPA) allegedly executed in her favor by Tan. On June 8, 1978, Tan executed an affidavit before petitioner's lawyer, Alejandro S. Some, stating that: 1) he had never executed any Special Power of Attorney in favor of Sonia S. Gonzaga; 2) he had never authorized Sonia Gonzaga to receive the sum of P32,480.00 from petitioner; 3) he signed a motion for the court to issue an Order to release the said sum of money to him and gave the same to Mr. Nilo Gonzaga (husband of Sonia) to be filed in court. However, after the Order was subsequently issued by the court, a certain Engineer Decena of the Highway Engineer's Office issued the authority to release the funds not to him but to Mr. Gonzaga. When he failed to recover the amount from PNB, private respondent filed a motion with the court to require PNB to pay the same to him. Petitioner filed an opposition contending that Sonia Gonzaga presented to it a copy of the May 22, 1978 order and a special power of attorney by virtue of which petitioner delivered the check to her. The matter was set for hearing on July 21, 1978 and petitioner was directed by the court to produce the said special power of attorney thereat. However, petitioner failed to do so. The court decided that there was need for the matter to be ventilated in a separate civil action and thus private respondent filed a complaint with the Regional Trial Court in Bacolod City (Branch 44) against petitioner and Juan Tagamolila, PNB's Assistant Branch Manager, to recover the said amount. In its defense, petitioner contended that private respondent had duly authorized Sonia Gonzaga to act as his agent.
2 1

On September 28, 1979, petitioner filed a third-party complaint against the spouses Nilo and Sonia Gonzaga praying that they be ordered to pay private respondent the amount of P32,480.00. However, for failure of petitioner to have the summons served on the Gonzagas despite opportunities given to it, the third-party complaint was dismissed. Tagamolila, in his answer, stated that Sonia Gonzaga presented a Special Power of Attorney to him but borrowed it later with the promise to return it, claiming that she needed it to encash the check. On June 7, 1989, the trial court rendered judgment ordering petitioner and Tagamolila to pay private respondent jointly and severally the amount of P32,480.00 with legal interest, damages and attorney's fees. Both petitioner and Tagamolila appealed the case to the Court of Appeals. In a resolution dated April 8, 1991, the appellate court dismissed Tagamolila's appeal for failure to pay the docket fee within the reglementary period. On August 31, 1992, the Court of Appeals affirmed the decision of the trial court against petitioner, with the modification that the award of P5,000.00 for exemplary damages and P5,000.00 for attorney's fees by the trial court was deleted. Hence, this petition. Petitioner PNB states that the issue in this case is whether or not the SPA ever existed. It argues that the existence of the SPA need not be proved by it under the "best evidence rule" because it already proved the existence of the SPA from the testimonies of its witnesses and by the certification issued by the Far East Bank and Trust Company that it allowed Sonia Gonzaga to encash Tan's check on the basis of the SPA. We find the petition unmeritorious. There is no question that no payment had ever been made to private respondent as the check was never delivered to him. When the court ordered petitioner to pay private respondent the amount of P32,480.00, it had the obligation to deliver the same to him. Under Art. 1233 of the Civil Code, a debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. The burden of proof of such payment lies with the debtor. petitioner was ever presented in court.
3

In the instant case, neither the SPA nor the check issued by

The testimonies of petitioner's own witnesses regarding the check were conflicting. Tagamolila testified that the check was 4 issued to the order of "Sonia Gonzaga as attorney-in-fact of Loreto Tan," while Elvira Tibon, assistant cashier of PNB (Bacolod 5 Branch), stated that the check was issued to the order of "Loreto Tan." Furthermore, contrary to petitioner's contention that all that is needed to be proved is the existence of the SPA, it is also necessary for evidence to be presented regarding the nature and extent of the alleged powers and authority granted to Sonia Gonzaga; more specifically, to determine whether the document indeed authorized her to receive payment intended for private respondent. However, no such evidence was ever presented. Section 2, Rule 130 of the Rules of Court states that: Sec. 2. Original writing must produced; exceptions. There can be no evidence of a writing the contents of which is the subject of inquiry, other than the original writing itself, except in the following cases: (a) When the original has been lost, destroyed, or cannot be produced in court; (b) When the original is in the possession of the party against whom the evidence is offered, and the latter fails to produce it after reasonable notice; (c) When the original is a record or other document in the custody of a public officer; (d) When the original has been recorded in an existing record a certified copy of which is made evidence by law; (e) When the original consists of numerous accounts or other documents which cannot be examined in court without great loss of time and the fact sought to be established from them is only the general result of the whole. Section 4, Rule 130 of the Rules of Court allows the presentation of secondary evidence when the original is lost or destroyed, thus: Sec. 4. Secondary evidence when original is lost or destroyed. When the original writing has been lost or destroyed, or cannot be produced in court, upon proof of its execution and loss or destruction, or unavailability, its contents may be proved by a copy, or by a recital of its contents in some authentic document, or by the recollection of witnesses. Considering that the contents of the SPA are also in issue here, the best evidence rule applies. Hence, only the original document (which has not been presented at all) is the best evidence of the fact as to whether or not private respondent indeed

authorized Sonia Gonzaga to receive the check from petitioner. In the absence of such document, petitioner's arguments regarding due payment must fail. Regarding the award of attorney's fees, we hold that private respondent Tan is entitled to the same. Art. 2208 of the Civil Code allows attorney's fees to be awarded if the claimant is compelled to litigate with third persons or to incur expenses to protect his 6 interest by reason of an unjustified act or omission of the party from whom it is sought. In Rasonable v. NLRC, et al., we held that when a party is forced to litigate to protect his rights, he is entitled to an award of attorney's fees. As for the award of exemplary damages, we agree with the appellate court that the same should be deleted. Under Art. 2232 of the Civil Code, exemplary damages may be awarded if a party acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. However, they cannot be recovered as a matter of right; the court has yet to decide whether 8 or not they should be adjudicated. Jurisprudence has set down the requirements for exemplary damages to be awarded: 1. they may be imposed by way of example in addition to compensatory damages, and only after the claimant's right to them has been established; 2. they cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant; 3. the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner.
9 7

In the case at bench, while there is a clear breach of petitioner's obligation to pay private respondents, there is no evidence that it acted in a fraudulent, wanton, reckless or oppressive manner. Furthermore, there is no award of compensatory damages which is a prerequisite before exemplary damages may be awarded. Therefore, the award by the trial court of P5,000.00 as exemplary damages is baseless. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that the award by the Regional Trial Court of P5,000.00 as attorney's fees is REINSTATED. SO ORDERED.

G.R. No. 116181 January 6, 1997 PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS and CARMELO H. FLORES, respondents. KAPUNAN, J.: This refers to private respondent's motion for reconsideration dated 29 May 1996 of the Court's decision promulgated on 17 April 1996, the dispositive portion of which reads: WHEREFORE, premises considered, the assailed decision is hereby MODIFIED as follows: 1. The award of moral damages is reduced from P1,000,000.00 to P100,000.00; and 2. The award of exemplary damages is reduced from P1,000,000.00 to P25,000.00. In all other respects, the assailed decision is hereby AFFIRMED.
1

Private respondent contends that the award of damages is too small considering that petitioner, to end the dispute, was willing to enter into a compromise agreement and offered the amount of P397,272.41 as settlement. In addition, private respondent assails petitioner's malicious act of attacking his character by alluding to his alleged reputation as a "gambler and big time casino player." Carmelo H. Flores' personality and character are irrelevant to the issues at hand. Petitioner's resort to character assassination is thus unfair and uncalled for. In its Brief dated 20 January 1993 filed with the Court of Appeals, petitioner audaciously stated that: . . . Significantly, there is uncontradicted evidence that Flores is a gambler and a big time casino player at that; consequently, his self-serving and uncorroborated evidence cannot be fully believed for as to quote a scholarly treatise A common gambler is a common nuisance, insensible to honor, deaf to pity, bent upon plunder, he is human cormorant, more destructible than the bird of prey itself: (VII, part II, FRANCISCO, EVIDENCE [1991] citing 2 Smith v. Wilson, 31 How. Pr. [N.Y.] 272,22 Fed. Cas. No. 13,128 [at p. 721]). Similarly, in its memorandum before this Court, petitioner asserted that "Flores used the proceeds of the manager's checks on the gaming table:" xxx xxx xxx The undeniable truth is that Flores was playing at the gaming table before he transacted with Angelita Sotero, Cashier of PNB Baguio Hyatt Casino Unit, for the encashment of the P1 Million checks; that after he was paid the first P500,000, in his way back to the gaming table, he took from Sotero a P100,000 advance; and that other three (3) P100,000 were separately paid to him by Sotero in the interval of one to two hours while Flores was playing at the gaming table (TSN, July 2, 1991, pp. 19-26, 34). Thus, the embarrassment claimed by Flores is but a figment of his imagination, as it is but natural to conclude 3 without fear of error that under the circumstances Flores used the money for gambling. Petitioner's allegation that it is allowed by Sec. 11, Rule 132 of the Revised Rules on Evidence to impeach the adverse party's witness "by evidence that his general reputation for truth, honesty, or integrity is bad" is undeserving of merit. Petitioner has not presented adequate evidence to show that private respondent is indeed a big time gambler. Mere allegations are not equivalent to proof. Petitioner has besmirched private respondent's reputation and has considerably caused him undue humiliation. On this point, we reiterate with emphasis the findings of the trial court and the Court of Appeals, to wit: Since there is no doubt as to the fact that the plaintiff purchased from the defendant bank two (2) manager's check worth P500,000.00 each as this was evidenced by an official receipt (Exhibit "A"), then, following the above jurisprudential ruling, the existence of the manager's check (sic) created as (sic) fiduciary relationship between the defendant bank and the plaintiff and therefore any breach thereof must be borne by the negligent party. In this case, the money counter who, among her other duties, is in charge of counting the money received from a client purchasing a manager's check did not perform her duty with diligence and due care. This may be gathered from her testimony that she did not wait for the counting machine to finish counting the money for the plaintiff is a VIP client and he was in a hurry as he was tapping the window (p. 37, T.S.N., August 28, 1990). Equally negligent is Reynaldo Castor for not doing anything when he noticed that their money counters who entertained the plaintiff were rattled. From these unfolded facts, the so-called honest mistake pleaded is therefore misplaced and perforced, defendant must suffer the consequences of its own negligent acts.

The records further show that plaintiff is a prominent businessman, licensed and engaged in the real estate business, buying and selling houses and lots under the business name and style CMS Commercial. He is at the same time a consultant of Dizon-Esguerra Real Estate Company. Defendant treated him as a valued and VIP client. Because of the bank's refusal to encash the entire one million face amount of his manager's checks, he was so embarrassed for he was not able to purchase a house and lot in Montenoza Subdivision, Baguio City. Significantly, the foregoing undisputed facts made even more untenable defendant's implicit supposition that the subject manager's checks were not intended for the purchase of a house or for any business transaction but for gambling. Finally, since plaintiff was compelled to litigate to protect its interest due to the non-compliance of defendant's obligation, he is therefore entitled to attorney's fees (pars. 5, article 2208, Civil Code of the Philippines). xxx xxx xxx Appellee Flores narrated his woes to the lower court when appellant bank refused to honor his Manager's Checks worth P1 Million because of the alleged shortage in appellee's payment to the effect that he had to go back and forth the bank to encash said checks (pp. 16-18, t.s.n., July 2, 1990), and that he lost a deal of (sic) a house for sale in Baguio City worth P1 Million as he could not produce said amount withheld by the appellant bank (p. 22, Id.). Appellee Flores further testified as to the effect of the incident on his integrity as a businessman as follows: Yes, my integrity and dependability as a businessman is highly doubted in Baguio because of the PNB refusal to honor the two (2) manager's checks inspite of them issuing me the receipt. So, whenever I make a deal in house and they would now even doubt whether I have the money to buy the house that I am buying, it greatly affected my integrity as a businessman in Baguio. In the case of Makabali v. C.A., 157 SCRA 253, the Supreme Court reiterated the doctrine on the grant of moral and exemplary damages, as follows: To begin with, there is no hard and fast rule in the determination of what would be a fair amount of moral damages, since each case must be governed by its own peculiar circumstances. Article 2217 of the Civil Code recognizes that moral damages which include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury, are incapable of pecuniary estimation. As to exemplary damages, Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good. While exemplary damages cannot be recovered as a matter of right, they need not be proved, although plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the 4 question of whether or not exemplary damages should be awarded. Accordingly, the moral and exemplary damages awarded to private respondent are increased by P100,000.00 and P25,000.00, respectively. WHEREFORE, the award of moral damages to private respondent is increased to P200,000.00 and the award of exemplary damages is increased to P50,000.00. SO ORDERED.