G.R. No. 116100 February 9, 1996SPOUSES CRISTINO and BRIGIDA CUSTODIO vs.COURT OF APPEALSREGALADO, J.:

This petition for review on certiorari assails the decision of respondent Court of Appeals in CA-G.R. CV No. 29115, promulgated on November 10, 1993, which affirmed with modification the decision of the trial court, as well as its resolution dated July 8, 1994 denying petitioner's motion for reconsideration.1

On August 26, 1982, Civil Case No. 47466 for the grant of an easement of right of way was filed by Pacifico Mabasa against Cristino Custodio, Brigida R. Custodio, Rosalina R. Morato, Lito Santos and Maria Cristina C. Santos before the Regional Trial Court of Pasig and assigned to Branch 22 thereof.2

The generative facts of the case, as synthesized by the trial court and adopted by the Court of Appeals, are as follows:

Perusing the record, this Court finds that the original plaintiff Pacifico Mabasa died during the pendency of this case and was substituted by Ofelia Mabasa, his surviving spouse [and children].

The plaintiff owns a parcel of land with a two-door apartment erected thereon situated at Interior P. Burgos St., Palingon, Tipas, Tagig, Metro Manila. The plaintiff was able to acquire said property through a contract of sale with spouses Mamerto Rayos and Teodora Quintero as vendors last September 1981. Said property may be described to be surrounded by other immovables pertaining to defendants herein. Taking P. Burgos Street as the point of reference, on the left side, going to plaintiff's property, the row of houses will be as follows: That of defendants Cristino and Brigido Custodio, then that of Lito and Maria Cristina Santos and then that of Ofelia Mabasa. On the right side (is) that of defendant Rosalina Morato and then a Septic Tank (Exhibit "D"). As an access to P. Burgos Street from plaintiff's property, there are two possible passageways. The first passageway is approximately one meter wide and is about 20 meters distan(t) from Mabasa's residence to P. Burgos Street. Such path is passing in between the previously mentioned row of houses. The second passageway is about 3 meters

in width and length from plaintiff Mabasa's residence to P. Burgos Street; it is about 26 meters. In passing thru said passageway, a less than a meter wide path through the septic tank and with 5-6 meters in length, has to be traversed.

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

On February 27, 1990, a decision was rendered by the trial court, with this dispositive part:

Accordingly, judgment is hereby rendered as follows:

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

2) Ordering the plaintiff to pay defendants Custodios and Santoses the sum of Eight Thousand Pesos (P8,000) as indemnity for the permanent use of the passageway.

The parties to shoulder their respective litigation expenses.4

Not satisfied therewith, therein plaintiff represented by his heirs, herein private respondents, went to the Court of Appeals raising the sole issue of whether or not the lower court erred in not awarding damages in their favor. On November 10, 1993, as earlier stated, the Court of Appeals rendered its decision affirming the judgment of the trial court with modification, the decretal portion of which disposes as follows:

WHEREFORE, the appealed decision of the lower court is hereby AFFIRMED WITH MODIFICATION only insofar as the herein grant of damages to plaintiffs-appellants. The Court hereby orders defendants-appellees to pay plaintiffs-appellants the sum of Sixty Five Thousand (P65,000) Pesos as Actual Damages, Thirty Thousand (P30,000) Pesos as Moral Damages, and Ten Thousand (P10,000) Pesos as Exemplary Damages. The rest of the appealed decision is affirmed to all respects.5

On July 8, 1994, the Court of Appeals denied petitioner's motion for reconsideration.6 Petitioners then took the present recourse to us, raising two issues, namely, whether or not the grant of right of way to herein private respondents is proper, and whether or not the award of damages is in order.

With respect to the first issue, herein petitioners are already barred from raising the same. Petitioners did not appeal from the decision of the court a quo granting private respondents the right of way, hence they are presumed to be satisfied with the adjudication therein. With the finality of the judgment of the trial court as to petitioners, the issue of propriety of the grant of right of way has already been laid to rest.

For failure to appeal the decision of the trial court to the Court of Appeals, petitioners cannot obtain any affirmative relief other than those granted in the decision of the trial court. That decision of the court below has become final as against them and can no longer be reviewed, much less reversed, by this Court. The rule in this jurisdiction is that whenever an appeal is taken in a civil case, an appellee who has not himself appealed may not obtain from the appellate court any affirmative relief other than what was granted in the decision of the lower court. The appellee can only advance any argument that he may deem necessary to defeat the appellant's claim or to uphold the decision that is being disputed, and he can assign errors in

his brief if such is required to strengthen the views expressed by the court a quo. These assigned errors, in turn, may be considered by the appellate court solely to maintain the appealed decision on other grounds, but not for the purpose of reversing or modifying the judgment in the appellee's favor and giving him other affirmative reliefs.7

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

However, the mere fact that the plaintiff suffered losses does not give rise to a right to recover damages. To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong.8

There is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. These situations are often called damnum absque injuria.9

In order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such injuries resulted from a breach of duty which the defendant owed to the plaintiff a concurrence of injury to the plaintiff and legal responsibility by the person causing it.10 The underlying basis for the award of tort damages is the premise that an individual was injured in contemplation of law. Thus, there must first be the breach of some duty and the imposition of liability for that breach before damages may be awarded; it is not sufficient to

state that there should be tort liability merely because the plaintiff suffered some pain and suffering.11

Many accidents occur and many injuries are inflicted by acts or omissions which cause damage or loss to another but which violate no legal duty to such other person, and consequently create no cause of action in his favor. In such cases, the consequences must be borne by the injured person alone. The law affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong.12

In other words, in order that the law will give redress for an act causing damage, that act must be not only hurtful, but wrongful. There must be damnum et injuria.13 If, as may happen in many cases, a person sustains actual damage, that is, harm or loss to his person or property, without sustaining any legal injury, that is, an act or omission which the law does not deem an injury, the damage is regarded as damnum absque injuria.14

In the case at bar, although there was damage, there was no legal injury. Contrary to the claim of private respondents, petitioners could not be said to have violated the principle of abuse of right. In order that the principle of abuse of right provided in Article 21 of the Civil Code can be applied, it is essential that the following requisites concur: (1) The defendant should have acted in a manner that is contrary to morals, good customs or public policy; (2) The acts should be willful; and (3) There was damage or injury to the plaintiff.15

The act of petitioners in constructing a fence within their lot is a valid exercise of their right as owners, hence not contrary to morals, good customs or public policy. The law recognizes in the owner the right to enjoy and dispose of a thing, without other limitations than those established by law.16 It is within the right of petitioners, as owners, to enclose and fence their property. Article 430 of the Civil Code provides that "(e)very owner may enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon."

At the time of the construction of the fence, the lot was not subject to any servitudes. There was no easement of way existing in favor of private respondents, either by law

or by contract. The fact that private respondents had no existing right over the said passageway is confirmed by the very decision of the trial court granting a compulsory right of way in their favor after payment of just compensation. It was only that decision which gave private respondents the right to use the said passageway after payment of the compensation and imposed a corresponding duty on petitioners not to interfere in the exercise of said right.

Hence, prior to said decision, petitioners had an absolute right over their property and their act of fencing and enclosing the same was an act which they may lawfully perform in the employment and exercise of said right. To repeat, whatever injury or damage may have been sustained by private respondents by reason of the rightful use of the said land by petitioners is damnum absque injuria.17

A person has a right to the natural use and enjoyment of his own property, according to his pleasure, for all the purposes to which such property is usually applied. As a general rule, therefore, there is no cause of action for acts done by one person upon his own property in a lawful and proper manner, although such acts incidentally cause damage or an unavoidable loss to another, as such damage or loss is damnum absque injuria. 18 When the owner of property makes use thereof in the general and ordinary manner in which the property is used, such as fencing or enclosing the same as in this case, nobody can complain of having been injured, because the incovenience arising from said use can be considered as a mere consequence of community life. 19

The proper exercise of a lawful right cannot constitute a legal wrong for which an action will lie, 20 although the act may result in damage to another, for no legal right has been invaded. 21 One may use any lawful means to accomplish a lawful purpose and though the means adopted may cause damage to another, no cause of action arises in the latter's favor. An injury or damage occasioned thereby is damnum absque injuria. The courts can give no redress for hardship to an individual resulting from action reasonably calculated to achieve a lawful means. 22

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

Romero and Puno, JJ., concur.Mendoza, J., took no part.

G.R. No. 160959 April 3, 2007ANTONIO DIAZ, Petitioner, vs.DAVAO LIGHT AND POWER CO., INC., MANUEL M. ORIG and ELISEO R. BRAGANZA, JR., Respondents.

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 68709, which affirmed the Decision2 of the Regional Trial Court (RTC) of Davao City, Branch 11, in Civil Case No. 21,655-92.

Antecedents

Antonio G. Diaz was the president of Diaz and Co., Inc. He was also vice-president of Diaz Realty Inc. which, in turn, owned the Doña Segunda Hotel,3 formerly known as the Davao Imperial Hotel (Imperial Hotel Building),4located along C.M. Recto Avenue, Davao City. Davao Light and Power Co., Inc. (DLPC), on the other hand, is a public utility duly franchised to provide light, heat and power to its customers in Davao City and the municipalities of Panabo, Santo Tomas and Carmen, in Davao del Norte.5 Manuel Orig was the resident manager/vice-president for Administration of DLPC,6 while Eliseo R. Braganza was its in-house lawyer.7 DLPC supplied the Doña Segunda Building (Imperial Hotel Building) with electricity service8 under Account No. 087-10669 and with Meter No. 36510.9

On July 25, 1983, DLPC sent a Notice of Disconnection10 to Diaz and Co., Inc. informing it that, as of June 13, 1983, the hotel’s unpaid electric consumption bill amounted to P190,111.02.11 It also warned that if the amount was not paid, DLPC would be impelled to discontinue its service. Since Diaz and Co., Inc. ignored the letter, Meter No. 36510 was disconnected on July 29, 1983.12

DLPC then filed a complaint for collection before the RTC, Cebu City, which case was docketed as Civil Case No. CEB-1049.

Meanwhile, in 1984, the National Food Authority (NFA) established its KADIWA13 store at C.M. Recto Avenue, Davao City.14 It leased a portion of the ground floor of the Imperial Hotel Building from Diaz and Co., Inc.15NFA/KADIWA also applied for electricity service with DLPC, and a contract16 was later executed between the parties. On March 15, 1984, DLPC connected the area leased by NFA/KADIWA to its electric grid17 under Account No. 091-12643,18 and installed Meter No. 8473819 to measure NFA/KADIWA’s monthly electric consumption.

In August 1986, the Kadiwa Center IV closed, and NFA/KADIWA vacated the Doña Segunda Building.20 In a letter21 dated August 11, 1986, NFA/KADIWA Provincial Manager, Roberta R. Melendres, informed DLPC that the light and power connection of NFA/KADIWA would be left behind; its right to the connection would be transferred to Diaz.22 She also informed DLPC that the P1,020.00 deposit of NFA/KADIWA for the power connection had been refunded to it by Diaz.23

In a letter24 dated September 2, 1986, Diaz informed respondent Manuel Orig that he had leased the untenanted portions of the Doña Segunda Building from Diaz and Co., Inc., and requested that a new electrical connection for the building in his name be installed, separate from the one assigned to him by NFA.25

On September 15, 1986, DLPC denied the request on the ground that since Diaz and Co., Inc. is a closed family corporation whose stockholders are the immediate members of the Diaz family, the lease in favor of Diaz could be simulated.26 DLPC, however, reminded Diaz that it would be too happy to grant his request "if he and/or Diaz and Co., Inc. would pay what is due and owing to it."27

Diaz and Co., Inc. sent a letter28 to DLPC dated September 17, 1986 declaring that it had assumed the electrical bills of NFA/KADIWA under Account No. 091-12643, and requested that the monthly bills/statements be sent to it. In its reply, DLPC rejected the request and declared that it was not aware that Diaz and Co., Inc. had refunded the NFA/KADIWA its P1,020.00 deposit.29

On September 26, 1986, Diaz filed a petition for mandamus30 before the RTC, Davao City. He alleged that as a holder of a certificate of public convenience, DLPC is

mandated by law to provide him with electric service; the grounds relied upon by respondent Orig in denying his application are anchored on bias and prejudice, since he (Diaz) is one of the stockholders of Diaz and Co. Inc., the owner of the Davao Imperial Hotel; and the civil case filed by DLPC is against Diaz and Co., Inc. and not personally against him.31 The complaint was docketed as Civil Case No. 18,288.

Meanwhile, on September 23, 1986, the portion of the building formerly leased by NFA/KADIWA was leased to Matias Mendiola.32 Because he needed more electricity than what could be provided by the existing electrical wirings, Mendiola opted to change the electrical installation from a one-phase meter to a three-phase meter connection.33 Mendiola’s application was approved by DLPC. On December 19, 1986, DLPC and Mendiola executed a service Contract34 for electricity service.

On January 7, 1987, Diaz filed an application for preliminary injunction in Sp. Civil Case No. 18,28835 to enjoin DLPC from disconnecting the electric connections to Meter No. 84738 under Account No. 091-12643. Also, an Inter-Office Memo36 dated January 7, 1987, signed by Officer-in-Charge, Rebecca Madrid, was issued to all security guards of the Doña Segunda Building who were ordered to prevent anyone from disturbing Meter No. 84738.37 Because of this, DLPC failed to substitute its single-phase meter with a three-phase meter. DLPC’s linemen thus installed the three-phase meter without removing the single-phase meter.381a\^/phi1.net

On March 12, 1987, the RTC in Sp. Civil Case No. 18,288, denied the motion for issuance of a writ of preliminary injunction39 filed by Diaz. He moved for a reconsideration, which was, however, denied in the Order40 dated August 20, 1987. DLPC then removed its single-phase meter on November 20, 1987, which rendered almost half of the building without power.41 That same day, Diaz went to the DLPC building and threw stones at it, breaking four glass windows in the process.42 He then bought his own electric meter, Meter No. 86673509,43 had it calibrated by the Board of Energy, and unilaterally replaced Meter No. 84738. The electricity in the building was then restored.44

On November 24, 1987, Diaz filed a Complaint for Damages with Prayer for Preliminary Prohibitory and Mandatory Injunction and Restraining Order45 before the

RTC, Davao City, docketed as Civil Case No. 18,855-87. In the said complaint, Diaz claimed that DLPC arbitrarily and illegally removed Meter No. 84738 in violation of their business franchise and Article 19 of the New Civil Code, and had threatened to remove Meter No. 86673509.46

DLPC, for its part, filed a counter-application for preliminary mandatory injunction47 in the same case to compel the removal of Meter No. 86673509 which Diaz had installed without DLPC’s consent and authority.48 The RTC issued an Order49 dated March 30, 1988 denying Diaz’s application for prohibitory and mandatory injunction, and granting DLPC’s counter-application for preliminary mandatory injunction. The RTC ordered Diaz to immediately remove Meter No. 86673509 and disconnect the electrical wirings he had unilaterally connected to the upper floor rooms. Diaz filed a motion for reconsideration but was denied.1a\^/phi1.net On June 13, 1998, the sheriff, with the aid of DLPC personnel, caused the removal of Meter No. 86673509.50

Aggrieved, Diaz assailed the orders via petition for certiorari before the CA. The petition was docketed as CA-G.R. SP No. 14909. On October 19, 1988, the CA rendered a Decision51 granting Diaz’s petition, to wit:

Wherefore, in view of the foregoing, the petition is hereby granted and the orders of the lower court dated March 30, 1988 and June 1, 1988 are set aside. Private respondents are thus ordered to maintain the status quo ante which existed before the issuance of the orders complained against, or else to connect its own electric meter to the premises, on the understanding, of course, that petitioner pays his electric bills and without prejudice to the continuance of the collection case against Diaz and Company.52

DLPC elevated the decision before this Court, via petition for review on certiorari. The petition was docketed as G.R. No. 85445.53

Meanwhile, on December 19, 1998, the parties in Civil Case No. CEB-104954 executed a Compromise Agreement,55 wherein they stipulated the following:

1. Plaintiff-appellee hereby reduces its total claims in the complaint to only P385,000.00 and

further waives any claim in excess of said amount in the same case, and the defendant-appellant shall pay said amount in full immediately upon the execution of this agreement. The latter also waives its counterclaims against the former in the above-entitled case.

2. Upon receipt of the payment of the aforesaid sum, plaintiff-appellee shall immediately grant and install in favor of defendant-appellant or Antonio G. Diaz electric service for the Doña Segunda Building, popularly known as Imperial Hotel Building, or for portions thereof designated by either including the tenants or lessees occupying the same, upon proper application therefor and the presentation of the requisite electrical permit.

3. the parties agree to the dismissal of Civil Case No. 18,288 of the Regional Trial Court of Davao City, pending in Branch XVI thereof, entitled "Diaz vs. Davao Light & Power Co., Inc. and Manuel Orig." for Mandamus inclusive of the counter-claim therein, the same having become moot and academic.

WHEREFORE, it is most respectfully prayed that this Honorable Court approves the foregoing compromise agreement and render judgment based thereon, and enjoin the parties to comply strictly with the terms thereof.

The RTC, in Civil Case No. CEB-1049, rendered a Decision56 approving the compromise on January 5, 1989.

In Sp. Civil Case No. 18,288, the parties also filed a Joint Motion to Dismiss57 based on the Compromise Agreement, and the RTC thereafter ordered the dismissal of the case.58

On April 17, 1989, this Court in G.R. No. 85445, issued a Resolution,59 denying the petition for review on certiorari questioning the CA decision in CA-G.R. SP No. 14909 for being moot and academic. The resolution reads:

After deliberating on the allegations made, the issues raised, and the arguments advanced in the Petition, the

Comment and the Reply, and it appearing that petitioner is now providing electrical service to private respondent’s entire building, the Court RESOLVED to DENY the petition for having become moot and academic. The Court makes the admonition, however, that connections of electrical service and installations of electric meters should always be upon mutual contract of the parties, and that payments for electrical consumption should also be made promptly whenever due. Contracts lay down the law between the parties and obligations arising therefrom should be complied with.

Meanwhile, on June 30, 1997, the RTC rendered a Decision60 in Civil Case No. 18,855-87 dismissing the case filed by Diaz.61

Diaz appealed the decision with the CA in CA-G.R. CV No. 63236,62 which appeal is still pending before the appellate court.

Based on the aforestated facts, on July 11, 1988, DLPC filed a complaint for theft of electricity against Diaz with the City Prosecutor’s Office, Davao City; respondent Braganza submitted an Affidavit63 to support the charge. In defense, Diaz alleged the following: (1) that the complaint was intended to harass him; (2) he was entitled to electric service by virtue of his subrogation to the right of NFA/KADIWA; (3) the installation of Meter No. 86673509 was made with the knowledge and consent of DLPC; (4) there is a pending case between the parties regarding Meter Nos. 84738 and 86673509; and (5) the filing of the action is premature. The complaint was docketed as I.S. No. 593.

On March 21, 1989, Lolito O. Evangelino, 4th Asst. City Prosecutor, City Prosecutor’s Office of Davao City, issued a Resolution64 recommending the dismissal of the charge. He opined that the correspondence to DLPC Manager Orig negated DLPC’s claim of lack of consent and knowledge, and since the issue is still pending litigation in court, the determination of whether there is theft of electricity is premature (Sp. Civil Case No. 18288 and Civil Case No. 18,855-87).

DLPC filed a Motion for Reconsideration65 which the City Prosecutor denied on the ground that DLPC failed to establish the elements of unlawful taking and intent to

gain. DLPC appealed the dismissal to the Secretary of Justice,66 who, however, dismissed the appeal in a letter67 dated August 2, 1990. The Motion for Reconsideration68 filed by DLPC was likewise denied in the letter69 dated September 6, 1990.

Undaunted, DLPC filed a criminal complaint70 against Diaz for Violation of P.D. 401,71 as amended by B.P. Blg. 87672 with the City Prosecutor’s Office, Davao City.73 The complaint was docketed as I.S. No. 92-4590. In his counter-affidavit dated September 19, 1992, Diaz alleged that a similar complaint (I.S. No. 593) had been filed by DLPC against him.74 In a Resolution75 dated October 23, 1992, Calixto A. Esparagoza, 2nd Asst. City Prosecutor, dismissed the case. The Public Prosecutor likewise denied the motion for reconsideration of DLPC on November 26, 1992.

Meanwhile Diaz, Ramos, and Arguellas, as complainants, filed a criminal complaint with the Office of the Provincial Fiscal of Davao del Norte charging the officers of DLPC with estafa through falsification of public documents. They also alleged that the officers of DLPC exacted additional and illegal profits from its consumers by devising a deceptive Varying Discount Formula; based on the alleged misrepresentation of said officers, the Board of Energy (BOE) granted DLPC provisional authority to apply the formula, thereby resulting in losses of more or less P300,000.00 to Diaz, Ramos, and Arguelles.76 As regards the charge of falsification, the complainants alleged that DLPC had its properties appraised by the Technical Management Services, Philippines, Inc. (TAMSPHIL), and included non-existent properties that did not belong to it; it also recorded the TAMSPHIL appraisal in its books of account even before it had been approved by the BOE; and submitted financial statements containing the appraisal to the Securities and Exchange Commission and the BOE.77

The Investigating Prosecutor found probable cause against the respondents. An Information was filed before the then Court of First Instance (CFI) of Tagum, Davao del Norte, docketed as Crim. Case No. 5800. Respondents appealed the resolution of the public prosecutor finding probable cause against them. The appeal was granted. On motion of the Prosecutor, the RTC dismissed the case in an Order dated July 13, 1983.78

On August 9, 1983, the officers of DLPC, Eduardo J. Aboitiz, Luis Aboitiz, Jr., Roberto E. Aboitiz, Jon R. Aboitiz, and Edson H. Canova, as plaintiffs, filed a Complaint against Diaz, Isagani T. Fuentes (Provincial Fiscal of Davao del Norte), Petronilo D. Ramos (Municipal Mayor of Carmen, Davao del Norte), Gabriel Arguelles (Municipal Attorney of Panabo, Davao del Norte) before the RTC, Cebu City, for damages and attorney’s fees against the defendants for malicious prosecution.79

The case was docketed as CEB Case No. 1055. After trial on the merits, the RTC rendered a Decision80 on April 30, 1992, dismissing the complaint. The fallo of the decision reads:

WHEREFORE, premises considered, plaintiffs’ complaint and defendants’ counterclaim are hereby DISMISSED for lack of cause of action with costs de oficio.

SO ORDERED.81

Both parties appealed the decision before the CA, docketed as CA-G.R. CV No. 41399.1ªvvphi1.nét

Diaz, et al. relied on the following grounds:

I

TRIAL COURT ERRED IN IGNORING PLAINTIFF-APPELLANT’S (SIC) EVIDENCE OF CONSPIRACY AMONG ALL DEFENDANT-APPELLANTS (SIC) AND IN MAKING NO FINDING THAT THERE WAS A CONSPIRACY TO PROSECUTE PLAINTIFF-APPELLANTS (SIC) CRIMINALLY FOR USE AS LEVERAGE IN ORDER TO OBTAIN CONCESSIONS FROM DAVAO LIGHT & POWER CO.

II

TRIAL COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLANTS (SIC) HAVE NO CAUSE OF ACTION BY COMMITTING THE FOLLOWING ERRORS:

(a) IN FINDING THAT THERE WAS NO PROSECUTION AND NO ACQUITTAL;

(b) IN FINDING THAT THERE WAS PROBABLE CAUSE FOR DEFENDANT-APPELLANT’S (SIC) CHARGE OF ESTAFA THROUGH FALSIFICATION;

(c) BY IGNORING THE FACT THAT THERE WAS NO EVIDENCE LINKING PLAINTIFF-APPELLANTS (SIC) TO THE CRIME CHARGED;

(d) BY IGNORING THE CIRCUMSTANCES THAT MANY ALLEGATIONS IN THE JOINT AFFIDAVIT OF DEFENDANT-APPELLANTS (SIC) ARE INADMISSIBLE;

(e) BY IGNORING THE FACT THAT DAVAO LIGHT’S USE OF THE VARYING DISCOUNT FORMULA WAS ADMITTEDLY PROVISIONALLY AUTHORIZED BY THE BOE WHICH AUTHORITY WAS IN FORCE DURING THE FILING AND PENDENCY OF THE CHARGE;

(f) BY IGNORING THE FACT THAT THE VARYING DISCOUNT FORMULA WAS A FORMULA TO DETERMINE THE AMOUNT OF DISCOUNT DEDUCTIBLE FROM THE RATES EARLIER FIXED BY THE BOE RESULTING FROM THE COST SAVINGS REALIZABLE FROM THE CHEAPER COST OF ELECTRIC POWER SOLD BY NPC TO DAVAO LIGHT, AND ITS NEGATIVE ASPECT WAS MERELY AN INCORPORATION INTO SAID FORMULA OF THE FUEL CLAUSE ADJUSTMENT ALREADY AUTHORIZED IN THE DECISION OF SAID BOARD IN CASE NO. 73-146;

(g) BY BEING OBLIVIOUS OF THE CIRCUMSTANCE THAT THERE WAS NO FRAUD OR DECEIT IN SECURING SAID PROVISIONAL AUTHORITY, AND THE BOARD MADE NO SUCH FINDING;

(h) BY IGNORING THE UNREBUTTED EVIDENCE THAT APPELLANT FUENTES DISOBEYED THE DIRECTIVE OF HIS SUPERIOR, THE CHIEF STATE PROSECUTOR TO HOLD IN ABEYANCE FURTHER PROCEEDINGS IN I.S. NO. 82-115, AND THAT HE FILED AN INFORMATION CHARGING PLAINTIFF-APPELLANTS (SIC) WITH AN OFFENSE DIFFERENT FROM THAT SUBJECT OF HIS PRELIMINARY INVESTIGATION;

(i) IN FINDING THAT DEFENDANT-APPELLANTS (SIC) DID NOT ACT WITH MALICE AND HAD ACTED IN GOOD FAITH IN FILING SAID CHARGE.

III

TRIAL COURT ERRED IN NOT AWARDING DAMAGES TO PLAINTIFF-APPELLANTS (SIC).82

For their part, DLPC, et al. alleged the following:

I

THAT THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANTS APPELLANTS’ COUNTERCLAIMS HAVE NO CAUSE OF ACTION.

II

THAT THE TRIAL COURT ERRED IN NOT AWARDING DAMAGES AND ATTORNEY’S FEES.83

On October 30, 2001, the CA rendered a Decision84 affirming the decision of the RTC.

Diaz, et al. appealed the decision before this Court, docketed as G.R. No. 154378. On November 13, 2002, this Court resolved to dismiss the petition for lack of merit.85 On April 15, 2003, as per Entry of Judgment,86 the resolution of this Court became final and executory.

On June 10, 1992, DLPC instituted a civil action for Damages,87 before the RTC, Cebu City, against Diaz for defamatory and libelous remarks and for abuse of rights. The plaintiff alleged that Diaz, motivated by malice and ill-will, had taken it upon himself to find fault in DLPC’s acts and oppose all its application with the BOE, using the media to assault its good name by circulating or publishing libelous and false statements in the newspapers. The case was docketed as Civil Case No. CEB-11843.

DLPC further alleged that Diaz published and disseminated a handbill claiming that there was something irregular and anomalous regarding the Energy Regulation Board’s approval of the appraisal of the properties and equipment of DLPC, because of which the customers of DLPC could expect a P5.00 per kilowatt charge in the future. Diaz allegedly gave identical interviews with the Mindanao Daily Mirror and the Ang Peryodiko Dabaw reiterating what he said in the handbill.88 In addition, Diaz, in an

interview with the People’s Daily Forum, claimed that the National Power Corporation sold two (2) generating sets to DLPC for only P1.00 each.89

Consequently, DLPC suffered besmirched reputation and public humiliation, and damage to its business standing. The complaint contained the following prayer:

1) Immediately issue a temporary restraining order ex-parte precluding defendant from committing further acts of tort or libel against plaintiff, and after the hearing of plaintiff’s application for preliminary injunction, issue such writ after posting of the required injunction bond;

2) After trial, render judgment in favor of plaintiff and against defendant Antonio Diaz making the injunction permanent, and ordering the latter to pay the former –

a) The sum of P10,000,000.00 as moral damages anddamages to its business standing;

b) The sum of P300,000.00 as exemplary damages;

c) The sum of P500,000.00 as attorney’s fees and expenses of litigation;

d) The cost of suit.90

After trial, the RTC in Civil Case No. CEB-11843 rendered a Decision91 in favor of DLPC and against Diaz, awarding more than P1,500,000.00 in damages to DLPC and dismissing the counterclaim of Diaz. The decretal portion reads:

WHEREFORE, premises above set-forth, the Court hereby renders judgment in favor of plaintiff Davao Light & Power Co., Inc. and against defendant Antonio Diaz ordering said defendant:

1. To pay plaintiff the amount of P1,500,000.00 by way of moral damages for besmirched reputation, loss of business standing and goodwill;

2. To pay plaintiff the amount of P300,000.00 in exemplary damages by way of example or correction for the public good; and

3. To pay plaintiff the amount of P500,000.00 in attorney’s fees and litigation expenses and to pay the costs.

Defendant takes nothing from his counterclaim.

SO ORDERED.92

Both parties appealed the decision to the CA in CA-G.R. CV No. 65082, which appeal is still pending.

On October 30, 1992, Diaz, as plaintiff, filed a complaint for Damages, Injunction with Writ of Preliminary Injunction and Temporary Restraining Order, Plus Attorney’s Fee93 against DLPC before the RTC, Davao City; the case was docketed as Civil Case No. 21,655-92. Diaz alleged that DLPC’s filing of criminal cases, I. S. No. 593 for theft of electricity and I.S. No. 92-4590 for violation of P.D. 401, as amended by B.P. Blg. 876), were intended to harass and humiliate him before the public and government authorities and ruin his image;94 he was seriously prejudiced by the filing of an P11.6 Million damage suit in Civil Case No. CEB-1055 and a P10.8 Million damage suit in Civil Case No. CEB-11843;95 defendants, by their common and joint acts, were motivated by evident bad faith and intentionally caused injustice to his person in violation of Article 19 of the New Civil Code.96Diaz thus prayed:

WHEREFORE, and in view of the foregoing, it is most respectfully prayed of the Honorable Court:

a) Before notice and hearing to issue a temporary restraining order enjoining defendants from committing any unlawful, illegal, tortiuous (sic) and inequitable act which may affect the individual rights of plaintiff, and after hearing to issue writ of preliminary injunction for the same purpose upon posting of the bond;

b) After trial on the merits, to make the writ of injunction as permanent;

c) To order defendants to pay plaintiff, jointly and severally, moral damages in the amount ofP10,000,000.00, attorney’s fee in the amount of P500,000.00, litigation expenses in the amount ofP100,000.00 and exemplary damage in the amount of P100,000.00; and,

d) To grant to plaintiff such other relief proper and equitable under the premises.97

On November 4, 1992, the RTC issued a TRO98 in favor of Diaz, directing DLPC or any person acting for and in its behalf, to desist and refrain from committing any unlawful, tortuous and inequitable conduct which may affect the former for a period of twenty (20) days.

During the pre-trial, the parties limited the issue to "whether or not the plaintiff is entitled to damages by virtue of the filing of the criminal cases against him for theft of electricity and violation of P.D. 401, both of which were already dismissed." Due to the pendency of various actions before several courts, the trial court opted to segregate the issues. It focused only on the alleged malicious prosecution with regard to the filing of the criminal action for theft, I. S. No. 593, and for Violation of P.D. 401, as amended by B.P. Blg. 876, I.S. No. 92-4590. The RTC reasoned in this wise:

The records show that plaintiff’s first cause of action, which is damages for defendant’s refusal to grant him electric service, has become moot and academic by virtue of the compromise agreement executed by the plaintiff and the defendant in the mandamus case docketed as Civil Case No. 18288 of this Court. The parties filed a Joint Motion to Dismiss based on the Compromise Agreement which was granted by this Court and which led to the eventual dismissal of the case with prejudice.

In summary, plaintiff asks for damages for defendant’s alleged malicious prosecution of a criminal case of theft of electricity against him, for plaintiff’s filing of a charge of violation of P.D. 401 as amended after dismissal of the theft case, the filing of a damage suit against him before the RTC of Cebu City which was dismissed and the filing of another damage suit before the same Cebu RTC which is still pending. Damages are also being sought for defendant’s removal of Electric Meter No. 847328 (sic). But this is a subject matter of a case pending before

Branch 13 of this Court and therefore said court retains jurisdiction over the said cause of action. x x x99

On May 22, 2000, the RTC rendered a Decision100 dismissing the complaint. The fallo reads:

In view of all the foregoing, finding no merit in plaintiff’s complaint, judgment is hereby rendered dismissing said complaint with costs de oficio.

SO ORDERED.101

The RTC held that while the City Prosecutor, and later the Secretary of Justice, concluded that there was no probable cause for the crime of theft, this did not change the fact that plaintiff made an illegal connection for electricity.102 A person’s right to litigate should not be penalized by holding him liable for damages.

Diaz appealed the decision to the CA, alleging that:

I ― THE TRIAL COURT ERRED IN HOLDING THAT “WHEN THE DEFENDANTS FILED THE CASES OF THEFT, THEY DID SO IN HONEST BELIEF THAT PLAINTIFF IS CRIMINALLY LIABLE”.

II ― THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR AND WITHOUT GRANTING THE AWARD OF DAMAGES.103

On October 1, 2003, the CA affirmed the decision of the RTC.104 It concluded that the evidence on hand showed good faith on the part of DLPC in filing the subject complaints. It pointed out that Diaz had been using the electrical services of DLPC without its consent. As to the effect of the compromise agreement, the CA ruled that it did not bar the filing of the criminal action. Thus, under the principle of damnum absque injuria, the legitimate exercise of a person’s right, even if it causes loss to another, does not automatically result in an actionable injury.105

Diaz, now petitioner, comes before this Court in this petition for review on certiorari, raising the following errors:

a) "Proof of moral suffering must be introduced, otherwise the award of moral damage is not proper. In this case, the evidence presented by the appellant is insufficient to overcome the presumption of good faith." (Decision, p. 10)

b) "In view of the foregoing, it is clear that the subject complaints were filed so as to protect appellee DLPC’s interest. In this regard, it must be borne in mind that no person should be penalized for the exercise of the right to litigate." (Decision, p. 12)106

The issues raised in the present action can be summarized as follows: (1) whether or not the compromise agreement entered into between DLPC and Diaz barred the former from instituting further actions involving electric Meter No. 84736 or 86673509; (2) whether or not DLPC acted in bad faith in instituting the criminal cases against Diaz; and (3) whether or not Diaz is entitled to damages.

The petition is without merit.

Petitioner insists that the compromise agreement as well as the decision of the CA in CA-G.R. SP No. 14909 already settled the controversies between them; yet, DLPC instituted the theft case against Diaz, and worse, instituted another action for violation of P.D. 401, as amended by B.P. Blg. 876. Thus, the only conclusion that can be inferred from the acts of DLPC is that they were designed to harass, embarrass, prejudice, and ruin him. He further avers that the compromise agreement in Civil Case No. CEB-1049 completely erased litigious matters that could necessarily arise out of either Electric Meter No. 84736 or 86673509.107 Moreover, Diaz asserts that the evidence he presented is sufficient to prove the damages he suffered by reason of the malicious institution of the criminal cases.

We do not agree.

Article 2028 of the Civil Code defines a compromise as a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. The purpose of compromise is to settle the claims of the parties and bar all future disputes and controversies. However, criminal liability is not affected by compromise for it is a public offense which must be prosecuted and punished by the Government on its own motion, though complete reparation should have been

made of the damages suffered by the offended party. A criminal case is committed against the People, and the offended party may not waive or extinguish the criminal liability that the law imposes for the commission of the offense.108 Moreover, a compromise is not one of the grounds prescribed by the Revised Penal Code for the extinction of criminal liability.109

As can be inferred from the compromise agreement, Diaz and DLPC merely agreed to (1) reduce the latter’s total claims to only P385,000.00; (2) for DLPC to waive its counterclaims against Diaz; and (3) upon receipt of the amount, for DLPC to immediately install the necessary electric service to the building. The parties likewise agreed to the dismissal of Sp. Civil Case No. 18,288 for being moot and academic. Nowhere in said agreement did the parties agree that DLPC was barred from instituting any further action involving electric Meter No. 84736 or 86673509.

We find that petitioner is not entitled to damages under Articles 19,110 20[111 and 21,112 and Articles 2217113and 2219(8)114 of the New Civil Code.

The elements of abuse of rights are the following: (a) the existence of a legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.115 Thus, malice or bad faith is at the core of the above provisions.116 Good faith refers to the state of the mind which is manifested by the acts of the individual concerned. It consists of the intention to abstain from taking an unconscionable and unscrupulous advantage of another.117 Good faith is presumed and he who alleges bad faith has the duty to prove the same.118 Bad faith, on the other hand, does not simply connote bad judgment to simple negligence, dishonest purpose or some moral obloquy and conscious doing of a wrong, a breach of known duty due to some motives or interest or ill-will that partakes of the nature of fraud. Malice connotes ill-will or spite and speaks not in response to duty. It implies an intention to do ulterior and unjustifiable harm. Malice is bad faith or bad motive. 119

The evidence presented by respondents negates malice or bad faith. Petitioner himself alleged in his complaint that he unilaterally installed Meter No. 86673509 to replace Meter No. 84738 after it was removed by DLPC. No less than this Court, in G.R. No. 85445, admonished petitioner and reminded him that connections of electrical service

and installations of electric meters should always be upon mutual contract of the parties, and that payments for electrical consumption should also be made promptly whenever due.120 Based on these established facts, petitioner has not shown that the acts of respondent were done with the sole intent of prejudicing and injuring him.

Petitioner may have suffered damages as a result of the filing of the complaints. However, there is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt or harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty. In such cases, the consequences must be borne by the injured person alone; the law affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong. These situations are often called damnum absque injuria.121 Whatever damages Diaz may have suffered would have to be borne by him alone since it was his acts which led to the filing of the complaints against him.

On the other hand, malicious prosecution has been defined as an action for damages brought by or against whom a criminal prosecution, civil suit or other legal proceeding has been instituted maliciously and without probable cause, after the termination of such prosecution, suit, or other proceeding in favor of the defendant therein.122 It is an established rule that in order for malicious prosecution to prosper, the following requisites must be proven by petitioner: (1) the fact of prosecution and the further fact that the defendant (respondent) was himself the prosecutor, and that the action finally terminated with an acquittal; (2) that in bringing the action, the prosecutor acted without probable cause; and (3) that the prosecutor was actuated or impelled by legal malice, that is, by improper or sinister motive.123 The foregoing are necessary to preserve a person’s right to litigate which may be emasculated by the undue filing of malicious prosecution cases.124 From the foregoing requirements, it can be inferred that malice and want of probable cause must both be clearly established to justify an award of damages based on malicious prosecution.125

The Court notes that respondents initiated two separate criminal actions, one for theft of electricity, Inv. Sheet No.

593 July/1988, and the other, for Violation of P.D. 401, as amended by B.P. Blg. 876, I.S. No. 92-4590. It must be stressed that theft of electricity is a felony defined and penalized under the Revised Penal Code, while Violation of P.D. 401, as amended by B.P. Blg. 876, is an offense punished by a special law. What generally makes the former a felony is criminal intent (dolo) or negligence (culpa); what makes the latter a crime is the special law enacting it.126 In addition, the elements of the two (2) offenses are different from one another. In theft, the elements are: (1) intent to gain; (2) unlawful taking; (3) personal property belonging to another; (4) and absence of violence or intimidation against persons or force upon things.127 On the other hand, the crime of Violation of P.D. 401, as amended by B.P. Blg. 876, is mala prohibita. The criminal act is not inherently immoral but becomes punishable only because the law says it is forbidden. With these crimes, the sole issue is whether the law has been violated. Criminal intent is not necessary.128

While the institution of separate criminal actions under the provisions of P.D. 401, as amended by B.P. Blg. 876, and under the provisions of the Revised Penal Code on theft may refer to identical acts committed by petitioner, the prosecution thereof cannot be limited to one offense because a single criminal act may give rise to a multiplicity of offenses; and where there is variance or difference between the elements of an offense in one law and another law, as in the case at bar, there will be no double jeopardy because what the rule on double jeopardy prohibits refers to identity of elements in the two (2) offenses. Otherwise stated, prosecution for the same act is not prohibited; what is forbidden is prosecution for the same offense.129 Hence, no fault could be attributed to respondent DLPC when it instituted the two separate actions.

As earlier stated, a claim for damages based on malicious prosecution will prosper only if the three elements aforecited are shown to exist. We find that none of the requisites are attendant here.

First. Although respondent DLPC initiated before the prosecutor’s office Inv. Sheet No. 593 July/1988 for theft of electricity, and I.S. No. 92-4590 for Violation of P.D. 401, as amended by B.P. Blg. 876, no information was ever filed in court. The cases were eventually dropped or dismissed

before they could be filed in court. Ultimately, both actions could not end in an acquittal.

Second. It cannot be concluded that respondent DLPC acted without probable cause when it instituted the actions. The events which led to the filing of the complaints are undisputed, and respondent DLPC cannot be faulted for filing them. In the early case of Buchanan v. Esteban,130 this Court had already stressed that "one cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause." As Justice Moreland explained in that case:

Probable cause is the existence of such facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for which he was prosecuted. The general rule is well settled that one cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause. In other words, a suit will lie only in cases where a legal prosecution has been carried on without probable cause. And the reason for the rule as stated by Blackstone, is that it would be a very great discouragement to public justice if prosecutors, who had a tolerable ground of suspicion, were liable to be sued at law when their indictments miscarried.

Thus, the element of malice and the absence of probable cause must be proved.131 There must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately knowing that the charge was false and baseless to entitle the victims to damages.132 The two elements must simultaneously exist; otherwise, the presence of probable cause signifies, as a legal consequence, the absence of malice.133 In the instant case, it is evident that respondent DLPC was not motivated by malicious intent or by a sinister design to unduly harass petitioner, but only by a well-founded anxiety to protect its rights. Respondent DLPC cannot therefore be faulted in availing of the remedies provided for by law.

In a free society, controversies are heard and settled under the rule of law in the forum of the courts of justice. It is one of the virtues of our system of government that a person who feels aggrieved does not have to take the law into his or her hands or resort to the use of force for the

vindication of injury. The courts are there to hear and act on the complaint. The right to litigate is an escape valve to relieve the pressures of personal disagreements that might otherwise explode in physical confrontation. It is necessary not only for upholding one’s claims when they are unjustly denied but also for the maintenance of peace, if not goodwill, among incipient antagonists. Without the right to litigate, conflicting claims cannot be examined and resolved in accordance with one of the primary purposes of government, which is to provide for a just and orderly society.134 Hence, the mere act of submitting a case to the authorities for prosecution does not render a person liable for malicious prosecution should he or she be unsuccessful, for the law could not have meant to impose a penalty on the right to litigate.135

IN LIGHT OF THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 68709 is AFFIRMED.

SO ORDERED.

G.R. No. 152040 March 31, 2006MARIKINA AUTO LINE TRANSPORT CORPORATION and FREDDIE L. SUELTO, Petitioners, vs.PEOPLE OF THE PHILIPPINES and ERLINDA V. VALDELLON, Respondents.

CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CR No. 16739 affirming the Joint Decision of the Regional Trial Court (RTC) in Criminal Case No. Q-93-42629 and Civil Case No. Q-93-16051, where Freddie Suelto was convicted of reckless imprudence resulting in damages to property.

Erlinda V. Valdellon is the owner of a two-door commercial apartment located at No. 31 Kamias Road, Quezon City. The Marikina Auto Line Transport Corporation (MALTC) is the owner-operator of a passenger bus with Plate Number NCV-849. Suelto, its employee, was assigned as the regular driver of the bus.2

At around 2:00 p.m. on October 3, 1992, Suelto was driving the aforementioned passenger bus along Kamias Road, Kamuning, Quezon City, going towards Epifanio de los Santos Avenue (EDSA). The bus suddenly swerved to the right and struck the terrace of the commercial apartment owned by Valdellon located along Kamuning Road.3 Upon Valdellon’s request, the court ordered Sergio Pontiveros, the Senior Building Inspection Officer of the City Engineer’s Office, to inspect the damaged terrace. Pontiveros submitted a report enumerating and describing the damages:

(1) The front exterior and the right side concrete columns of the covered terrace were vertically displaced from its original position causing exposure of the vertical reinforcement.

(2) The beams supporting the roof and parapet walls are found with cracks on top of the displaced columns.

(3) The 6″ CHB walls at [the] right side of the covered terrace were found with cracks caused by this accident.

(4) The front iron grills and concrete balusters were found totally damaged and the later [sic] beyond repair.4

He recommended that since the structural members made of concrete had been displaced, the terrace would have to be demolished "to keep its monolithicness, and to insure the safety and stability of the building."5

Photographs6 of the damaged terrace were taken. Valdellon commissioned Engr. Jesus R. Regal, Jr. to estimate the cost of repairs, inclusive of labor and painting, and the latter pegged the cost at P171,088.46.7

In a letter dated October 19, 1992 addressed to the bus company and Suelto, Valdellon demanded payment ofP148,440.00, within 10 days from receipt thereof, to cover the cost of the damage to the terrace.8 The bus company and Suelto offered a P30,000.00 settlement which Valdellon refused.9

Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property against Suelto. After the requisite preliminary investigation, an Information was filed with the RTC of Quezon City. The accusatory portion of the Information reads:

That on or about the 3rd day of October 1992, in Quezon City, Philippines, the said accused, being then the driver and/or person in charge of a Marikina Auto Line bus bearing Plate No. NVC-849, did then and there unlawfully, and feloniously drive, manage, and operate the same along Kamias Road, in said City, in a careless, reckless, negligent, and imprudent manner, by then and there making the said vehicle run at a speed greater than was reasonable and proper without taking the necessary precaution to avoid accident to person/s and damage to property, and considering the condition of the traffic at said place at the time, causing as a consequence of his said carelessness, negligence, imprudence and lack of precaution, the said vehicle so driven, managed and operated by him to hit and bump, as in fact it hit and bump a commercial apartment belonging to ERLINDA V. VALDELLON located at No. 31 Kamias Road, this City, thereby causing damages to said apartment in the total amount of P171,088.46, Philippine Currency, to her

damage and prejudice in the total amount aforementioned.

CONTRARY TO LAW.10

Valdellon also filed a separate civil complaint against Suelto and the bus company for damages. She prayed that after due proceedings, judgment be rendered in her favor, thus:

WHEREFORE, it is respectfully prayed of this Honorable Court to issue a writ of preliminary attachment against the defendants upon approval of plaintiff’s bond, and after trial on the merits, to render a decision in favor of the plaintiff, ordering the defendants, jointly and severally, to pay –

a) the total sum of P171,088.46 constituting the expenses for the repair of the damaged apartment of plaintiff, with interests to be charged thereon at the legal rate from the date of the formal demand until the whole obligation is fully paid;

b) the sum of not less than P20,000.00 each as compensatory and exemplary damages;

c) the sum of P20,000.00 as attorney’s fees and the sum of P1,000.00 for each appearance of plaintiff’s counsel; and costs of suit;

PLAINTIFF further prays for such other reliefs as may be just and equitable in the premises.11

A joint trial of the two cases was ordered by the trial court.12

The trial court conducted an ocular inspection of the damaged terrace, where defendants offered to have it repaired and restored to its original state. Valdellon, however, disagreed because she wanted the building demolished to give way for the construction of a new one.13

During the trial, Valdellon testified on the damage caused to the terrace of her apartment, and, in support thereof, adduced in evidence a receipt for P35,000.00, dated

October 20, 1993, issued by the BB Construction and Steel Fabricator for "carpentry, masonry, welding job and electrical [work]."14

Pontiveros of the Office of the City Engineer testified that there was a need to change the column of the terrace, but that the building should also be demolished because "if concrete is destroyed, [one] cannot have it restored to its original position."15

Engr. Jesus Regal, Jr., the proprietor of the SSP Construction, declared that he inspected the terrace and estimated the cost of repairs, including labor, at P171,088.46.

Suelto testified that at 2:00 p.m. on October 3, 1992, he was driving the bus on its way to Ayala Avenue, Makati, Metro Manila. When he reached the corner of K-H Street at Kamias Road, Quezon City, a passenger jeepney suddenly crossed from EDSA going to V. Luna and swerved to the lane occupied by the bus. Suelto had to swerve the bus to the right upon which it hit the side front of the terrace of Valdellon’s two-door apartment.16Based on his estimate, the cost to the damage on the terrace of the apartment amounted to P40,000.00.17 On cross-examination, Suelto declared that he saw the passenger jeepney when it was a meter away from the bus. Before then, he had seen some passenger jeepneys on the right trying to overtake one another.18

Architect Arnulfo Galapate testified that the cost of the repair of the damaged terrace amounted to P55,000.00.19

On April 28, 1994, the trial court rendered judgment finding Suelto guilty beyond reasonable doubt of reckless imprudence resulting in damage to property, and ordered MALTC and Suelto to pay, jointly and severally,P150,000.00 to Valdellon, by way of actual and compensatory damages, as well as attorney’s fees and costs of suit. The fallo of the decision reads:

WHEREFORE, finding the accused FREDDIE SUELTO Y LIWAG guilty beyond reasonable doubt of the crime of Reckless Imprudence Resulting in Damage to Property, said accused is hereby sentenced to suffer imprisonment of ONE (1) YEAR.

With respect to the civil liability, judgment is hereby rendered in favor of plaintiff Erlinda Valdellon and against defendant Marikina Auto Line Transport Corporation and accused Freddie Suelto, where both are ordered, jointly and severally, to pay plaintiff:

a. the sum of P150,000.00, as reasonable compensation sustained by plaintiff for her damaged apartment;

b. the sum of P20,000.00, as compensatory and exemplary damages;

c. the sum of P20,000.00, as attorney’s fees; and,

d. the costs of suit.

SO ORDERED.20

MALTC and Suelto, now appellants, appealed the decision to the CA, alleging that the prosecution failed to prove Suelto’s guilt beyond reasonable doubt. They averred that the prosecution merely relied on Valdellon, who testified only on the damage caused to the terrace of her apartment which appellants also alleged was excessive. Appellant Suelto further alleged that he should be acquitted in the criminal case for the prosecution’s failure to prove his guilt beyond reasonable doubt. He maintained that, in an emergency case, he was not, in law, negligent. Even if the appellate court affirmed his conviction, the penalty of imprisonment imposed on him by the trial court is contrary to law.

In its Brief for the People of the Philippines, the Office of the Solicitor General (OSG) submitted that the appealed decision should be affirmed with modification. On Suelto’s claim that the prosecution failed to prove his guilt for the crime of reckless imprudence resulting in damage to property, the OSG contended that, applying the principle of res ipsa loquitur, the prosecution was able to prove that he drove the bus with negligence and recklessness. The OSG averred that the prosecution was able to prove that Suelto’s act of swerving the bus to the right was the cause of damage to the terrace of Valdellon’s apartment, and in the absence of an explanation to the contrary, the accident was evidently due to appellant’s want of care. Consequently, the OSG posited, the burden was on the appellant to prove that, in swerving the bus to the right,

he acted on an emergency, and failed to discharge this burden. However, the OSG averred that the trial court erred in sentencing appellant to a straight penalty of one year, and recommended a penalty of fine.

On June 20, 2000, the CA rendered judgment affirming the decision of the trial court, but the award for actual damages was reduced to P100,000.00. The fallo of the decision reads:

WHEREFORE, premises considered, the decision dated April 28, 1994, rendered by the court a quo is AFFIRMED with the modification that the sum of P150,000.00 as compensation sustained by the plaintiff-appellee for her damaged apartment be reduced to P100,000.00 without pronouncement as to costs.

SO ORDERED.21

Appellants filed a Motion for Reconsideration, but the CA denied the same.22

MALTC and Suelto, now petitioners, filed the instant petition reiterating its submissions in the CA: (a) the prosecution failed to prove the crime charged against petitioner Suelto; (b) the prosecution failed to adduce evidence to prove that respondent suffered actual damages in the amount of P100,000.00; and (c) the trial court erred in sentencing petitioner Suelto to one (1) year prison term.

On the first issue, petitioners aver that the prosecution was mandated to prove that petitioner Suelto acted with recklessness in swerving the bus to the right thereby hitting the terrace of private respondent’s apartment. However, the prosecution failed to discharge its burden. On the other hand, petitioner Suelto was able to prove that he acted in an emergency when a passenger jeepney coming from EDSA towards the direction of the bus overtook another vehicle and, in the process, intruded into the lane of the bus.

On the second issue, petitioners insist that private respondent was able to prove only the amount of P35,000.00 by way of actual damages; hence, the award of P100,000.00 is barren of factual basis.

On the third issue, petitioner Suelto posits that the straight penalty of imprisonment recommended by the trial court, and affirmed by the CA, is contrary to Article 365 of the Revised Penal Code.

The petition is partially granted.

On the first issue, we find and so resolve that respondent People of the Philippines was able to prove beyond reasonable doubt that petitioner Suelto swerved the bus to the right with recklessness, thereby causing damage to the terrace of private respondent’s apartment. Although she did not testify to seeing the incident as it happened, petitioner Suelto himself admitted this in his answer to the complaint in Civil Case No. Q-93-16051, and when he testified in the trial court.

Suelto narrated that he suddenly swerved the bus to the right of the road causing it to hit the column of the terrace of private respondent. Petitioners were burdened to prove that the damage to the terrace of private respondent was not the fault of petitioner Suelto.

We have reviewed the evidence on record and find that, as ruled by the trial court and the appellate court, petitioners failed to prove that petitioner acted on an emergency caused by the sudden intrusion of a passenger jeepney into the lane of the bus he was driving.

It was the burden of petitioners herein to prove petitioner Suelto’s defense that he acted on an emergency, that is, he had to swerve the bus to the right to avoid colliding with a passenger jeep coming from EDSA that had overtaken another vehicle and intruded into the lane of the bus. The sudden emergency rule was enunciated by this Court in Gan v. Court of Appeals,23 thus:

[O]ne who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to adopt what subsequently and upon reflection may appear to have been a better method unless the emergency in which he finds himself is brought about by his own negligence.

Under Section 37 of Republic Act No. 4136, as amended, otherwise known as the Land Transportation and Traffic

Code, motorists are mandated to drive and operate vehicles on the right side of the road or highway:

SEC. 37. Driving on right side of highway. – Unless a different course of action is required in the interest of the safety and the security of life, person or property, or because of unreasonable difficulty of operation in compliance herewith, every person operating a motor vehicle or an animal-drawn vehicle on a highway shall pass to the right when meeting persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction, and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the center of the intersection of the highway.

Section 35 of the law provides, thus:

Sec. 35. Restriction as to speed.—(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead (emphasis supplied).

In relation thereto, Article 2185 of the New Civil Code provides that "unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent, if at the time of mishap, he was violating any traffic regulation." By his own admission, petitioner Suelto violated the Land Transportation and Traffic Code when he suddenly swerved the bus to the right, thereby causing damage to the property of private respondent.

However, the trial court correctly rejected petitioner Suelto’s defense, in light of his contradictory testimony vis-à-vis his Counter-Affidavit submitted during the preliminary investigation:

It is clear from the photographs submitted by the prosecution (Exhs. C, D, G, H & I) that the commercial apartment of Dr. Valdellon sustained heavy damage

caused by the bus being driven by Suelto. "It seems highly improbable that the said damages were not caused by a strong impact. And, it is quite reasonable to conclude that, at the time of the impact, the bus was traveling at a high speed when Suelto tried to avoid the passenger jeepney." Such a conclusion finds support in the decision of the Supreme Court in People vs. Ison, 173 SCRA 118, where the Court stated that "physical evidence is of the highest order. It speaks more eloquently than a hundred witnesses." The pictures submitted do not lie, having been taken immediately after the incident. The damages could not have been caused except by a speeding bus. Had the accused not been speeding, he could have easily reduced his speed and come to a full stop when he noticed the jeep. Were he more prudent in driving, he could have avoided the incident or even if he could not avoid the incident, the damages would have been less severe.

In addition to this, the accused has made conflicting statements in his counter-affidavit and his testimony in court. In the former, he stated that the reason why he swerved to the right was because he wanted to avoid the passenger jeepney in front of him that made a sudden stop. But, in his testimony in court, he said that it was to avoid a passenger jeepney coming from EDSA that was overtaking by occupying his lane. Such glaring inconsistencies on material points render the testimony of the witness doubtful and shatter his credibility. Furthermore, the variance between testimony and prior statements renders the witness unreliable. Such inconsistency results in the loss in the credibility of the witness and his testimony as to his prudence and diligence.

As already maintained and concluded, the severe damages sustained could not have resulted had the accused acted as a reasonable and prudent man would. The accused was not diligent as he claims to be. What is more probable is that the accused had to swerve to the right and hit the commercial apartment of the plaintiff because he could not make a full stop as he was driving too fast in a usually crowded street.24

Moreover, if the claim of petitioners were true, they should have filed a third-party complaint against the driver of the offending passenger jeepney and the owner/operator thereof.

Petitioner Suelto’s reliance on the sudden emergency rule to escape conviction for the crime charged and his civil liabilities based thereon is, thus, futile.

On the second issue, we agree with the contention of petitioners that respondents failed to prove that the damages to the terrace caused by the incident amounted to P100,000.00. The only evidence adduced by respondents to prove actual damages claimed by private respondent were the summary computation of damage made by Engr. Jesus R. Regal, Jr. amounting to P171,088.46 and the receipt issued by the BB Construction and Steel Fabricator to private respondent for P35,000.00 representing cost for carpentry works, masonry, welding, and electrical works. Respondents failed to present Regal to testify on his estimation. In its five-page decision, the trial court awarded P150,000.00 as actual damages to private respondent but failed to state the factual basis for such award. Indeed, the trial court merely declared in the decretal portion of its decision that the "sum ofP150,000.00 as reasonable compensation sustained by plaintiff for her damaged apartment." The appellate court, for its part, failed to explain how it arrived at the amount of P100,000.00 in its three-page decision. Thus, the appellate court merely declared:

With respect to the civil liability of the appellants, they contend that there was no urgent necessity to completely demolish the apartment in question considering the nature of the damages sustained as a result of the accident. Consequently, appellants continue, the award of P150,000.00 as compensation sustained by the plaintiff-appellee for her damaged apartment is an unconscionable amount.

The damaged portions of the apartment in question are not disputed.

Considering the aforesaid damages which are the direct result of the accident, the reasonable, and adequate compensation due is hereby fixed at P100,000.00.25

Under Article 2199 of the New Civil Code, actual damages include all the natural and probable consequences of the act or omission complained of, classified as one for the loss of what a person already possesses (daño emergente) and the other, for the failure to receive, as a benefit, that

which would have pertained to him (lucro cesante). As expostulated by the Court in PNOC Shipping and Transport Corporation v. Court of Appeals:26

Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of. There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses (daño emergente), and the other is the failure to receive as a benefit that which would have pertained to him (lucro cesante).27

The burden of proof is on the party who would be defeated if no evidence would be presented on either side. The burden is to establish one’s case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side, is superior to that of the other. Actual damages are not presumed. The claimant must prove the actual amount of loss with a reasonable degree of certainty premised upon competent proof and on the best evidence obtainable. Specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne must be pointed out. Actual damages cannot be anchored on mere surmises, speculations or conjectures. As the Court declared:

As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available. The burden of proof is on the party who would be defeated if no evidence would be presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other. In other words, damages cannot be presumed and courts, in making an award, must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne.28

The Court further declared that "where goods are destroyed by the wrongful act of defendant, the plaintiff is

entitled to their value at the time of the destruction, that is, normally, the sum of money which he would have to pay in the market for identical or essentially similar goods, plus in a proper case, damages for the loss of the use during the period before replacement.29

While claimants’ bare testimonial assertions in support of their claims for damages should not be discarded altogether, however, the same should be admitted with extreme caution. Their testimonies should be viewed in light of claimants’ self-interest, hence, should not be taken as gospel truth. Such assertion should be buttressed by independent evidence. In the language of the Court:

For this reason, Del Rosario’s claim that private respondent incurred losses in the total amount of P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it should be supported by independent evidence. Moreover, because he was the owner of private respondent corporation whatever testimony he would give with regard to the value of the lost vessel, its equipment and cargoes should be viewed in the light of his self-interest therein. We agree with the Court of Appeals that his testimony as to the equipment installed and the cargoes loaded on the vessel should be given credence considering his familiarity thereto. However, we do not subscribe to the conclusion that his valuation of such equipment, cargo, and the vessel itself should be accepted as gospel truth. We must, therefore, examine the documentary evidence presented to support Del Rosario’s claim as regards the amount of losses.30

An estimate of the damage cost will not suffice:

Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually incurred. It is not enough that the damage be capable of proof but must be actually proved with a reasonable degree of certainty, pointing out specific facts that afford a basis for measuring whatever compensatory damages are borne. Private respondents merely sustained an estimated amount needed for the repair of the roof of their subject building. What is more, whether the necessary repairs were caused only by petitioner’s alleged negligence in the maintenance of its school building, or included the ordinary wear and tear of the house itself, is an essential question that remains indeterminable.31

We note, however, that petitioners adduced evidence that, in their view, the cost of the damage to the terrace of private respondent would amount to P55,000.00.32 Accordingly, private respondent is entitled to P55,000.00 actual damages.

We also agree with petitioner Suelto’s contention that the trial court erred in sentencing him to suffer a straight penalty of one (1) year. This is so because under the third paragraph of Article 365 of the Revised Penal Code, the offender must be sentenced to pay a fine when the execution of the act shall have only resulted in damage to property. The said provision reads in full:

ART. 365. Imprudence and negligence. – Any person who, by reckless imprudence, shall commit any act which, had it been intentional, would constitute a grave felony, shall suffer the penalty of arresto mayor in its maximum period, to prision correccional in its medium period; if it would have constituted a less grave felony, the penalty of arresto mayor in its minimum and medium periods shall be imposed; if it would have constituted a light felony, the penalty of arresto menor in its maximum period shall be imposed.

Any person who, by simple imprudence or negligence, shall commit an act which would, otherwise, constitute a grave felony, shall suffer the penalty of arresto mayor in its medium and maximum periods; if it would have constituted a less serious felony, the penalty of arresto mayor in its minimum period shall be imposed.

When the execution of the act covered by this article shall have only resulted in damage to the property of another, the offender shall be punished by a fine ranging from an amount equal to the value of said damages to three times such value, but which shall in no case be less than 25 pesos.

A fine not exceeding two hundred pesos and censure shall be imposed upon any person who, by simple imprudence or negligence, shall cause some wrong which, if done maliciously, would have constituted a light felony.

In the imposition of these penalties, the courts shall exercise their sound discretion, without regard to the rules prescribed in Article 64 (Emphasis supplied).

In the present case, the only damage caused by petitioner Suelto’s act was to the terrace of private respondent’s apartment, costing P55,000.00. Consequently, petitioner’s contention that the CA erred in awarding P100,000.00 by way of actual damages to private respondent is correct. We agree that private respondent is entitled to exemplary damages, and find that the award given by the trial court, as affirmed by the CA, is reasonable. Considering the attendant circumstances, we rule that private respondent Valdellon is entitled to only P20,000.00 by way of exemplary damages.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The joint decision of the Regional Trial Court of Quezon City is AFFIRMED WITH THE MODIFICATION that petitioner Suelto is sentenced to pay a fine of P55,000.00 with subsidiary imprisonment in case of insolvency. Petitioners are ORDERED to pay to Erlinda V. Valdellon, jointly and severally, the total amount of P55,000.00 by way of actual damages, and P20,000.00 by way of exemplary damages.

No pronouncement as to costs.

SO ORDERED.

G.R. No. L-25499 February 18, 1970VILLA REY TRANSIT, INC., petitioner, vs.THE COURT OF APPEALS, TRINIDAD A. QUINTOS, PRIMA A. QUINTOS, AND JULITA A. QUINTOS,respondents.

CONCEPCION, C.J.:

Petitioner, Villa Rey Transit, Inc., seeks the review by certiorari of a decision of the Court of Appeals affirming that of the Court of First Instance of Pangasinan. The basic facts are set forth in said decision of the Court of Appeals, from which We quote:At about 1:30 in the morning of March 17, 1960, an Izuzu First Class passenger bus owned and operated by the defendant, bearing Plate No. TPU-14871-Bulacan and driven by Laureano Casim, left Lingayen, Pangasinan, for Manila. Among its paying passengers was the deceased, Policronio Quintos, Jr. who sat on the first seat, second row, right side of the bus. At about 4:55 o'clock a.m. when the vehicle was nearing the northern approach of the Sadsaran Bridge on the national highway in barrio Sto. Domingo, municipality of Minalin, Pampanga, it frontally hit the rear side of a bullcart filled with hay. As a result the end of a bamboo pole placed on top of the hayload and tied to the cart to hold it in place, hit the right side of the windshield of the bus. The protruding end of the bamboo pole, about 8 feet long from the rear of the bullcart, penetrated through the glass windshield and landed on the face of Policronio Quintos, Jr. who, because of the impact, fell from his seat and was sprawled on the floor. The pole landed on his left eye and the bone of the left side of his face was fractured. He suffered other multiple wounds and was rendered unconscious due, among other causes to severe cerebral concussion. A La Mallorca passenger bus going in the opposite direction towards San Fernando, Pampanga, reached the scene of the mishap and it was stopped by Patrolman Felino Bacani of the municipal police force of Minalin who, in the meantime, had gone to the scene to investigate. Patrolman Bacani placed Policronio Quintos, Jr. and three other injured men who rode on the bullcart aboard the La Mallorca bus and brought them to the provincial hospital of Pampanga at San Fernando for medical assistance. Notwithstanding such assistance, Policronio Quintos, Jr. died at 3:15 p.m. on the same day, March 17, 1960, due to traumatic shock due to cerebral injuries.

The private respondents, Trinidad, Prima and Julita, all surnamed Quintos, are the sisters and only surviving heirs of Policronio Quintos Jr., who died single, leaving no descendants nor ascendants. Said respondents herein brought this action against herein petitioner, Villa Rey Transit, Inc., as owner and operator of said passenger bus, bearing Plate No. TPU-14871-Bulacan, for breach of the contract of carriage between said petitioner and the deceased Policronio Quintos, Jr., to recover the aggregate sum of P63,750.00 as damages, including attorney's fees. Said petitioner — defendant in the court of first instance — contended that the mishap was due to a fortuitous event, but this pretense was rejected by the trial court and the Court of Appeals, both of which found that the accident and the death of Policronio had been due to the negligence of the bus driver, for whom petitioner was liable under its contract of carriage with the deceased. In the language of His Honor, the trial Judge:

The mishap was not the result of any unforeseeable fortuitous event or emergency but was the direct result of the negligence of the driver of the defendant. The defendant must, therefore, respond for damages resulting from its breach of contract for carriage. As the complaint alleged a total damage of only P63,750.00 although as elsewhere shown in this decision the damages for wake and burial expenses, loss of income, death of the victim, and attorneys fee reach the aggregate of P79,615.95, this Court finds it just that said damages be assessed at total of only P63,750.00 as prayed for in plaintiffs' amended complaint.

The despositive part of the decision of the trial Court reads:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay to the plaintiffs the amount of P63,750.00 as damages for breach of contract of carriage resulting from the death of Policronio Quintos, Jr.

which, as above indicated, was affirmed by the Court of Appeals. Hence, the present petition for review oncertiorari, filed by Villa Rey Transit, Inc.

The only issue raised in this appeal is the amount of damages recoverable by private respondents herein. The determination of such amount depends, mainly upon two

(2) factors, namely: (1) the number of years on the basis of which the damages shall be computed and (2) the rate at which the losses sustained by said respondents should be fixed.

The first factor was based by the trial court — the view of which was concurred in by the Court of Appeals — upon the life expectancy of Policronio Quintos, Jr., which was placed at 33-1/3 years — he being over 29 years of age (or around 30 years for purposes of computation) at the time of his demise — by applying the formula (2/3 x [80-301 = life expectancy) adopted in the American Expectancy Table of Mortality or the actuarial of Combined Experience Table of Mortality. Upon the other hand, petitioner maintains that the lower courts had erred in adopting said formula and in not acting in accordance with Alcantara v. Surro1 in which the damages were computed on a four (4) year basis, despite the fact that the victim therein was 39 years old, at the time of his death, and had a life expectancy of 28.90 years.

The case cited is not, however, controlling in the one at bar. In the Alcantara case, none of the parties had questioned the propriety of the four-year basis adopted by the trial court in making its award of damages. Both parties appealed, but only as regards the amount thereof. The plaintiffs assailed the non-inclusion, in its computation, of the bonus that the corporation, which was the victim's employer, had awarded to deserving officers and employees, based upon the profits earned less than two (2) months before the accident that resulted in his death. The defendants, in turn, objected to the sum awarded for the fourth year, which was treble that of the previous years, based upon the increases given, in that fourth year, to other employees of the same corporation. Neither this objection nor said claim for inclusion of the bonus was sustained by this Court. Accordingly, the same had not thereby laid down any rule on the length of time to be used in the computation of damages. On the contrary, it declared:

The determination of the indemnity to be awarded to the heirs of a deceased person has thereforeno fixed basis. Much is left to the discretion of the court considering the moral and material damages involved, and so it has been said that "(t)here can be no exact or uniform rule for measuring the value of a human life and the measure of damages cannot be arrived at by precise mathematical

calculation, but the amount recoverable depends on the particular facts and circumstances of each case. The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor.' (25 C.J.S. 1241.) Other factors that are usually considered are: (1) pecuniary loss to plaintiff or beneficiary (25 C.J.S. 1243-1250) ; (2) loss of support (25 C.J.S., 1250-1251); (3) loss of service (25 C.J.S. 1251-1254); (4) loss of society (25 C.J.S. 1254-1255); (5) mental suffering of beneficiaries (25 C.J.S., 1258-1259) ; and (6) medical and funeral expenses (26 C.J.S., 1254-1260)."2

Thus, life expectancy is, not only relevant, but, also, an important element in fixing the amount recoverable by private respondents herein. Although it is not the sole element determinative of said amount, no cogent reason has been given to warrant its disregard and the adoption, in the case at bar, of a purely arbitrary standard, such as a four-year rule. In short, the Court of Appeals has not erred in basing the computation of petitioner's liability upon the life expectancy of Policronio Quintos, Jr.

With respect to the rate at which the damages shall be computed, petitioner impugns the decision appealed from upon the ground that the damages awarded therein will have to be paid now, whereas most of those sought to be indemnified will be suffered years later. This argument is basically true, and this is, perhaps, one of the reasons why the Alcantara case points out the absence of a "fixed basis" for the ascertainment of the damages recoverable in litigations like the one at bar. Just the same, the force of the said argument of petitioner herein is offset by the fact that, although payment of the award in the case at bar will have to take place upon the finality of the decision therein, the liability of petitioner herein had been fixed at the rate only of P2,184.00 a year, which is the annual salary of Policronio Quintos, Jr. at the time of his death, as a young "training assistant" in the Bacnotan Cement Industries, Inc. In other words, unlike the Alcantara case, on which petitioner relies, the lower courts did not consider, in the present case, Policronio's potentiality and capacity to increase his future income. Indeed, upon the conclusion of his training period, he was supposed to have a better job and be promoted from time to time, and, hence, to earn more, if not — considering the growing importance of trade, commerce and industry and the concomitant rise in the income level of officers and employees therein — much more.

At this juncture, it should be noted, also, that We are mainly concerned with the determination of the losses or damages sustained by the private respondents, as dependents and intestate heirs of the deceased, and that said damages consist, not of the full amount of his earnings, but of the support, they received or would have received from him had he not died in consequence of the negligence of petitioner's agent. In fixing the amount of that support, We must reckon with the "necessary expenses of his own living", which should be deducted from his earnings. Thus, it has been consistently held that earning capacity, as an element of damages to one's estate for his death by wrongful act is necessarily his net earning capacity or his capacity to acquire money, " less the necessary expense for his own living.3 Stated otherwise, the amount recoverable is not loss of the entire earning, but rather the loss of that portion of the earnings which the beneficiary would have received.4 In other words, only net earnings, not gross earning, are to be considered5 that is, the total of the earnings less expenses necessary in the creation of such earnings or income6 and less living and other incidental expenses.7

All things considered, We are of the opinion that it is fair and reasonable to fix the deductible living and other expenses of the deceased at the sum of P1,184.00 a year, or about P100.00 a month, and that, consequently, the loss sustained by his sisters may be roughly estimated at P1,000.00 a year or P33,333.33 for the 33-1/3 years of his life expectancy. To this sum of P33,333.33, the following should be added: (a) P12,000.00, pursuant to Arts. 104 and 107 of the Revised Penal Code, in relation to Article 2206 of our Civil Code, as construed and applied by this Court;8 (b) P1,727.95, actually spent by private respondents for medical and burial expenses; and (c) attorney's fee, which was fixed by the trial court, at P500.00, but which, in view of the appeal taken by petitioner herein, first to the Court of Appeals and later to this Supreme Court, should be increased to P2,500.00. In other words, the amount adjudged in the decision appealed from should be reduced to the aggregate sum of P49,561.28, with interest thereon, at the legal rate, from December 29, 1961, date of the promulgation of the decision of the trial court.

Thus modified, said decision and that of the Court of Appeals are hereby affirmed, in all other respects, with

costs against petitioner, Villa Rey Transit, Inc. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee, Barredo and Villamor, JJ., concur.

G.R. No. 172122 June 22, 2007MERCURY DRUG CORPORATION and ROLANDO J. DEL ROSARIO, petitioners, vs.SPOUSES RICHARD HUANG and CARMEN HUANG, and STEPHEN HUANG, respondents.

PUNO, C.J.:

On appeal are the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 83981, dated February 16, 2006 and March 30, 2006, respectively which affirmed with modification the Decision3 of the Regional Trial Court (RTC) of Makati City, dated September 29, 2004. The trial court found petitioners jointly and severally liable to pay respondents damages for the injuries sustained by respondent Stephen Huang, son of respondent spouses Richard and Carmen Huang.

First, the facts:

Petitioner Mercury Drug Corporation (Mercury Drug) is the registered owner of a six-wheeler 1990 Mitsubishi Truck with plate number PRE 641 (truck). It has in its employ petitioner Rolando J. del Rosario as driver. Respondent spouses Richard and Carmen Huang are the parents of respondent Stephen Huang and own the red 1991 Toyota Corolla GLI Sedan with plate number PTT 775 (car).

These two vehicles figured in a road accident on December 20, 1996 at around 10:30 p.m. within the municipality of Taguig, Metro Manila. Respondent Stephen Huang was driving the car, weighing 1,450 kg., while petitioner Del Rosario was driving the truck, weighing 14,058 kg. Both were traversing the C-5 Highway, north bound, coming from the general direction of Alabang going to Pasig City. The car was on the left innermost lane while the truck was on the next lane to its right, when the truck suddenly swerved to its left and slammed into the front right side of the car. The collision hurled the car over the island where it hit a lamppost, spun around and landed on the opposite lane. The truck also hit a lamppost, ran over the car and zigzagged towards, and finally stopped in front of Buellah Land Church.

At the time of the accident, petitioner Del Rosario only had a Traffic Violation Receipt (TVR). His driver’s license had

been confiscated because he had been previously apprehended for reckless driving.

The car, valued at P300,000.00, was a total wreck. Respondent Stephen Huang sustained massive injuries to his spinal cord, head, face, and lung. Despite a series of operations, respondent Stephen Huang is paralyzed for life from his chest down and requires continuous medical and rehabilitation treatment.

Respondents fault petitioner Del Rosario for committing gross negligence and reckless imprudence while driving, and petitioner Mercury Drug for failing to exercise the diligence of a good father of a family in the selection and supervision of its driver.

In contrast, petitioners allege that the immediate and proximate cause of the accident was respondent Stephen Huang’s recklessness. According to petitioner Del Rosario, he was driving on the left innermost lane when the car bumped the truck’s front right tire. The truck then swerved to the left, smashed into an electric post, crossed the center island, and stopped on the other side of the highway. The car likewise crossed over the center island and landed on the same portion of C-5. Further, petitioner Mercury Drug claims that it exercised due diligence of a good father of a family in the selection and supervision of all its employees.

The trial court, in its Decision dated September 29, 2004, found petitioners Mercury Drug and Del Rosario jointly and severally liable to pay respondents actual, compensatory, moral and exemplary damages, attorney’s fees, and litigation expenses. The dispositive portion reads:

WHEREFORE, judgment is rendered finding defendants Mercury Drug Corporation, Inc. and Rolando del Rosario, jointly and severally liable to pay plaintiffs Spouses Richard Y. Huang and Carmen G. Huang, and Stephen Huang the following amounts:

1. Two Million Nine Hundred Seventy Three Thousand Pesos (P2,973,000.00) actual damages;

2. As compensatory damages:

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

b. Ten Million Pesos (P10,000,000.00) as and for lost or impaired earning capacity of Stephen;

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

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

5. One Million Pesos (P1,000,000.00) as attorneys fees and litigation expense.4

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

Hence, this appeal.

Petitioners cite the following grounds for their appeal:

1. That the subject Decision which dismissed the appeal of petitioners herein but AFFIRMED WITH MODIFICATION the decision of the Regional Trial Court, Branch 64, Makati City, in that the award of moral damages was reduced to P1,000,000.00 and its Resolution dated March 30, 2006, which dismissed outright the Motion for Reconsideration must be set aside because the Honorable Court of Appeals committed reversible error:

A. IN DENYING OUTRIGHTLY THE MOTION FOR RECONSIDERATION ON ALLEGEDLY BEING FILED OUT OF TIME FOR ONE DAY;

B. IN ACCORDING GREATER WEIGHT TO THE EVIDENCE ADDUCED BY THE RESPONDENTS HEREIN AND COMPLETELY DISREGARDING THE DEFENSE INTERPOSED BY THE PETITIONERS HEREIN;

C. IN DISREGARDING COMPLETELY ALL EVIDENCES PRESENTED BY THE PETITIONERS HEREIN AND PROCEEDED TO RENDER ITS DECISION BASED ON PRESUMPTIONS AND

PERSONAL OPINIONS OF PEOPLE WHO ARE NOT WITNESSES TO THE ACCIDENT;

D. IN AWARDING DAMAGES IN FAVOR OF RESPONDENTS HEREIN;

E. IN FINDING THAT MERCURY DRUG CORPORATION FAILED TO EXERCISE THE DILIGENCE REQUIRED IN SUPERVISING ITS EMPLOYEES DESPITE OVERWHELMING EVIDENCE PRESENTED BY PETITIONER COMPANY;

F. IN FINDING THAT PETITIONER ROLANDO DEL ROSARIO WAS NEGLIGENT IN DRIVING THE TRUCK AT THE TIME OF ACCIDENT AND TOTALLY DISREGARDING THE EVIDENCES PRESENTED DURING THE TRIAL OF THE CASE.

G. IN PRESENTING ONLY IN THE DECISION TESTIMONIES FAVORABLE TO THE RESPONDENTS HEREIN AND COMPLETELY DISREGARDING THE EVIDENCES PRESENTED BY THE PETITIONERS HEREIN WHICH CONTRADICTED SUCH TESTIMONIES NOT ONLY THROUGH ORAL TESTIMONIES BUT AS WELL AS DOCUMENTARY EVIDENCES.5

We affirm the findings of the trial court and the appellate court that petitioner Del Rosario was negligent. The evidence does not support petitioners’ claim that at the time of the accident, the truck was at the left inner lane and that it was respondent Stephen Huang’s car, at its right, which bumped the right front side of the truck. Firstly, petitioner Del Rosario could not precisely tell which part of the truck was hit by the car,6 despite the fact that the truck was snub-nosed and a lot higher than the car. Petitioner Del Rosario could not also explain why the car landed on the opposite lane of C-5 which was on its left side. He said that "the car did not pass in front of him after it hit him or under him or over him or behind him."7 If the truck were really at the left lane and the car were at its right, and the car hit the truck at its front right side, the car would not have landed on the opposite side, but would have been thrown to the right side of the C-5 Highway. Noteworthy on this issue is the testimony of Dr. Marlon Rosendo H. Daza, an expert in the field of physics. He conducted a study based on the following assumptions provided by respondents:

1. Two vehicles collided;

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

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

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

Dr. Daza testified that given the foregoing assumptions, if the lighter vehicle hits the right front portion of the heavier vehicle, the general direction of the light vehicle after the impact would be to the right side of the heavy vehicle, not the other way around. The truck, he opined, is more difficult to move as it is heavier. It is the car, the lighter vehicle, which would move to the right of, and away from the truck. Thus, there is very little chance that the car will move towards the opposite side, i.e., to the left of the truck.

Dr. Daza also gave a further study on the basis of the same assumptions except that the car is on the left side of the truck, in accordance with the testimony of respondent Stephen Huang. Dr. Daza concluded that the general direction of the car after impact would be to the left of the truck. In this situation, the middle island against which the car was pinned would slow down the car, and enable the truck to catch up and hit the car again, before running over it.8

To support their thesis, petitioners tried to show the damages that the truck sustained at its front right side. The attempt does not impress. The photographs presented were taken a month after the accident, and Rogelio Pantua, the automechanic who repaired the truck and authenticated the photographs, admitted that there were damages also on the left side of the truck.9

Worse still, petitioner Del Rosario further admitted that after the impact, he lost control of the truck and failed to apply his brakes. Considering that the car was smaller and lighter than the six-wheeler truck, the impact allegedly caused by the car when it hit the truck could not possibly be so great to cause petitioner to lose all control that he failed to even step on the brakes. He testified, as follows:

ATTY. DIAZ:

May I proceed, Your Honor. You were able to apply the brakes, were you sir?

WITNESS:

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

ATTY. DIAZ:

Because as you said you lost control, correct sir?

WITNESS:

Yes, sir.

ATTY. DIAZ:

In other words, sir from the time your truck was hit according to you up to the time you rested on the shoulder, you traveled fifty meters?

WITNESS:

Yes, sir, about that distance.

ATTY. DIAZ:

And this was despite the fact that you were only traveling at the speed of seventy five kilometers per hour, jumped over the island, hit the lamppost, and traveled the three lanes of the opposite lane of C-5 highway, is that what you want to impress upon this court?

WITNESS:

Yes, sir.10

We therefore find no cogent reason to disturb the findings of the RTC and the Court of Appeals. The evidence proves petitioner Del Rosario’s negligence as the direct and proximate cause of the injuries suffered by respondent Stephen Huang. Petitioner Del Rosario failed to do what a reasonable and prudent man would have done under the circumstances.

We now come to the liability of petitioner Mercury Drug as employer of Del Rosario. Articles 2176 and 2180 of the Civil Code provide:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

Art. 2180. The obligation imposed by article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible.

x x x

The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions.

x x x

The liability of the employer under Art. 2180 of the Civil Code is direct or immediate. It is not conditioned on a prior recourse against the negligent employee, or a prior showing of insolvency of such employee. It is also joint and solidary with the employee.11

To be relieved of liability, petitioner Mercury Drug should show that it exercised the diligence of a good father of a family, both in the selection of the employee and in the supervision of the performance of his duties. Thus, in the selection of its prospective employees, the employer is required to examine them as to their qualifications, experience, and service records.12 With respect to the supervision of its employees, the employer should formulate standard operating procedures, monitor their implementation, and impose disciplinary measures for their breach. To establish compliance with these requirements, employers must submit concrete proof, including documentary evidence.13

In the instant case, petitioner Mercury Drug presented testimonial evidence on its hiring procedure. According to

Mrs. Merlie Caamic, the Recruitment and Training Manager of petitioner Mercury Drug, applicants are required to take theoretical and actual driving tests, and psychological examination. In the case of petitioner Del Rosario, however, Mrs. Caamic admitted that he took the driving tests and psychological examination when he applied for the position of Delivery Man, but not when he applied for the position of Truck Man. Mrs. Caamic also admitted that petitioner Del Rosario used a Galant which is a light vehicle, instead of a truck during the driving tests. Further, no tests were conducted on the motor skills development, perceptual speed, visual attention, depth visualization, eye and hand coordination and steadiness of petitioner Del Rosario. No NBI and police clearances were also presented. Lastly, petitioner Del Rosario attended only three driving seminars – on June 30, 2001, February 5, 2000 and July 7, 1984. In effect, the only seminar he attended before the accident which occurred in 1996 was held twelve years ago in 1984.

It also appears that petitioner Mercury Drug does not provide for a back-up driver for long trips. At the time of the accident, petitioner Del Rosario has been out on the road for more than thirteen hours, without any alternate. Mrs. Caamic testified that she does not know of any company policy requiring back-up drivers for long trips.14

Petitioner Mercury Drug likewise failed to show that it exercised due diligence on the supervision and discipline over its employees. In fact, on the day of the accident, petitioner Del Rosario was driving without a license. He was holding a TVR for reckless driving. He testified that he reported the incident to his superior, but nothing was done about it. He was not suspended or reprimanded.15 No disciplinary action whatsoever was taken against petitioner Del Rosario. We therefore affirm the finding that petitioner Mercury Drug has failed to discharge its burden of proving that it exercised due diligence in the selection and supervision of its employee, petitioner Del Rosario.

We now consider the damages which respondents should recover from the petitioners.

The trial court awarded the following amounts:

1. Two Million Nine Hundred Seventy-Three Thousand Pesos (P2,973,000.00) actual damages;

2. As compensatory damages:

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

b. Ten Million Pesos (P10,000,000.00) as and for lost or impaired earning capacity of Stephen;

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

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

5. One Million Pesos (P1,000,000.00) as attorney’s fees and litigation expense.

The Court of Appeals affirmed the decision of the trial court but reduced the award of moral damages toP1,000,000.00.

With regard to actual damages, Art. 2199 of the Civil Code provides that "[E]xcept as provided by law or by stipulation one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved x x x." In the instant case, we uphold the finding that the actual damages claimed by respondents were supported by receipts. The amount of P2,973,000.00 represented cost of hospital expenses, medicines, medical services and supplies, and nursing care services provided respondent Stephen from December 20, 1996, the day of the accident, until December 1998.

Petitioners are also liable for all damages which are the natural and probable consequences of the act or omission complained of.16 The doctors who attended to respondent Stephen are one in their prognosis that his chances of walking again and performing basic body functions are nil. For the rest of his life, he will need continuous rehabilitation and therapy to prevent further complications such as pneumonia, bladder and rectum infection, renal failure, sepsis and severe bed sores, osteoporosis and fractures, and other spinal cord injury-

related conditions. He will be completely dependent on the care and support of his family. We thus affirm the award of P23,461,062.00 for the life care cost of respondent Stephen Huang, based on his average monthly expense and the actuarial computation of the remaining years that he is expected to live; and the conservative amount of P10,000,000.00, as reduced by the trial court, for the loss or impairment of his earning capacity,17considering his age, probable life expectancy, the state of his health, and his mental and physical condition before the accident. He was only seventeen years old, nearly six feet tall and weighed 175 pounds. He was in fourth year high school, and a member of the school varsity basketball team. He was also class president and editor-in-chief of the school annual. He had shown very good leadership qualities. He was looking forward to his college life, having just passed the entrance examinations of the University of the Philippines, De La Salle University, and the University of Asia and the Pacific. The University of Sto. Tomas even offered him a chance to obtain an athletic scholarship, but the accident prevented him from attending the basketball try-outs. Without doubt, he was an exceptional student. He excelled both in his academics and extracurricular undertakings. He is intelligent and motivated, a go-getter, as testified by Francisco Lopez, respondent Stephen Huang’s godfather and a bank executive.18 Had the accident not happened, he had a rosy future ahead of him. He wanted to embark on a banking career, get married and raise children. Taking into account his outstanding abilities, he would have enjoyed a successful professional career in banking. But, as Mr. Lopez stated, it is highly unlikely for someone like respondent to ever secure a job in a bank. To his knowledge, no bank has ever hired a person suffering with the kind of disability as Stephen Huang’s.19

We likewise uphold the award of moral and exemplary damages and attorney’s fees.

"The award of moral damages is aimed at a restoration, within the limits of the possible, of the spiritual status quo ante."20 Moral damages are designed to compensate and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused a person. Although incapable of pecuniary computation, they must be proportionate to the suffering inflicted.21 The amount of the award bears no

relation whatsoever with the wealth or means of the offender.

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

Respondent Carmen Huang’s brother testified on the insensitivity of petitioner Mercury Drug towards the plight of respondent. Stephen, viz.:

Maybe words cannot describe the anger that we feel towards the defendants. All the time that we were going through the crisis, there was none (sic) a single sign of nor offer of help, any consolation or anything whatsoever. It is funny because, you know, I have many colleagues, business associates, people even as far as United States, Japan, that I probably met only once, when they found out, they make a call, they sent card, they write small notes, but from the defendant, absolute silence. They didn’t care, and worst, you know, this is a company that have (sic) all the resources to help us. They were (sic) on our part, it was doubly painful because we have no choice but to go back to them and buy the medicines that we need for Stephen. So, I don’t know how someone will really have no sense of decency at all to at least find out what happened to my son, what is his condition, or if there is anything that they can do to help us.22

On the matter of exemplary damages, Art. 2231 of the Civil Code provides that in cases of quasi-delicts, exemplary

damages may be granted if the defendant acted with gross negligence. The records show that at the time of the accident, petitioner Del Rosario was driving without a license because he was previously ticketed for reckless driving. The evidence also shows that he failed to step on his brakes immediately after the impact. Had petitioner Del Rosario done so, the injuries which respondent Stephen sustained could have been greatly reduced. Wanton acts such as that committed by petitioner Del Rosario need be suppressed; and employers like petitioner Mercury Drug should be more circumspect in the observance of due diligence in the selection and supervision of their employees. The award of exemplary damages in favor of the respondents is therefore justified.

With the award of exemplary damages, we also affirm the grant of attorney’s fees to respondents.23 In addition, attorney’s fees may be granted when a party is compelled to litigate or incur expenses to protect his interest by reason of an unjustified act of the other party.24

Cost against petitioners.

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

SO ORDERED.

G.R. No. 97412 July 12, 1994EASTERN SHIPPING LINES, INC., petitioner, vs.HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.

VITUG, J.:

The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the arrastre operator and the customs broker; (b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).

The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and undisputed facts that have led to the controversy are hereunder reproduced:

This is an action against defendants shipping company, arrastre operator and broker-forwarder for damages sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the value of such losses/damages.

On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38.

Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service, Inc., one drum opened and without seal (per "Request for Bad Order Survey." Exh. D).

On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to one drum which contained spillages, while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E).

Plaintiff contended that due to the losses/damage sustained by said drum, the consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims were presented against defendants who failed and refused to pay the same (Exhs. H, I, J, K, L).

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants (per "Form of Subrogation", "Release" and Philbanking check, Exhs. M, N, and O). (pp. 85-86, Rollo.)

There were, to be sure, other factual issues that confronted both courts. Here, the appellate court said:

Defendants filed their respective answers, traversing the material allegations of the complaint contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter, is no longer its liability (p. 17, Record); Metroport averred that although subject shipment was discharged unto its custody, portion of the same was already in bad order (p. 11, Record); Allied Brokerage alleged that plaintiff has no cause of action against it, not having negligent or at fault for the shipment was already in damage and bad order condition when received by it, but nonetheless, it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it.

From the evidence the court found the following:

The issues are:

1. Whether or not the shipment sustained losses/damages;

2. Whether or not these losses/damages were sustained while in the custody of defendants (in whose respective custody, if determinable);

3. Whether or not defendant(s) should be held liable for the losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34; Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).

As to the first issue, there can be no doubt that the shipment sustained losses/damages. The two drums were shipped in good order and condition, as clearly shown by the Bill of Lading and Commercial Invoice which do not indicate any damages drum that was shipped (Exhs. B and C). But when on December 12, 1981 the shipment was delivered to defendant Metro Port Service, Inc., it excepted to one drum in bad order.

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

place of destination, until the consignee has been advised and has had reasonable opportunity to remove or dispose of the goods (Art. 1738, NCC). Defendant Eastern Shipping's own exhibit, the "Turn-Over Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states that on December 12, 1981 one drum was found "open".and thus held:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:

A. Ordering defendants to pay plaintiff, jointly and severally:

1. The amount of P19,032.95, with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints, until fully paid (the liability of defendant Eastern Shipping, Inc. shall not exceed US$500 per case or the CIF value of the loss, whichever is lesser, while the liability of defendant Metro Port Service, Inc. shall be to the extent of the actual invoice value of each package, crate box or container in no case to exceed P5,000.00 each, pursuant to Section 6.01 of the Management Contract);

2. P3,000.00 as attorney's fees, and

3. Costs.

B. Dismissing the counterclaims and crossclaim of defendant/cross-claimant Allied Brokerage Corporation.

SO ORDERED. (p. 207, Record).

Dissatisfied, defendant's recourse to US.

The appeal is devoid of merit.

After a careful scrutiny of the evidence on record. We find that the conclusion drawn therefrom is correct. As there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants, and therefore they are liable to the appellee, as subrogee for the amount it paid to the consignee. (pp. 87-89, Rollo.)

The Court of Appeals thus affirmed in toto the judgment of the court a quo.

In this petition, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse of discretion on the part of the appellate court when —

I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS GRANTED IN THE QUESTIONED DECISION;

II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE RATE OF SIX PERCENT PER ANNUM, PRIVATE RESPONDENT'S CLAIM BEING INDISPUTABLY UNLIQUIDATED.

The petition is, in part, granted.

In this decision, we have begun by saying that the questions raised by petitioner carrier are not all that novel. Indeed, we do have a fairly good number of previous decisions this Court can merely tack to.

The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it liable (Art. 1735, Civil Code; Philippine National Railways vs. Court of Appeals, 139 SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA 365). There are, of course, exceptional cases when such presumption of fault is not observed but these cases,

enumerated in Article 1734 1 of the Civil Code, are exclusive, not one of which can be applied to this case.

The question of charging both the carrier and the arrastre operator with the obligation of properly delivering the goods to the consignee has, too, been passed upon by the Court. In Fireman's Fund Insurance vs. Metro Port Services (182 SCRA 455), we have explained, in holding the carrier and the arrastre operator liable in solidum,thus:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator (Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the consignee.

We do not, of course, imply by the above pronouncement that the arrastre operator and the customs broker are themselves always and necessarily liable solidarily with the carrier, or vice-versa, nor that attendant facts in a given case may not vary the rule. The instant petition has been brought solely by Eastern Shipping Lines, which, being the carrier and not having been able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A factual finding of both the court a quo and the appellate court, we take note, is that "there is sufficient evidence that the shipment sustained damage while in the successive possession of appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are others solidarily liable with it.

It is over the issue of legal interest adjudged by the appellate court that deserves more than just a passing remark.

Let us first see a chronological recitation of the major rulings of this Court:

The early case of Malayan Insurance Co., Inc., vs. Manila Port Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the lower court) averred in its complaint that the total amount of its claim for the value of the undelivered goods amounted to P3,947.20. This demand, however, was neither established in its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the complaint was filed on 28 December 1962 until full payment thereof. The appellants then assailed,inter alia, the award of legal interest. In sustaining the appellants, this Court ruled:

Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial. The trial court opted for judicial demand as the starting point.

But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty." And as was held by this Court in Rivera vs. Perez, 4 L-6998, February 29, 1956, if the suit were for damages, "unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos, 25 Phil. 447; Lichauco v. Guzman, 38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis supplied)

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

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows:

Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay jointly and severally the following persons:

(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of P131,084.00 which is the value of the boat F B Pacita III together with its accessories, fishing gear and equipment minus P80,000.00 which is the value of the insurance recovered and the amount of P10,000.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time they are actually paid or already the total sum of P370,000.00 as of June 4, 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5,000.00 with costs against defendants and third party plaintiffs. (Emphasis supplied.)

On appeal to the Court of Appeals, the latter modified the amount of damages awarded but sustained the trial court in adjudging legal interest from the filing of the complaint until fully paid. When the appellate court's decision became final, the case was remanded to the lower court for execution, and this was when the trial court issued its assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of the Civil Code. In their petition for review on certiorari, the petitioners contended that Central Bank Circular No. 416, providing thus —

By virtue of the authority granted to it under Section 1 of Act 2655, as amended, Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the loan, or forbearance of any money, goods, or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve (12%) percent per annum. This Circular shall take effect immediately. (Emphasis found in the text) —

should have, instead, been applied. This Court 6 ruled:

The judgments spoken of and referred to are judgments in litigations involving loans or forbearance of any money, goods or credits. Any other kind of monetary judgment which has nothing to do with, nor involving loans or forbearance of any money, goods or credits does not fall

within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank.

Coming to the case at bar, the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan, much less forbearances of any money, goods or credits. As correctly argued by the private respondents, the law applicable to the said case is Article 2209 of the New Civil Code which reads —

Art. 2209. — If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum.

The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28 July 1986. The case was for damages occasioned by an injury to person and loss of property. The trial court awarded private respondent Pedro Manabat actual and compensatory damages in the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully paid. Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12% to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the complaint until fully paid.

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

WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, we deem it reasonable to

render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra. p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception to attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon aforementioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (Except Roman Ozaeta). (Emphasis supplied)

A motion for reconsideration was filed by United Construction, contending that "the interest of twelve (12%) per cent per annum imposed on the total amount of the monetary award was in contravention of law." The Court 10 ruled out the applicability of the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April 1988, it explained:

There should be no dispute that the imposition of 12% interest pursuant to Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2) forbearance of any money, goods or credit; and (3) rate allowed in judgments (judgments spoken of refer to judgments involving loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA 260 [1985]). It is true that in the instant case, there is neither a loan or a forbearance, but then no interest is actually imposed provided the sums referred to in the judgment are paid upon the finality of the judgment. It is delay in the payment of such final judgment, that will cause the imposition of the interest.

It will be noted that in the cases already adverted to, the rate of interest is imposed on the total sum, from the filing of the complaint until paid; in other words, as part of the judgment for damages. Clearly, they are not applicable to the instant case. (Emphasis supplied.)

The subsequent case of American Express International, Inc., vs. Intermediate Appellate Court 11 was a petition for

review on certiorari from the decision, dated 27 February 1985, of the then Intermediate Appellate Court reducing the amount of moral and exemplary damages awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution, dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e., P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest thereon at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09 November 1988, this Court, while recognizing the right of the private respondent to recover damages, held the award, however, for moral damages by the trial court, later sustained by the IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court and rendered a new one, "ordering the petitioner to pay private respondent the sum of One Hundred Thousand (P100,000.00) Pesos as moral damages, with six (6%) percent interest thereon computed from the finality of this decision until paid. (Emphasis supplied)

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

WHEREFORE, except as modified hereinabove the decision of the CFI of Negros Oriental dated October 31, 1972 is affirmed in all respects, with the modification that defendants-appellants, except defendant-appellant Merton Munn, are ordered to pay, jointly and severally, the amounts stated in the dispositive portion of the decision, including the sum of P1,400.00 in concept of compensatory damages, with interest at the legal rate from the date of the filing of the complaint until fully paid(Emphasis supplied.)

The petition for review to this Court was denied. The records were thereupon transmitted to the trial court, and an entry of judgment was made. The writ of execution issued by the trial court directed that only compensatory damages should earn interest at 6% per annum from the date of the filing of the complaint. Ascribing grave abuse of discretion on the part of the trial judge, a petition for certiorari assailed the said order. This Court said:

. . . , it is to be noted that the Court of Appeals ordered the payment of interest "at the legal rate"from the time of the filing of the complaint. . . Said circular [Central Bank Circular No. 416] does not apply to actions based on a breach of employment contract like the case at bar. (Emphasis supplied)

The Court reiterated that the 6% interest per annum on the damages should be computed from the time the complaint was filed until the amount is fully paid.

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

. . . , (T)he transaction involved is clearly not a loan or forbearance of money, goods or credits but expropriation of certain parcels of land for a public purpose, the payment of which is without stipulation regarding interest, and the interest adjudged by the trial court is in the nature of indemnity for damages. The legal interest required to be paid on the amount of just compensation for the properties expropriated is manifestly in the form of indemnity for damages for the delay in the payment thereof. Therefore, since the kind of interest involved in the joint judgment of the lower court sought to be enforced in this case is interest by way of damages, and not by way of earnings from loans, etc. Art. 2209 of the Civil Code shall apply.

Concededly, there have been seeming variances in the above holdings. The cases can perhaps be classified into two groups according to the similarity of the issues involved and the corresponding rulings rendered by the court. The "first group" would consist of the cases of Reformina v. Tomol (1985), Philippine Rabbit Bus Lines v. Cruz(1986), Florendo v. Ruiz (1989) and National Power Corporation v. Angas (1992). In the "second group" would be Malayan Insurance Company

v.Manila Port Service (1969), Nakpil and Sons v. Court of Appeals (1988), and American Express International v.Intermediate Appellate Court (1988).

In the "first group", the basic issue focuses on the application of either the 6% (under the Civil Code) or 12% (under the Central Bank Circular) interest per annum. It is easily discernible in these cases that there has been a consistent holding that the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance 16 of money, goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the 6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that in these cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully paid.

The "second group", did not alter the pronounced rule on the application of the 6% or 12% interest per annum, 17depending on whether or not the amount involved is a loan or forbearance, on the one hand, or one of indemnity for damage, on the other hand. Unlike, however, the "first group" which remained consistent in holding that the running of the legal interest should be from the time of the filing of the complaint until fully paid, the "second group" varied on the commencement of the running of the legal interest.

Malayan held that the amount awarded should bear legal interest from the date of the decision of the court a quo,explaining that "if the suit were for damages, 'unliquidated and not known until definitely ascertained, assessed and determined by the courts after proof,' then, interest 'should be from the date of the decision.'" American Express International v. IAC, introduced a different time frame for reckoning the 6% interest by ordering it to be "computed from the finality of (the) decision until paid." The Nakpil and Sons case ruled that 12% interest per annum should be imposed from the finality of the decision until the judgment amount is paid.

The ostensible discord is not difficult to explain. The factual circumstances may have called for different

applications, guided by the rule that the courts are vested with discretion, depending on the equities of each case, on the award of interest. Nonetheless, it may not be unwise, by way of clarification and reconciliation, to suggest the following rules of thumb for future guidance.

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts 18 is breached, the contravenor can be held liable for damages. 19 The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. 20

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. 21 Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. 22 In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 23 of the Civil Code.

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

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

WHEREFORE, the petition is partly GRANTED. The appealed decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.

SO ORDERED.

G.R. No. 178062 September 8, 2010PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, vs.ABDUL AMINOLA y OMAR and MIKE MAITIMBANG y ABUBAKAR, Accused-Appellants.

VELASCO, JR., J.:

This is an appeal from the February 12, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CR-H.C. No. 01300 entitled People of the Philippines v. Abdul Aminola y Omar and Mike Maitimbang y Abubakar, which affirmed the January 21, 2004 Decision in Criminal Case Nos. 116595-H and 116596 of the Regional Trial Court (RTC), Branch 156 in Pasig City. The RTC found accused-appellants guilty of Robbery with Homicide and sentenced them to reclusion perpetua.

The Facts

In Criminal Case No. 116595-H, an Information charged accused-appellants as follows:

On or about August 31, 1999 in Taguig, Metro Manila and within the jurisdiction of this Honorable Court, the accused, conspiring and confederating together and all of them mutually helping and aiding one another, armed with an unlicensed gun, with intent to gain, did then and there willfully, unlawfully and feloniously take, rob and divest one Nestor Aranas Gabuya cash amounting to P150,000.00, placed inside the bag of the said victim which was forcibly taken by the respondents, necklace worth P35,000.00, Timex watch worth P4,000.00 and a licensed 9 mm. Bernardelli gun with serial number 302617-50 worth P45,000.00; that by reason or on the occasion of the crime of robbery, accused, Datu Ban Ampatuan y Panaguilan, Abdul Aminola y Omar, a.k.a. "Roy," Alimudin Laminda y Macacua, a.k.a. "Modin," Abdulan Sandaton y Sangcopan, a.k.a. "Kulem" and Mike Batimbang y Abubakar, a.k.a. "Nuke" with intent to kill, did then and there willfully, unlawfully and feloniously attack, assault and shot Nestor Aranas Gabuya with the gun into the different parts of his body, thereby inflicting upon him mortal gunshot wounds which directly caused his death.1

In Criminal Case No. 116596, an Information charged accused-appellant Abdul Aminola y Omar with illegal possession of firearms allegedly as follows:

On or about August 31, 1999 in Taguig, Metro Manila and within the jurisdiction of this Honorable Court, the accused, being then a private person, did then and there willfully, unlawfully and feloniously have in his possession and under his custody and control one caliber (1) magazine loaded with two (2) live ammos, without first securing the necessary license or permit from the proper authorities.2

During their arraignment, accused-appellants gave a negative plea. Thereafter, the two cases were jointly tried.

Version of the Prosecution

At the trial, the prosecution presented the following witnesses: Police Major Rolando Migano, Ballistician III Ireneo S. Ordiano, and Jesus Oliva, the eyewitness.

In the afternoon of August 31, 1999, at around five, Nestor Gabuya closed shop at his motorcycle and bicycle spare parts store located in Upper Bicutan, Taguig. He then headed home on his bike. Unbeknownst to him, accused-appellant Abdul Aminola and accused Alimudin Laminda were observing him from a nearby basketball court. Aminola proceeded to follow Gabuya. Upon catching up with Gabuya, Aminola put his arms around Gabuya and wrestled for the bag Gabuya was carrying. Gabuya refused to let go of his bag, whereupon Aminola pulled out a gun and shot him. Gabuya fell to the ground but still resisted, prompting Aminola to take another shot.3

Accused-appellant Mike Maitimbang then approached and took something from the fallen Gabuya. Maitimbang shot Gabuya behind and fled towards the direction of eyewitness Oliva. Joel, Gabuya’s caretaker, gave chase but was fired upon by Maitimbang.4 Oliva testified seeing the incident while he was on Genera Valdez St. in Purok V, Upper Bicutan.5

Regina, Gabuya’s wife, reported the incident that same afternoon. Based on her information, Major Migano formed a team to investigate the crime.6

Later that evening, an informant known as "Abdul" told the police that he witnessed what had happened to Gabuya and could tell them where the suspects could be found. True enough, Abdul led Major Migano and his men. A blocking force was organized while Col. Bernido formed a team to make the arrests on the suspects.

In the evening of September 1, 1999, Major Migano’s team once again went to the hideout, where Abdul identified four of Gabuya’s assailants. One of them, Aminola, was found in possession of an unlicensed .45 caliber gun with one (1) magazine and two (2) ammunitions.7

The four men arrested, identified as Aminola, Laminda, Datu Ban Ampatuan, and Abdulan Sandaton, were then brought to the Criminal Investigation Division at Camp Crame, Quezon City for further investigation.8 On September 2, 1999, Maitimbang was also arrested.

The result of the post-mortem examination of Gabuya, conducted by Dr. David, showed that he had four (4) gunshot wounds with three (3) entry wounds and one (1) exit wound.9 Two (2) slugs were recovered from the Gabuya’s body, one from the brain and the other from his lungs.10

Version of the Defense

The defense offered the testimonies of accused-appellant Maitimbang, Laminda, Sandaton, accused-appellant Aminola, and their witnesses Mymona Quirod and Senior Police Officer 2 (SPO2) Bero Saud Lukman.

Maitimbang testified that he was arrested on September 2, 1999 after arriving home from work due to a grenade found in his possession. At the police precinct, he was not informed that his arrest was made in connection with the death of Gabuya. It was only during the inquest, according to him, that he saw his fellow accused for the first time. He further averred that Gabuya’s widow pinpointed him as one of the suspects when she learned he was a Muslim. He claimed his name was only included and superimposed on the list of suspects.11

Laminda, for his part, narrated that he was nabbed together with his cousin Sandaton in the early morning of September 1, 1999 at their house on Rogan St., Maharlika

Village, Taguig. He disavowed any knowledge of the reason for their arrest and claimed that the arresting police officers had neither a warrant of arrest nor a search warrant. He likewise denied acting as a lookout in the robbery resulting in the death of Gabuya. He attested that he was a tricycle driver, and that on August 31, 1999, he was ferrying passengers in his usual route of Maharlika-Triumph-Signal. He denied having fellow accused Ampatuan as a passenger and only came to know of Aminola because the latter was also a tricycle driver.12

Mymona Quirod corroborated Laminda’s story. On the witness stand, Quirod testified that she boarded Lamida’s tricycle at around 5:10 in the afternoon of August 31, 1999 and got off at exactly six in the evening. She was in Davao when she heard that Laminda had been implicated in Gabuya’s death and felt compelled to come back to help Laminda who she believed was innocent.13

Sandaton, on the other hand, narrated that it was only during the inquest proceedings that he learned of the criminal charge against him. He denied knowing Oliva and being a lookout while Gabuya was being robbed and killed.14

Aminola testified that he was at home on September 1, 1999 when policemen suddenly entered and arrested him and brought him to the police station in Maharlika Village, Taguig. He was brought there together with Ampatuan, Sandaton and Laminda. He denied knowing Oliva but admitted knowing Laminda and Ampatuan as acquaintances.15

SPO2 Lukman was presented to establish Aminola’s whereabouts at about the time of Gabuya’s killing. According to SPO2 Lukman, at around half past five in the afternoon of August 31, 1999, he was talking to Aminola outside the latter’s house until six in the evening.16

Instead of testifying for his defense, Ampatuan filed a Demurrer to Evidence.

The Ruling of the Trial Court

Finding no proof of Ampatuan’s involvement in the robbery with homicide, the trial court granted his Demurrer to Evidence.

After trial, the RTC found accused-appellants Aminola and Maitimbang guilty of robbery with homicide, but acquitted accused Sandaton and Laminda. The trial court, however, cleared Aminola of the crime charged in Criminal Case No. 116596.

The fallo of the RTC’s Joint Decision dated January 21, 2004 reads:

WHEREFORE, premises considered, the Court find on [sic] Criminal Case No. 116595 accused Abdul Aminola y Omar and Mike Maitimbang y Abubakar GUILTY beyond reasonable doubt of the crime of "Robbery with Homicide" defined and punished under par. 1 of Article 294 of the Revised Penal Code with the aggravating circumstance of use of unlicensed firearm, applying Section 1 of Republic Act 8294 [July 6, 1997] they are hereby sentenced to suffer the penalty of Death while accused Alimudin Laminda y Macacua and Abdulan Sandaton y Sangcopan are hereby ACQUITTED of the charge for failure of the prosecution to present the quantum of proof mandated by law to establish conspiracy in the killing of Nestor Aranas Gabuya and are further ordered immediately released from confinement unless held for some other lawful cause/s.

The accused Abdul Aminola y Omar and Mike Maitimbang y Abubakar are likewise sentenced, separately:

a) To indemnify the heirs of NESTOR ARANAS GABUYA in the amount of Fifty Thousand (P50,000.00) Pesos as death indemnity.

b) The amount of Fifty Thousand (P50,000.00) Pesos each as moral damages.

c) The amount of Thirty Thousand (P30,000.00) each as exemplary damages.

In Criminal Case No. 116596, accused Abdul Aminola y Omar is ACQUITTED.

SO ORDERED.17

As before the RTC, accused-appellant Aminola on appeal put up the defense of alibi, maintaining that he could not have committed the crime for he was at home talking with

SPO2 Lukman at the time of the incident. Aminola likewise questioned his warrantless arrest. On the other hand, accused-appellant Maitimbang reiterated his innocence, claiming that there was no reason for his arrest other than the fact that a grenade was found in his possession. He also asserted that he was merely included in the list of suspects with his name superimposed on the list.

The Ruling of the Appellate Court

The CA affirmed the trial court’s decision but reduced the penalty imposed to reclusion perpetua in view of the abolition of the death penalty.18

Disagreeing with the appellate court’s decision, accused-appellants timely filed their Notice of Appeal with this Court.

On August 8, 2007 , the Court required the parties to submit supplemental briefs if they so desired. The People of the Philippines, thru the Office of the Solicitor General (OSG), informed the Court that it is submitting the case for decision based on records and pleadings previously filed. Accused-appellants, on the other hand, averred in their Supplemental Brief that they were erroneously convicted despite the existence of reasonable doubt.

The Issue

WHETHER THE COURT OF APPEALS ERRED IN FINDING ACCUSED-APPELLANTS GUILTY BEYOND REASONABLE DOUBT.

Insisting on his innocence, accused-appellant Maitimbang maintains that he should have been identified as a suspect at the onset of the investigation if he were really one of the perpetrators.

Accused-appellant Aminola, on the other hand, claims that the appellate court erroneously disregarded his alibi, a defense indisputably corroborated by SPO2 Lukman.

Accused-appellants question the legality of their warrantless arrest, arguing that there was no hot pursuit to speak of, since there was no indication that they were committing or attempting to commit an offense in the

presence of the arresting officers or that they had just committed an offense. As claimed, a considerable period of time had elapsed between their arrest and the commission of the crime, thus necessitating a warrant of arrest.

The OSG counters that what transpired were hot pursuit arrests, for the arresting team’s investigation and the data gathered from informant Abdul were sufficient reasonable grounds to believe that accused-appellants indeed robbed and killed Gabuya. The fact that Aminola was arrested a day after the incident while Maitimbang was arrested two days later would bring the arrests within the purview of hot pursuit arrests, made as they were within a brief interval between the actual commission of the crime and the arrests effected.

Our Ruling

We affirm accused-appellants’ conviction.

Elements of the Crime

The following elements must be established for a conviction in the special complex crime of robbery with homicide:

1. The taking of personal property is committed with violence or intimidation against persons;

2. The property taken belongs to another;

3. The taking is animo lucrandi; and

4. By reason of the robbery or on the occasion thereof, homicide is committed.19

Essential for conviction of robbery with homicide is proof of a direct relation, an intimate connection between the robbery and the killing, whether the latter be prior or subsequent to the former or whether both crimes are committed at the same time.20

The prosecution was able to establish that accused-appellants committed robbery with homicide through the totality of their evidence. The first three elements were

established when Oliva testified that he saw, and positively identified, accused-appellants taking Gabuya’s property by force and both shooting Gabuya. Gabuya’s death resulting from their attack proves the last element of the complex crime as duly confirmed by the post-mortem report.

Defense of Alibi Unavailing

Accused-appellants cannot avoid liability by way of their defenses. Alibi is the weakest of all defenses because it is easy to concoct and difficult to disprove.21 To establish alibi, an accused must prove (1) that he was present at another place at the time the crime was perpetrated; and (2) that it was physically impossible for him to be at the scene of the crime. Physical impossibility "refers to the distance between the place where the accused was when the crime transpired and the place where it was committed, as well as the facility of access between the two places."22

The fact that Aminola’s witness, i.e., SPO2 Lukman, corroborated Aminola’s testimony about not being at the situsof the crime when Gabuya was robbed and killed does not, without more, serve to strengthen Aminola’s alibi. As the appellate court aptly observed, SPO2 Lukman’s testimony did not prove the physical impossibility for Aminola to be at the scene of the crime. SPO2 Lukman did not categorically specify the time he was with Aminola on the date of the incident. His testimony did not preclude the possibility of Aminola perpetrating the crime after their meeting. As the trial court perceptively observed:

The time interval from Rogan Street to Bonifacio Street is just five (5) or ten (10) minutes. Such distance does not preclude the accused from being at the place of the crime at the time of its commission. Hence SPO2 Lukman’s testimony could not be given more weight than prosecution witness Oliva’s testimony.23

The defense of Maitimbang, likewise, cannot overcome the positive identification by Oliva. Under oath, Oliva testified seeing Maitimbang take Gabuya’s property and shot Gabuya at the back while already prone on the ground.

Denial and alibi cannot prevail over the positive and categorical testimony of the witness24 identifying a person as the perpetrator of the crime absent proof of ill motive. No reason or motive was given for Oliva to falsely testify against accused-appellants on such a serious crime. As often noted, the trial court is in a better position to observe the demeanor and candor of the witnesses and to decide who is telling the truth.1avvphi1 We, thus, defer to the trial court’s findings especially when duly affirmed by the appellate court.

Legality of Warrantless Arrests

The CA correctly ruled on the question of legality of the warrantless arrests of accused-appellants. A warrantless arrest is not a jurisdictional defect and any objection to it is waived when the person arrested submits to arraignment without any objection,25 as in this case. Accused-appellants are questioning their arrest for the first time on appeal and are, therefore, deemed to have waived their right to the constitutional protection against illegal arrests and searches.26

Penalty

The Revised Penal Code provides:

Art. 294. Robbery with violence against or intimidation of persons – Penalties. – Any person guilty of robbery with the use of violence against or intimidation of any person shall suffer:

1. The penalty of reclusion perpetua to death, when by reason or on the occasion of the robbery, the crime of homicide shall have been committed or when the robbery shall have been accompanied by rape or intentional mutilation or arson. x x x

The RTC sentenced both accused-appellants to death. But consonant to the abolition of death penalty under Republic Act No. (RA) 9346,27 the CA reduced the penalty to reclusion perpetua. While the penalty reduction was legally correct, the CA omitted to include in the imposition that both accused-appellants shall be ineligible for parole. Section 2 of RA 9346 provides that sentences "which will be reduced to reclusion perpetua by reason of the

law, shall not be eligible for parole." Thus, the sentence handed down by the CA must be accordingly modified.

Anent accused-appellants’ pecuniary liability, we modify the damages awarded by the lower court. Civil indemnity of PhP 50,000 is given without need of proof other than the fact of death as a result of the crime and proof of the accused’s responsibility for it.28 If, however, the commission of robbery with homicide is attended by a qualifying aggravating circumstance, as here, that requires the imposition of the death penalty (such as the use of an unlicensed firearm), the civil indemnity for the victim shall be PhP 75,000.29 Moral damages awarded in the amount of PhP 50,000 must also be increased to PhP 75,000 pursuant to current jurisprudence.30

The exemplary damages of PhP 30,000 was correctly awarded, since under Article 2230 of the Civil Code, exemplary damages may be imposed when the crime was committed with one or more aggravating circumstances, as in the instant case.

WHEREFORE, the appeal is DENIED. The CA Decision in CA-G.R. CR-H.C. No. 01300 finding accused-appellants guilty beyond reasonable doubt of robbery with homicide is AFFIRMED, with MODIFICATIONS that accused-appellants are to suffer the penalty of reclusion perpetua without eligibility for parole, and each of them is ordered to pay the increased amount of PhP 75,000 as civil indemnity and PhP 75,000 as moral damages, in addition to PhP 30,000 as exemplary damages.

SO ORDERED.

G.R. No. 119086 January 25, 2002EMMANUEL G. HERBOSA and ROSEMARIE L. HERBOSA, petitioners, vs.COURT OF APPEALS (Fifteenth Division), and PROFESSIONAL VIDEO EQUIPMENT a Division of Solid Distributors, Inc., respondents.x---------------------------------------------------------xG. R. No. 119087 January 25, 2002EMMANUEL G. HERBOSA and ROSEMARIE L. HERBOSA, petitioners, vs.COURT OF APPEALS (Fifteenth Division) and SOLID CORPORATION, respondents.

DE LEON, JR., J.:

This is a Petition for Review on Certiorari of the decision1 of the Court of Appeals in CA-G.R. CV Nos. 15346 and 15093 promulgated on October 20, 1994 which reversed the decision of the trial court in Civil Case No. R-82-43892 while affirming in toto the decision of the trial court in Civil Case No. R-83-21786,3 respectively, and the resolution4 promulgated on February 7, 1995 which denied the subsequent motion for reconsideration.

The facts show that on January 25, 1982 petitioner spouses sued Professional Video Equipment (PVE for brevity), a division of private respondent Solid Distributors, Inc., for breach of contract with damages5 with the Regional Trial Court of Manila, Branch 39, docketed as Civil Case No. R-82-4389. The case stemmed from the failure of PVE to record on video the petitioners' wedding celebration allegedly due to the gross negligence of its crew as well as the lack of supervision on the part of the general manager of the PVE. Petitioners also alleged that said failure on the part of PVE to perform its obligation caused deep disappointment, anxiety and an irreparable break in the continuity of an established family tradition of recording by film or slide historical and momentous family events especially wedding celebrations and for which they were entitled to be paid actual, moral and exemplary damages including attorney's fees.

In its Answer,6 PVE claimed that it had diligently supervised its VTR crew in the video recording of petitioners' wedding and reception and that its crew acted in good faith and

with due care and proper diligence of a good father of a family.

After trial the lower court rendered a decision7 on January 3, 1983 in favor of the petitioners, the dispositive portion of which reads:

FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment, ordering defendant to pay the plaintiffs actual, moral and exemplary damages in the amount of P100,000.00, P10,000.00 for attorney's fees and to pay the costs of these proceedings.

For insufficiency of evidence, the counterclaim is hereby DISMISSED.

SO ORDERED.

Complications arose when the petitioners moved for execution on June 23, 1983 of the above judgment for failure of PVE to file a motion for reconsideration despite, as petitioners alleged, the mailing to its former counsel a copy of the decision by registered mail.8

PVE opposed the motion,9 and on July 27, 1983 filed a petition for relief from judgment10 under Rule 38 of the Rules of Court essentially alleging that it failed to receive notice of the said judgment sought to be executed and that said failure was due to fraud and accident when the mail matter was posted in a post office box which was not registered in the name of PVE's former counsel.

In an order11 dated November 10, 1983, the trial court denied the petition for relief from judgment and ordered the issuance of a writ of execution.

Consequently, PVE filed a notice of appeal12 from the order of November 10, 1983. In addition, it filed a motion for reconsideration13 of the said order insofar as it directed the issuance of a writ of execution.

The trial court gave due course to PVE's appeal14 but it took no action on the motion for reconsideration of the order, thus a writ of execution was issued and an auction sale of certain personal properties levied upon by the

deputy sheriff of the trial court was scheduled on December 8, 1983.

On December 3, 1983 PVE filed a petition for injunction with the Court of Appeals, docketed as AC-G.R. SP No. 02155, to restrain the scheduled auction sale. Although a temporary restraining order was issued by the appellate court, the same was served one hour late, at 4:30 o'clock in the afternoon on the day of the auction sale on December 8, 1983. As a result, the personal properties which had been levied upon were sold to Atty. Santiago Gabionza, Jr. as the highest bidder.15

In view of the auction sale held on December 8, 1983, the trial court recalled16 on May 10, 1984 its previous order giving due course to the appeal from its order dated November 10, 1983. The action taken by the trial court prompted PVE to file a separate petition for mandamus17 with the Court of Appeals, docketed as AC-G.R. SP No.03470, to compel the respondent trial court to give due course to its appeal.

Meanwhile, on December 13, 1983, private respondent Solid Corporation, filed a complaint for damages18 with the Regional Trial Court of Manila, Branch 54, docketed as Civil Case No. R-83-21786, against Deputy Sheriff Angel Borja and the petitioners. Solid Corporation essentially alleged in its complaint that it was the true owner of the electronic appliances valued at One Hundred Thirty Nine Thousand Eight Hundred Pesos (P139,800.00) which were levied upon and subsequently sold at public auction on December 8, 1983 for the satisfaction of the judgment in Civil Case No. R-82-4389 in favor of the petitioners; that the levy on execution and the subsequent auction sale were illegal; and that it suffered actual and compensatory damages in the sum of One Hundred Thirty Nine Thousand Eight Hundred Pesos (P139,800.00), moral damages in the sum of One Million Pesos (P1,000,000.00), exemplary damages in the sum of One Million Pesos (P1,000,000.00) and attorney's fees of Two Hundred Thousand Pesos (P200,000.00).

On January 18, 1984, petitioners filed an Answer19 specifically denying that Solid Corporation was the owner of the personal properties levied upon and subsequently sold at public auction on December 8, 1983. They claimed that the showroom and offices located at 1000 J. Bocobo Street corner Kalaw Street, Ermita, Manila

where the subject personal properties were then on display were owned and operated by respondent Solid Distributors, Inc., a sister company of Solid Corporation, Inc.; and that both corporations had interlocking directors, officers and principal stockholders.

On September 6, 1984, the Court of Appeals rendered a consolidated decision20 in AC - G.R. SP No. 02155 and AC - G.R. SP No. 03470, the dispositive portion of which reads:

WHEREFORE, the petition for injunction and mandamus are GRANTED and (1) the sheriff's sale is nullified and the respondents Emmanuel and Rosemarie Herbosa are ordered to deliver the proceeds of the sale to the Solid Corporation, Inc. and (2) the respondent court is hereby ordered to give due course to the petitioner's appeal in Civil Case No. 137541. Costs against the private respondents.

Petitioners appealed the above judgment of the appellate court to this Court through a petition for review on certiorari, docketed as G. R. Nos. 69008-09, but which we denied in a resolution dated December 17, 1984 for lack of merit. Forthwith, the trial court granted on June 23, 1987 the subsequent motion of herein respondent Solid Corporation for summary judgment in Civil Case No. R-83-21786. The dispositive portion of the decision21of the trial court reads:

WHEREFORE, summary judgment is hereby rendered in favor of the plaintiff, ordering the private defendants Emmanuel G. Herbosa and Rosemarie L. Herbosa to deliver to the plaintiff the amount of P139,800.(00) as the proceeds of the sale of plaintiff's properties and attorney's fees of P10,000.00, plus costs.

Considering that the defendant First Integrated Bonding Co., Inc. is not a party in the aforesaid Court of Appeals' cases, the judgment therein does not bind the defendant and therefore the case as against it is hereby dismissed.

SO ORDERED.

The appeal taken by the petitioner spouses to the Court of Appeals of the said Decision of the trial court in Civil Case No. R-83-21786 and the earlier appeal filed by respondent Solid Distributors, Inc. in Civil Case No. R-82-4389,

respectively docketed as CA-G.R. CV Nos. 15093 and 15346, were ordered consolidated by the appellate court in its Resolution22 dated February 23, 1988.

On October 20, 1994 the Court of Appeals rendered its consolidated Decision,23 in CA-G.R. CV Nos. 15093 and 15346, the dispositive portion of which reads:

"WHEEREFORE, the Court renders judgment:

(1) In CA-G.R. CV No. 15346, REVERSING the appealed decision, and, accordingly, DISMISSING plaintiff's complaint and defendant's counterclaim;

(2) In CA-G.R. CV No. 15093, AFFIRMING in toto the decision appealed from. The Court sentences defendants Emmanuel G. Herbosa and Rosemarie L. Herbosa to pay plaintiff Solid Corporation the amount of One Hundred Thirty Nine Thousand Eight Hundred (P139,800.00), pesos, as the proceeds of the sale of plaintiff's property, and Ten Thousand (P10,000.00), pesos, as attorney's fees, plus costs.

In both cases, we make no special pronouncement as to costs in this instance.

SO ORDERED."

The Court of Appeals denied the motion for reconsideration filed by the petitioner spouses on November 14, 1994 for having been allegedly filed out of time.24

Dissatisfied, petitioner spouses filed the instant petition25 raising the following assignment of errors:

I

THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONERS' MOTION FOR RECONSIDERATION DATED NOVEMBER 11, 1994 WAS FILED OUT OF TIME WHEN IT RELIED ON THE CASE OF IMPERIAL VICTORY SHIPPING AGENCY vs. NLRC (200 SCRA 178) WHICH IS CLEARLY INAPPLICABLE IN THE CASE AT BAR.

II

THE COURT OF APPEALS ERRED WHEN, IN CA-G.R. CV NO. 15346, IT REVERSED THE FINDING OF THE TRIAL COURT THAT PRIVATE RESPONDENT "PVE" IS GUILTY OF GROSS NEGLIGENCE IN THE PERFORMANCE OF ITS OBLIGATION BY SOLELY RELYING ON THE TRIAL COURT'S STATEMENT THAT PRIVATE RESPONDENT "PVE" FAILED TO PRESENT AN IOTA OF PROOF THAT IT EXERCISED EXTRAORDINARY CARE IN THE PROPER MAINTENANCE OF ITS EQUIPMENT USED IN THE COVERAGE.

III

THE COURT OF APPEALS ERRED WHEN, IN CA-G.R. CV NO. 15346, IT TOTALLY SET ASIDE THE TRIAL COURT'S AWARD OF ACTUAL, MORAL, AND EXEMPLARY DAMAGES IN THE AMOUNT OF P100,000.00 AS WELL AS ATTORNEY'S FEES IN THE AMOUNT OF P10,000.00 PLUS COSTS OF SUIT, IN FAVOR OF THE SPOUSES HERBOSA FOR HAVING ALLEGEDLY NO BASIS BOTH IN FACT AND IN LAW.

IV

THE COURT OF APPEALS ALSO ERRED WHEN, WITHOUT ANY LAWFUL BASIS, IT ERRONEOUSLY AFFIRMED, IN CA-G.R. CV NO. 15093, THE DECISION OF THE TRIAL COURT WHICH RENDERED SUMMARY JUDGMENT IN THE ENTIRE CASE NOTWITHSTANDING THE APPARENT EXISTENCE OF A GENUINE ISSUE OF FACT CONCERNING THE OWNERSHIP OF PERSONAL PROPERTY LEVIED UPON WHICH ISSUE CLEARLY REMAINS UNAFFECTED BY THE DECISION OF THE COURT OF APPEALS IN CA-G.R. SP NOS. 02155 AND 03470.

Petitioners contend that their motion for reconsideration was filed within the reglementary period inasmuch as the ruling in the case of Imperial Victory Shipping Agency v. NLRC26 cited in the questioned resolution of the appellate court dated February 7, 1995 was superseded by the

decision of the Supreme Court in the case ofRamon Aquino v. NLRC.27

They also contend that the ruling of the Court of Appeals in CA-G.R. CV No. 15346 to the effect that the degree of diligence required under the contract was that of diligence of a good father of a family, and not extraordinary diligence as opined by the trial court, does not negate the finding of the lower court that breach of contract due to gross negligence on the part of PVE was duly proven by the petitioners. Due to the presence of gross negligence on the part of PVE (a division of respondent Solid Distributors, Inc.), petitioners are entitled to an award of actual, moral and exemplary damages including attorney's fees and costs.

Additionally, petitioners contend that the summary judgment rendered by the trial court in Civil Case No. R-83-21786 was improper since the question of ownership of the levied personal properties to satisfy the judgment in Civil Case No. R-82-4389 remains unaffected by the decision of the Court of Appeals in AC-G.R. SP Nos. 02155 and 03470 which merely declared that the execution of the said judgment was void for being premature.

On the other hand, both private respondents Solid Distributors, Inc. and Solid Corporation invoke the ruling in the case of Azores v. SEC28 which affirmed our ruling in the cases of Bank of America, NT and SA v. Gerochi, Jr., et al.,29 and Imperial Victory Shipping Agency v. NLRC30 such that if the last day to appeal fell on a Saturday, the act was still due on that day. While private respondents concede that rules of procedure are intended to promote substantial justice, they emphasized that the perfection of appeal in the manner and within the period permitted by law is not only mandatory but jurisdictional.

Private respondents also invoke the well-settled rule that only questions of law may be entertained on appeal. By questioning in the instant petition public respondent appellate court's appreciation of the evidence on the issue of diligence, petitioners, in effect, raised questions of fact which cannot be done by the Supreme Court, on appeal, as it is not a trier of facts. After having determined by the Court of Appeals that no cause of action exists against private respondent PVE, there appears to be no basis for an award of damages contrary to the contention of the petitioners in the third assignment of error.

Lastly, private respondents maintain that summary judgment was properly rendered in Civil Case No. R-83-21786 in view of the Decision of the Court of Appeals in AC-G.R. SP Nos. 02155 and 03470 promulgated on September 6, 1984 which was affirmed by the Supreme Court in a resolution dated December 17, 1984. The said decision, which is the law of the case, mandates that the petitioners were to deliver the proceeds of the sheriff's auction sale to herein private respondent Solid Corporation.

Hence, the issues are:

1. Whether or not the motion for reconsideration filed by the petitioners on November 14, 1994 was filed beyond the reglementary period.

2. Whether or not the petitioners are entitled to award of damages arising from breach of contract of service in Civil Case No. R-82-4389.

3. Whether or not the trial court correctly rendered summary judgment in Civil Case No. R-83-21786 in favor of respondent Solid Corporation.

In denying petitioners' motion for reconsideration filed on November 14, 1994, the Court of Appeals ruled that the petitioners had only until November 12, 1994, which was a Saturday, within which to file a motion for reconsideration of its Decision dated October 20, 1994 in CA-G.R. CV Nos. 15346 and 15093 inasmuch as they had been furnished notice of its said decision on October 28, 1994. The appellate court cited the case of Imperial Victory Shipping where it was held that "if the last day to appeal fell on a Saturday, the act was still due on that day and not on the next succeeding business day".

It should be noted, however, that even in the cases31 invoked by the private respondents, we have already made pronouncements therein that, as early as January 23, 1993, this Court had issued an order directing court offices closed on Saturdays so that when the last day for filing of a pleading should fall on a Saturday, the same should be done on the following Monday, provided the latter is not a holiday. Significantly, the motion for

reconsideration which was filed by the petitioners on November 14, 1994 came after the issuance of our said order. Consequently, respondent appellate court should not have denied outright petitioners' motion for reconsideration since the last day for the filing thereof fell on November 12, 1994, which was a Saturday, when the Receiving and Docket Section and the Cashier Section of the Court of Appeals were closed.

Likewise, respondent PVE or respondent Solid Distributors, Inc. may not validly thwart the petitioners' instant petition for review of the decision of the Court of Appeals in CA-G.R. CV No. 15346 by arguing that the principal issue as to the existence of negligence involves a question of fact which cannot be raised on appeal. The general rule that only questions of law may be raised on appeal in a petition for review under Rule 45 of the Rules of Court admits of certain exceptions, namely: a) when the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; b) when the inference made is manifestly mistaken, absurd, or impossible; c) where there is a grave abuse of discretion; d) when the judgment is based on a misapprehension of facts; e) when the findings of fact are conflicting; f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; g) when the findings of the Court of Appeals are contrary to those of the trial court; h) when the findings of fact are conclusions without citation of specific evidence on which they are based; I) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence but is contradicted by the evidence on record; and j) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion.32 Notably, the Court of Appeals and the trial court arrived at conflicting findings of fact in Civil Case No. R-82-4389 which is an action for breach of contract and damages and the appeal therefrom, thus necessitating further review of the evidence by this Court.

It appears from the evidence adduced that the petitioner spouses contracted the services of PVE (a division of respondent Solid Distributors, Inc.) for the betamax coverage of their then forthcoming wedding celebration scheduled in the morning of October 11, 1980. Pursuant to the contract33 PVE undertook to record on betamax format the wedding celebration of the petitioners starting with

the pre-departure activities of the bride at her residence, followed by the wedding ceremony and the reception which had an approximate playback time of sixty (60) to ninety (90) minutes. Petitioners paid PVE the amount of One Thousand Four Hundred Twenty-Three Pesos (P1,423.00) as downpayment while the balance of One Thousand Five Hundred Thirty-Two Pesos (P1,532.00) was to be paid upon receipt of the finished video tape.

Accordingly, on October 11, 1980 at around 6:30 o'clock in the morning34 the PVE crew composed of the cameraman, Vedastro Sulit, VTR (video tape recorder) operator, Michael Rodriguez, and the driver and lightman, Felix Baguio, arrived at the residence of the bride at 1694 M. H. Del Pilar Street, Ermita, Manila. They recorded the pre-departure activities of the bride before leaving for the Malate Church along Mabini Street, Malate, Manila where the wedding ceremonies were held at 9:00 o'clock in the morning. Thereafter, the crew proceeded to the Manila Hotel in Intramuros, Manila, where the wedding reception followed at 10:30 o'clock in the morning.

On October 13, 1980, however, Ben Zarate, studio manager of PVE, informed the petitioners that the videotape coverage of their wedding celebration was damaged due to mechanical defect in their equipment. On October 19, 1980 PVE general manager, Eric Sycip, confirmed the damage and proposed to do a video tape production of their wedding celebration through photographs or a video coverage of any event of similar significance.35 In addition, Eric Sycip sent a check36 representing the amount of the downpayment which the petitioners did not accept. Deeply aggrieved, the petitioners rejected both of the proposed alternatives since, according to them, a video tape production through photographs was not going to compensate for the betamax or film coverage of their actual wedding celebration and that there could be no event of similar significance insofar as petitioners are concerned.

PVE, a division of respondent Solid Distributors, Inc., disclaimed any liability for the damaged videotape by invoking force majeure or fortuitous event and asserted that a defective transistor caused the breakdown in its video tape recorder. However, said respondent failed to substantiate its bare allegation by presenting in evidence the alleged defective transistor before the trial court. Instead, it presented another component37 of the same

kind. Having invoked fortuitous event, it was incumbent upon said respondent to adduce sufficient and convincing proof to establish its defense.

At any rate, in order that fortuitous event may exempt PVE or respondent Solid Distributors, Inc. from liability, it is necessary that it be free from negligence.38 The record shows, however, that the alleged malfunctioning of the video tape recorder occurred at the beginning of the video coverage at the residence of the bride. The PVE crew miserably failed to detect the defect in the video tape recorder and that they discovered the same rather too late after the wedding reception at the Manila Hotel.

There appeared to be no valid reason why the alleged defect in the video tape recorder had gone undetected. There was more than sufficient time for the PVE crew to check the video tape recorder for the reason that they arrived at the bride's residence at 6:30 o'clock in the morning while they departed for the wedding ceremonies at the Malate Church at 9:00 o'clock in the morning. Besides, PVE was admittedly furnished earlier by the petitioners with a copy of the script39 of the scenes to be recorded so that it could prepare and organize its contracted task. PVE studio manager Ben Zarate even testified that ordinarily, the standard playback test to monitor the functioning of the video tape recorder was required at every opportunity. In the instant case, a playback test on three (3) occasions, preferably at the beginning, middle and towards the end portions of the video coverage would have been sufficient.40

Based on the investigation allegedly conducted by its officers, PVE or respondent Solid Distributors, Inc. claimed that its crew, whom it never presented to testify during the trial of the case, allegedly conducted a playback test at the residence of the bride and that the next playback test was conducted after the wedding reception at the Manila Hotel where the defect in the video tape recorder was allegedly discovered for the first time.41 A review of the records however, raised doubts as to whether the crew actually conducted a playback test at the residence of the bride. A very minimal portion, lasting only for two and one half (2 ½) minutes, of the pre-departure activities at the residence of the bride had been recorded while the rest of the video tape was damaged. This strongly suggests that any alleged defect in the video tape recorder could have easily been detected by the PVE crew at the residence of

the bride had a sufficient playback test been conducted therein prior to their departure for the wedding ceremonies at the Malate Church. The pertinent portion of the stenographic notes of the trial is reproduced, thus:

Interpreter:

We are about to witness the video coverage of the Herbosa Wedding on the television set. (V)iew on (sic) the M. H. del Pilar and what is in focus is a residence No. 1694. What is shown is the facade of the De Leon residence, the residence of the bride, Rosemarie de Leon; next in focus is apparently a bedroom of the bride. What is shown on screen now is that she was being made up by her artist and hairdresser in preparation for the forthcoming wedding. She is wearing an electric blue dressing gown.

Court:

It would seem that at this juncture, the picture is clear as shown on the television.

Interpreter:

Then, the other members of the entourage is also in focus. They are shown to be made-up by the artist. At this juncture, it is still visible that the screen is clear, then suddenly, there is complete darkness, and snatches on the screen which has a span of about…

Atty. Agcaoili:

May we stipulate that the good tape your Honor, lasted for only two and a half minutes?

Atty. Mendoza:

Agreed, your Honor.

Atty. Agcaoili:

And that from this point, the cassette is blurred and you cannot see any visible figure on the cassette tape. May we note the ringing sound apparently a telephone ringing which will indicate that the audio pick-up is being taken or

at least, the audio was working. After four minutes of complete blurred, there appears to be snatches of the bride's face and again, it has faded into complete non-appearance of the subject being taken.

Court:

In other words, no pictures registered after the few snatches of the bride.42

The misfortune that befell the then newly-wed couple, petitioners herein, could have been avoided by a timely exercise of minimum prudence by the crew of PVE who are all employees of respondent Solid Distributors, Inc. to check any possible mechanical defect in the video tape recorder. The defect could have been detected earlier and remedial measures could have been made to ensure full video tape coverage of the petitioners' wedding celebration. But PVE or respondent Solid Distributors, Inc. did not. We take judicial notice of the short distance between the office of PVE or respondent Solid Distributors, Inc. at 1000 J. Bocobo corner Kalaw Streets, Ermita, Manila, on one hand, and the locations of the required video tape coverage at the residence of the bride at M. H. Del Pilar Street, Ermita, Manila, the Malate Church and the Manila Hotel. The failure to record on videotape the wedding celebration of the petitioners constitutes malicious breach of contract as well as gross negligence on the part of respondent Solid Distributors, Inc.

PVE or respondent Solid Distributors, Inc. cannot seek refuge under Article 2180 of the New Civil Code by claiming that it exercised due care in the selection and supervision of its employees and that its employees are experienced in their respective trade. That defense, as provided in the last paragraph of Article 2180 of the New Civil Code, may be availed of only where the liability arises from culpa aquilana and not from culpa contractualsuch as in the case at bar.43

However, the award of damages to the petitioners cannot be lumped together as was done by the trial court. It is basic that the claim for actual, moral and exemplary damages as well as attorney's fees must each be independently identified and justified.44 In this connection, Article 1170 of the New Civil Code 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." For failure of PVE, a division of respondent Solid Distributors, Inc., to comply with its obligation under the video tape coverage contract, petitioners are entitled to actual damages at least in the amount of One Thousand Four Hundred Twenty-Three Pesos (P1,423.00) representing their downpayment in that contract.

Ordinarily, moral damages cannot be recovered in an action for breach of contract because such an action is not among those expressly mentioned in Article 221945 of the New Civil Code. However, moral damages are recoverable for breach of contract where the breach was wanton, reckless, malicious or in bad faith, oppressive or abusive.46 The wanton and reckless failure and neglect to timely check and remedy the video tape recorder by the PVE crew who are all employees of respondent Solid Distributors, Inc. indicates a malicious breach of contract and gross negligence on the part of said respondent in the discharge of its contractual obligations. Consequently, the petitioners who suffered mental anguish and tortured feelings thereby, are entitled to an award of One Hundred Thousand Pesos (P100,000.00) as moral damages.

In the case of Go v. Court of Appeals47 we emphasized that "(i)n our society, the importance of a wedding ceremony cannot be underestimated as it is the matrix of the family and, therefore, an occasion worth reliving in the succeeding years." Further, we reiterate the following pronouncements therein where we also awarded moral damages on account of a malicious breach of contract similar to the case at bar, to wit:

Considering the sentimental value of the tapes and the fact that the event therein recorded—a wedding which in our culture is a significant milestone to be cherished and remembered—could no longer be reenacted and was lost forever, the trial court was correct in awarding the appellees moral damages albeit in the amount of P75,000.00 xxx in compensation for the mental anguish, tortured feelings, sleepless nights and humiliation that the appellees suffered and which under the circumstances could be awarded as allowed under Articles 2271 and 2218 of the Civil Code.

The award of exemplary damages which is hereby fixed in the amount of Forty Thousand Pesos (P40,000.00) is justified, under the premises, to serve as a warning to all entities engaged in the same business to observe good faith and due diligence in the fulfillment of their contractual obligations. Additionally, the award of attorney's fees in the amount of Ten Thousand Pesos (P10,000.00) is also proper in accordance with Article 220848 of the Civil Code.

Anent the third issue, we hold that the Court of Appeals, in CA-G.R. CV No. 15346, did not err in sustaining the summary judgment rendered by the trial court in Civil Case No. R-83-21786. The test for propriety of a motion for summary judgment is whether the pleadings, affidavits and exhibits in support of the motion are sufficient to overcome the opposing papers and to justify the finding that, as a matter of law, there is no defense to the action or claim which is clearly meritorious.49

The decision of the Court of Appeals in AC G.R. SP Nos. 02155 and 03470, for injunction and mandamus, specifically commands herein petitioners to "deliver the proceeds of the (auction) sale to Solid Corporation" due to the nullity of the sheriff's sale on December 8, 1983 for being premature. The said decision of the Court of Appeals became final and executory after this Court, in G.R. Nos. 69008 and 69009, denied on December 17, 1984 the appeal therefrom instituted by herein petitioners.

WHEREFORE, judgment is hereby rendered as follows:

(1) In G.R. No. 119086, the appealed decision of the Court of Appeals in CA-G.R. CV No. 15346 is REVERSED. Private respondent Solid Distributors, Inc. is ordered to pay the petitioners One Thousand Four Hundred Twenty-Three Pesos (P1,423.00) as actual damages, One Hundred Thousand Pesos (P100,000.00) as moral damages, Forty Thousand Pesos (P40,000.00) as exemplary damages, and Ten Thousand Pesos (P10,000.00) by way of attorney's fees; and

(2) In G.R. No. 119087, the appealed decision of the Court of Appeals in CA-G.R. CV No. 15093 is AFFIRMED.

No pronouncement as to costs.SO ORDERED.

G.R. No. 127358 March 31, 2005NOEL BUENAVENTURA, Petitioner, vs.COURT OF APPEALS and ISABEL LUCIA SINGH BUENAVENTURA, respondents.x-------------------xG.R. No. 127449 March 31, 2005NOEL BUENAVENTURA, Petitioner, vs.COURT OF APPEALS and ISABEL LUCIA SINGH BUENAVENTURA, Respondents.

AZCUNA, J.:

These cases involve a petition for the declaration of nullity of marriage, which was filed by petitioner Noel Buenaventura on July 12, 1992, on the ground of the alleged psychological incapacity of his wife, Isabel Singh Buenaventura, herein respondent. After respondent filed her answer, petitioner, with leave of court, amended his petition by stating that both he and his wife were psychologically incapacitated to comply with the essential obligations of marriage. In response, respondent filed an amended answer denying the allegation that she was psychologically incapacitated.1

On July 31, 1995, the Regional Trial Court promulgated a Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1) Declaring and decreeing the marriage entered into between plaintiff Noel A. Buenaventura and defendant Isabel Lucia Singh Buenaventura on July 4, 1979, null and void ab initio;

2) Ordering the plaintiff to pay defendant moral damages in the amount of 2.5 million pesos and exemplary damages of 1 million pesos with 6% interest from the date of this decision plus attorney’s fees ofP100,000.00;

3) Ordering the plaintiff to pay the defendant expenses of litigation of P50,000.00, plus costs;

4) Ordering the liquidation of the assets of the conjugal partnership property[,] particularly the plaintiff’s

separation/retirement benefits received from the Far East Bank [and] Trust Company[,] by ceding, giving and paying to her fifty percent (50%) of the net amount of P3,675,335.79 or P1,837,667.89 together with 12% interest per annum from the date of this decision and one-half (1/2) of his outstanding shares of stock with Manila Memorial Park and Provident Group of Companies;

5) Ordering him to give a regular support in favor of his son Javy Singh Buenaventura in the amount ofP15,000.00 monthly, subject to modification as the necessity arises;

6) Awarding the care and custody of the minor Javy Singh Buenaventura to his mother, the herein defendant; and

7) Hereby authorizing the defendant to revert back to the use of her maiden family name Singh.

Let copies of this decision be furnished the appropriate civil registry and registries of properties.

SO ORDERED.2

Petitioner appealed the above decision to the Court of Appeals. While the case was pending in the appellate court, respondent filed a motion to increase the P15,000 monthly support pendente lite of their son Javy Singh Buenaventura. Petitioner filed an opposition thereto, praying that it be denied or that such incident be set for oral argument.3

On September 2, 1996, the Court of Appeals issued a Resolution increasing the support pendente lite toP20,000.4 Petitioner filed a motion for reconsideration questioning the said Resolution.5

On October 8, 1996, the appellate court promulgated a Decision dismissing petitioner’s appeal for lack of merit and affirming in toto the trial court’s decision.6 Petitioner filed a motion for reconsideration which was denied. From the abovementioned Decision, petitioner filed the instant Petition for Review on Certiorari.

On November 13, 1996, through another Resolution, the Court of Appeals denied petitioner’s motion for reconsideration of the September 2, 1996 Resolution,

which increased the monthly support for the son.7Petitioner filed a Petition for Certiorari to question these two Resolutions.

On July 9, 1997, the Petition for Review on Certiorari8 and the Petition for Certiorari9 were ordered consolidated by this Court.10

In the Petition for Review on Certiorari petitioner claims that the Court of Appeals decided the case not in accord with law and jurisprudence, thus:

1. WHEN IT AWARDED DEFENDANT-APPELLEE MORAL DAMAGES IN THE AMOUNT OF P2.5 MILLION AND EXEMPLARY DAMAGES OF P1 MILLION, WITH 6% INTEREST FROM THE DATE OF ITS DECISION, WITHOUT ANY LEGAL AND MORAL BASIS;

2. WHEN IT AWARDED P100,000.00 ATTORNEY’S FEES AND P50,000.00 EXPENSES OF LITIGATION, PLUS COSTS, TO DEFENDANT-APPELLEE, WITHOUT FACTUAL AND LEGAL BASIS;

3. WHEN IT ORDERED PLAINTIFF-APPELLANT NOEL TO PAY DEFENDANT-APPELLEE ONE-HALF ORP1,837,667.89 OUT OF HIS RETIREMENT BENEFITS RECEIVED FROM THE FAR EAST BANK AND TRUST CO., WITH 12% INTEREST THEREON FROM THE DATE OF ITS DECISION, NOTWITHSTANDING THAT SAID RETIREMENT BENEFITS ARE GRATUITOUS AND EXCLUSIVE PROPERTY OF NOEL, AND ALSO TO DELIVER TO DEFENDANT-APPELLEE ONE-HALF OF HIS SHARES OF STOCK WITH THE MANILA MEMORIAL PARK AND THE PROVIDENT GROUP OF COMPANIES, ALTHOUGH SAID SHARES OF STOCK WERE ACQUIRED BY NOEL BEFORE HIS MARRIAGE TO RESPONDENT ISABEL AND ARE, THEREFORE, AGAIN HIS EXCLUSIVE PROPERTIES; AND

4. WHEN IT AWARDED EXCLUSIVE CARE AND CUSTODY OVER THE PARTIES’ MINOR CHILD TO DEFENDANT-APPELLEE WITHOUT ASKING THE CHILD (WHO WAS ALREADY 13 YEARS OLD AT THAT TIME) HIS CHOICE AS TO WHOM, BETWEEN HIS TWO PARENTS, HE WOULD LIKE TO HAVE CUSTODY OVER HIS PERSON.11

In the Petition for Certiorari, petitioner advances the following contentions:

THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT REFUSED TO SET RESPONDENT’S MOTION FOR INCREASED SUPPORT FOR THE PARTIES’ SON FOR HEARING.12

THERE WAS NO NEED FOR THE COURT OF APPEALS TO INCREASE JAVY’S MONTHLY SUPPORT OF P15,000.00 BEING GIVEN BY PETITIONER EVEN AT PRESENT PRICES.13

IN RESOLVING RESPONDENT’S MOTION FOR THE INCREASE OF JAVY’S SUPPORT, THE COURT OF APPEALS SHOULD HAVE EXAMINED THE LIST OF EXPENSES SUBMITTED BY RESPONDENT IN THE LIGHT OF PETITIONER’S OBJECTIONS THERETO, INSTEAD OF MERELY ASSUMING THAT JAVY IS ENTITLED TO A P5,000 INCREASE IN SUPPORT AS SAID AMOUNT IS "TOO MINIMAL."14

LIKEWISE, THE COURT OF APPEALS SHOULD HAVE GIVEN PETITIONER AN OPPORTUNITY TO PROVE HIS PRESENT INCOME TO SHOW THAT HE CANNOT AFFORD TO INCREASE JAVY’S SUPPORT.15

With regard to the first issue in the main case, the Court of Appeals articulated:

On Assignment of Error C, the trial court, after findings of fact ascertained from the testimonies not only of the parties particularly the defendant-appellee but likewise, those of the two psychologists, awarded damages on the basis of Articles 21, 2217 and 2229 of the Civil Code of the Philippines.

Thus, the lower court found that plaintiff-appellant deceived the defendant-appellee into marrying him by professing true love instead of revealing to her that he was under heavy parental pressure to marry and that because of pride he married defendant-appellee; that he was not ready to enter into marriage as in fact his career was and always would be his first priority; that he was unable to relate not only to defendant-appellee as a husband but also to his son, Javy, as a father; that he had no inclination to make the marriage work such that in times of trouble, he chose the easiest way out, that of leaving defendant–appellee and their son; that he had no desire to keep defendant-appellee and their son as proved by his reluctance and later, refusal to reconcile after their separation; that the aforementioned caused defendant-

appellee to suffer mental anguish, anxiety, besmirched reputation, sleepless nights not only in those years the parties were together but also after and throughout their separation.

Plaintiff-appellant assails the trial court’s decision on the ground that unlike those arising from a breach in ordinary contracts, damages arising as a consequence of marriage may not be awarded. While it is correct that there is, as yet, no decided case by the Supreme Court where damages by reason of the performance or non-performance of marital obligations were awarded, it does not follow that no such award for damages may be made.

Defendant-appellee, in her amended answer, specifically prayed for moral and exemplary damages in the total amount of 7 million pesos. The lower court, in the exercise of its discretion, found full justification of awarding at least half of what was originally prayed for. We find no reason to disturb the ruling of the trial court.16

The award by the trial court of moral damages is based on Articles 2217 and 21 of the Civil Code, which read as follows:

ART. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act or omission.

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.

The trial court referred to Article 21 because Article 221917 of the Civil Code enumerates the cases in which moral damages may be recovered and it mentions Article 21 as one of the instances. It must be noted that Article 21 states that the individual must willfully cause loss or injury to another. There is a need that the act is willful and hence done in complete freedom. In granting moral damages, therefore, the trial court and the Court of Appeals could not but have assumed that the acts on which the moral

damages were based were done willfully and freely, otherwise the grant of moral damages would have no leg to stand on.

On the other hand, the trial court declared the marriage of the parties null and void based on Article 36 of the Family Code, due to psychological incapacity of the petitioner, Noel Buenaventura. Article 36 of the Family Code states:

A marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated to comply with the essential marital obligations of marriage, shall likewise be void even if such incapacity becomes manifest only after its solemnization.

Psychological incapacity has been defined, thus:

. . . no less than a mental (not physical) incapacity that causes a party to be truly incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage which, as so expressed by Article 68 of the Family Code, include their mutual obligations to live together, observe love, respect and fidelity and render help and support. There is hardly any doubt that the intendment of the law has been to confine the meaning of "psychological incapacity" to the most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage. . . .18

The Court of Appeals and the trial court considered the acts of the petitioner after the marriage as proof of his psychological incapacity, and therefore a product of his incapacity or inability to comply with the essential obligations of marriage. Nevertheless, said courts considered these acts as willful and hence as grounds for granting moral damages. It is contradictory to characterize acts as a product of psychological incapacity, and hence beyond the control of the party because of an innate inability, while at the same time considering the same set of acts as willful. By declaring the petitioner as psychologically incapacitated, the possibility of awarding moral damages on the same set of facts was negated. The award of moral damages should be predicated, not on the mere act of entering into the marriage, but on specific evidence that it was done deliberately and with malice by a party who had knowledge of his or her disability and yet

willfully concealed the same. No such evidence appears to have been adduced in this case.

For the same reason, since psychological incapacity means that one is truly incognitive of the basic marital covenants that one must assume and discharge as a consequence of marriage, it removes the basis for the contention that the petitioner purposely deceived the private respondent. If the private respondent was deceived, it was not due to a willful act on the part of the petitioner. Therefore, the award of moral damages was without basis in law and in fact.

Since the grant of moral damages was not proper, it follows that the grant of exemplary damages cannot stand since the Civil Code provides that exemplary damages are imposed in addition to moral, temperate, liquidated or compensatory damages.19

With respect to the grant of attorney’s fees and expenses of litigation the trial court explained, thus:

Regarding Attorney’s fees, Art. 2208 of the Civil Code authorizes an award of attorney’s fees and expenses of litigation, other than judicial costs, when as in this case the plaintiff’s act or omission has compelled the defendant to litigate and to incur expenses of litigation to protect her interest (par. 2), and where the Court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered. (par. 11)20

The Court of Appeals reasoned as follows:

On Assignment of Error D, as the award of moral and exemplary damages is fully justified, the award of attorney’s fees and costs of litigation by the trial court is likewise fully justified.21

The acts or omissions of petitioner which led the lower court to deduce his psychological incapacity, and his act in filing the complaint for the annulment of his marriage cannot be considered as unduly compelling the private respondent to litigate, since both are grounded on petitioner’s psychological incapacity, which as explained above is a mental incapacity causing an utter inability to comply with the obligations of marriage. Hence, neither can be a ground for attorney’s fees and litigation expenses.

Furthermore, since the award of moral and exemplary damages is no longer justified, the award of attorney’s fees and expenses of litigation is left without basis.

Anent the retirement benefits received from the Far East Bank and Trust Co. and the shares of stock in the Manila Memorial Park and the Provident Group of Companies, the trial court said:

The third issue that must be resolved by the Court is what to do with the assets of the conjugal partnership in the event of declaration of annulment of the marriage. The Honorable Supreme Court has held that the declaration of nullity of marriage carries ipso facto a judgment for the liquidation of property (Domingo v. Court of Appeals, et al., G.R. No. 104818, Sept. 17, 1993, 226 SCRA, pp. 572 – 573, 586). Thus, speaking through Justice Flerida Ruth P. Romero, it was ruled in this case:

When a marriage is declared void ab initio, the law states that the final judgment therein shall provide for the liquidation, partition and distribution of the properties of the spouses, the custody and support of the common children and the delivery of their presumptive legitimes, unless such matters had been adjudicated in the previous proceedings.

The parties here were legally married on July 4, 1979, and therefore, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved (Art. 116, New Family Code; Art. 160, Civil Code). Art. 117 of the Family Code enumerates what are conjugal partnership properties. Among others they are the following:

1) Those acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

2) Those obtained from the labor, industry, work or profession of either or both of the spouses;

3) The fruits, natural, industrial, or civil, due or received during the marriage from the common property, as well as

the net fruits from the exclusive property of each spouse. . . .

Applying the foregoing legal provisions, and without prejudice to requiring an inventory of what are the parties’ conjugal properties and what are the exclusive properties of each spouse, it was disclosed during the proceedings in this case that the plaintiff who worked first as Branch Manager and later as Vice-President of Far East Bank & Trust Co. received separation/retirement package from the said bank in the amount of P3,701,500.00 which after certain deductions amounting to P26,164.21 gave him a net amount of P3,675,335.79 and actually paid to him on January 9, 1995 (Exhs. 6, 7, 8, 9, 10, 11). Not having shown debts or obligations other than those deducted from the said retirement/separation pay, under Art. 129 of the Family Code "The net remainder of the conjugal partnership properties shall constitute the profits, which shall be divided equally between husband and wife, unless a different proportion or division was agreed upon in the marriage settlement or unless there has been a voluntary waiver or forfeiture of such share as provided in this Code." In this particular case, however, there had been no marriage settlement between the parties, nor had there been any voluntary waiver or valid forfeiture of the defendant wife’s share in the conjugal partnership properties. The previous cession and transfer by the plaintiff of his one-half (1/2) share in their residential house and lot covered by T.C.T. No. S-35680 of the Registry of Deeds of Parañaque, Metro Manila, in favor of the defendant as stipulated in their Compromise Agreement dated July 12, 1993, and approved by the Court in its Partial Decision dated August 6, 1993, was actually intended to be in full settlement of any and all demands for past support. In reality, the defendant wife had allowed some concession in favor of the plaintiff husband, for were the law strictly to be followed, in the process of liquidation of the conjugal assets, the conjugal dwelling and the lot on which it is situated shall, unless otherwise agreed upon by the parties, be adjudicated to the spouse with whom their only child has chosen to remain (Art. 129, par. 9). Here, what was done was one-half (1/2) portion of the house was ceded to defendant so that she will not claim anymore for past unpaid support, while the other half was transferred to their only child as his presumptive legitime.

Consequently, nothing yet has been given to the defendant wife by way of her share in the conjugal properties, and it is but just, lawful and fair, that she be given one-half (1/2) share of the separation/retirement benefits received by the plaintiff the same being part of their conjugal partnership properties having been obtained or derived from the labor, industry, work or profession of said defendant husband in accordance with Art. 117, par. 2 of the Family Code. For the same reason, she is entitled to one-half (1/2) of the outstanding shares of stock of the plaintiff husband with the Manila Memorial Park and the Provident Group of Companies.22

The Court of Appeals articulated on this matter as follows:

On Assignment of Error E, plaintiff-appellant assails the order of the trial court for him to give one-half of his separation/retirement benefits from Far East Bank & Trust Company and half of his outstanding shares in Manila Memorial Park and Provident Group of Companies to the defendant-appellee as the latter’s share in the conjugal partnership.

On August 6, 1993, the trial court rendered a Partial Decision approving the Compromise Agreement entered into by the parties. In the same Compromise Agreement, the parties had agreed that henceforth, their conjugal partnership is dissolved. Thereafter, no steps were taken for the liquidation of the conjugal partnership.

Finding that defendant-appellee is entitled to at least half of the separation/retirement benefits which plaintiff-appellant received from Far East Bank & Trust Company upon his retirement as Vice-President of said company for the reason that the benefits accrued from plaintiff–appellant’s service for the bank for a number of years, most of which while he was married to defendant-appellee, the trial court adjudicated the same. The same is true with the outstanding shares of plaintiff-appellant in Manila Memorial Park and Provident Group of Companies. As these were acquired by the plaintiff-appellant at the time he was married to defendant-appellee, the latter is entitled to one-half thereof as her share in the conjugal partnership. We find no reason to disturb the ruling of the trial court.23

Since the present case does not involve the annulment of a bigamous marriage, the provisions of Article 50 in relation to Articles 41, 42 and 43 of the Family Code, providing for the dissolution of the absolute community or conjugal partnership of gains, as the case may be, do not apply. Rather, the general rule applies, which is that in case a marriage is declared void ab initio, the property regime applicable and to be liquidated, partitioned and distributed is that of equal co-ownership.

In Valdes v. Regional Trial Court, Branch 102, Quezon City,24 this Court expounded on the consequences of a void marriage on the property relations of the spouses and specified the applicable provisions of law:

The trial court correctly applied the law. In a void marriage, regardless of the cause thereof, the property relations of the parties during the period of cohabitation is governed by the provisions of Article 147 or Article 148, such as the case may be, of the Family Code. Article 147 is a remake of Article 144 of the Civil Code as interpreted and so applied in previous cases; it provides:

ART. 147. When a man and a woman who are capacitated to marry each other, live exclusively with each other as husband and wife without the benefit of marriage or under a void marriage, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on co-ownership.

In the absence of proof to the contrary, properties acquired while they lived together shall be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by them in equal shares. For purposes of this Article, a party who did not participate in the acquisition by the other party of any property shall be deemed to have contributed jointly in the acquisition thereof if the former's efforts consisted in the care and maintenance of the family and of the household.

Neither party can encumber or dispose by acts inter vivos of his or her share in the property acquired during cohabitation and owned in common, without the consent of the other, until after the termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in bad faith in the co-ownership shall be forfeited in favor of their common children. In case of default of or waiver by any or all of the common children or their descendants, each vacant share shall belong to the respective surviving descendants. In the absence of descendants, such share shall belong to the innocent party. In all cases, the forfeiture shall take place upon termination of the cohabitation.

This peculiar kind of co-ownership applies when a man and a woman, suffering no legal impediment to marry each other, so exclusively live together as husband and wife under a void marriage or without the benefit of marriage. The term "capacitated" in the provision (in the first paragraph of the law) refers to thelegal capacity of a party to contract marriage, i.e., any "male or female of the age of eighteen years or upwards not under any of the impediments mentioned in Articles 37 and 38" of the Code.

Under this property regime, property acquired by both spouses through their work and industry shall be governed by the rules on equal co-ownership. Any property acquired during the union is prima facie presumed to have been obtained through their joint efforts. A party who did not participate in the acquisition of the property shall still be considered as having contributed thereto jointly if said party's "efforts consisted in the care and maintenance of the family household." Unlike the conjugal partnership of gains, the fruits of the couple's separate property are not included in the co-ownership.

Article 147 of the Family Code, in substance and to the above extent, has clarified Article 144 of the Civil Code; in addition, the law now expressly provides that —

(a) Neither party can dispose or encumber by act[s] inter vivos [of] his or her share in co-ownership property, without the consent of the other, during the period of cohabitation; and

(b) In the case of a void marriage, any party in bad faith shall forfeit his or her share in the co-ownership in favor of their common children; in default thereof or waiver by any or all of the common children, each vacant share shall belong to the respective surviving descendants, or still in

default thereof, to the innocent party. The forfeiture shall take place upon the termination of the cohabitation or declaration of nullity of the marriage.

In deciding to take further cognizance of the issue on the settlement of the parties' common property, the trial court acted neither imprudently nor precipitately; a court which had jurisdiction to declare the marriage a nullity must be deemed likewise clothed with authority to resolve incidental and consequential matters. Nor did it commit a reversible error in ruling that petitioner and private respondent own the "family home" and all their common property in equal shares, as well as in concluding that, in the liquidation and partition of the property owned in common by them, the provisions on co-ownership under the Civil Code, not Articles 50, 51 and 52, in relation to Articles 102 and 129, of the Family Code, should aptly prevail. The rules set up to govern the liquidation of either the absolute community or the conjugal partnership of gains, the property regimes recognized for valid and voidable marriages (in the latter case until the contract is annulled), are irrelevant to the liquidation of the co-ownership that exists between common-law spouses. The first paragraph of Article 50 of the Family Code, applying paragraphs (2), (3), (4) and (5) of Article 43, relates only, by its explicit terms, to voidable marriages and, exceptionally, to void marriages under Article 40 of the Code, i.e., the declaration of nullity of a subsequent marriage contracted by a spouse of a prior void marriage before the latter is judicially declared void. The latter is a special rule that somehow recognizes the philosophy and an old doctrine that void marriages are inexistent from the very beginning and no judicial decree is necessary to establish their nullity. In now requiring for purposes of remarriage, the declaration of nullity by final judgment of the previously contracted void marriage, the present law aims to do away with any continuing uncertainty on the status of the second marriage. It is not then illogical for the provisions of Article 43, in relation to Articles 41 and 42, of the Family Code, on the effects of the termination of a subsequent marriage contracted during the subsistence of a previous marriage to be made applicable pro hac vice. In all other cases, it is not to be assumed that the law has also meant to have coincident property relations, on the one hand, between spouses in valid and voidable marriages (before annulment) and, on the other, between common-law spouses or spouses of void marriages, leaving to ordain, in the latter case, the ordinary rules on

co-ownership subject to the provision of Article 147 and Article 148 of the Family Code. It must be stressed, nevertheless, even as it may merely state the obvious, that the provisions of the Family Code on the "family home," i.e., the provisions found in Title V, Chapter 2, of the Family Code, remain in force and effect regardless of the property regime of the spouses.25

Since the properties ordered to be distributed by the court a quo were found, both by the trial court and the Court of Appeals, to have been acquired during the union of the parties, the same would be covered by the co-ownership. No fruits of a separate property of one of the parties appear to have been included or involved in said distribution. The liquidation, partition and distribution of the properties owned in common by the parties herein as ordered by the court a quo should, therefore, be sustained, but on the basis of co-ownership and not of the regime of conjugal partnership of gains.

As to the issue on custody of the parties over their only child, Javy Singh Buenaventura, it is now moot since he is about to turn twenty-five years of age on May 27, 200526 and has, therefore, attained the age of majority.

With regard to the issues on support raised in the Petition for Certiorari, these would also now be moot, owing to the fact that the son, Javy Singh Buenaventura, as previously stated, has attained the age of majority.

WHEREFORE, the Decision of the Court of Appeals dated October 8, 1996 and its Resolution dated December 10, 1996 which are contested in the Petition for Review (G.R. No. 127449), are hereby MODIFIED, in that the award of moral and exemplary damages, attorney’s fees, expenses of litigation and costs are deleted. The order giving respondent one-half of the retirement benefits of petitioner from Far East Bank and Trust Co. and one-half of petitioner’s shares of stock in Manila Memorial Park and in the Provident Group of Companies is sustained but on the basis of the liquidation, partition and distribution of the co-ownership and not of the regime of conjugal partnership of gains. The rest of said Decision and Resolution are AFFIRMED.

The Petition for Review on Certiorari (G.R. No. 127358) contesting the Court of Appeals’ Resolutions of September

2, 1996 and November 13, 1996 which increased the support pendente lite in favor of the parties’ son, Javy Singh Buenaventura, is now MOOT and ACADEMIC and is, accordingly, DISMISSED.

No costs.

SO ORDERED.

G.R. No. 173575 February 2, 2011IMMACULATE CONCEPTION ACADEMY and the late DR. PAULO C. CAMPOS substituted by his heirs, DR. JOSE PAULO E. CAMPOS, ATTY. PAULO E. CAMPOS, JR. and DR. ENRIQUE E. CAMPOS,1 Petitioners, vs.AMA COMPUTER COLLEGE, INCORPORATED, Respondent.

ABAD, J.:

This case is about the rescission of a lease contract on the ground that the building turned out to be structurally unsafe even as the lessee had previously inspected the same.

The Facts and the Case

Immaculate Conception Academy (ICA) owned a three-storey building in Dasmariñas, Cavite. The property caught the eye of AMA Computer College, Inc. (AMA) and it sought to buy the same but did not succeed. Subsequently, after inspecting the building, AMA settled on leasing it.2 The parties signed a contract of lease for 10 years from September 22, 1997 to September 21, 2007. The agreed rent was P561,000.00 plus VAT per month. In accordance with the contract, AMA paid ICA P500,000.00 in earnest money, three months advance rentals, and security deposit.

After the signing of the contract, officials of AMA re-inspected the building and began renovating it for the upcoming school year. But during an inspection, AMA’s Chief Operating Officer for its Cavite Campus noted several cracks on the floor and walls of the building’s second storey. This prompted more inspections. Eventually, AMA applied with the municipal engineer’s office for an occupancy permit.3 After inspection, Municipal Engineer Gregorio C. Bermejo wrote AMA a letter dated September 29, 1997, detailing his findings and conclusion, thus:

[The] inspection reveals the following defects in the building, such as:

1. Multiple cracks in the second floor slabs showing signs of insufficient or improper reinforcements.

2. Deflections in the second floor slabs and bears ranging from 20 mm to 50 mm which are beyond normal and allowable.

3. Unusual vibrations in the second floor level which are apparent when subjected to live loadings.

Based from the above observations we are in doubt as to the structural soundness and stability of that three-storey building. Whether it can withstand against any natural calamity is presently under question. We are convinced that the building is structurally unsafe for human occupancy.4

On the same date, September 29, 1997, AMA wrote ICA demanding the return of all that it paid within 24 hours from notice. AMA cited the building’s structural deficiency, which it regarded as a violation of ICA’s implied warranty against hidden defects. AMA did not pursue the lease contract and instead leased another property from a different party.

When its request for reimbursement remained unheeded, AMA filed an action5 for breach of contract and damages with prayer for the issuance of a writ of preliminary attachment against ICA before the Regional Trial Court (RTC) of Dasmariñas, Cavite. In its complaint, AMA alleged that ICA (represented by the late Dr. Paulo C. Campos) fraudulently entered into the lease agreement, fraudulently breached the same, and violated its implied warranty against hidden defects; that despite knowledge of the instability of the building, ICA insisted on offering it to AMA; and that ICA had been unable to produce the building’s certificate of occupancy. AMA prayed for restitution of the amounts it paid to ICA with interest and award of exemplary damages and attorney’s fees.

In its Answer, ICA denied that AMA asked for the building’s certificate of occupancy. ICA alleged that it was AMA’s responsibility to secure the certificate from the municipal government as stipulated in the contract. Further, ICA claims that it never misrepresented the condition of the building and that AMA inspected it before entering into the contract of lease.

In its Decision dated April 8, 2003, the RTC took AMA’s side and ruled that the latter entered into the lease

contract without knowing the actual condition of the building. The RTC held that ICA failed to disclose the building’s condition, thus justifying AMA’s rescission of the contract. The RTC ordered ICA to return theP4,072,150.00 it got from AMA, representing five months security deposit and three months advance rentals plus interest of 6% per annum, from January 19, 1998 until full payment and, further, to pay AMA P300,000.00 andP200,000.00 as exemplary damages and attorney’s fees, respectively.6

On appeal,7 the Court of Appeals (CA) rendered a Decision dated February 27, 2006, holding that ICA did not violate its implied warranty against hidden defects, misrepresent the building’s condition, or act in bad faith since AMA inspected the building before it entered into the lease agreement. It should have noticed the patent cracks on the second floor. Still, the CA ruled that AMA was justified in rescinding the lease contract considering ICA’s default in repairing the defects in the building’s structure. The CA held that AMA’s demand for the certificate of occupancy amounted to a demand for repairs. Thus, the CA affirmed the decision of the RTC but deleted the grant of exemplary damages and attorney’s fees. ICA now turns to this Court for succor.

The Issues Presented

The issues presented in this case are:

1. Whether or not AMA was justified in rescinding the contract of lease either on account of ICA’s fraudulent representation regarding the condition of its building or on account of its failure to make repairs on the same upon demand; and

2. Whether or not ICA and Dr. Campos are entitled to their claims for damages against AMA.

The Court’s Rulings

One. The Court is not convinced that AMA was justified in rescinding the contract of lease on account of ICA’s alleged fraudulent representation regarding the true condition of its building. The fact is that AMA’s representatives inspected the building to determine if it was suitable for their school’s needs. The cracks on the floor and on the walls were too obvious to suggest to them that something

was amiss. It was their fault that they did not check the significance of such signs. ICA for its part was candid about the condition of the building and did not in fact deny AMA access to it.

Apparently, AMA did not, at the beginning, believe that the cracks on the floor and on the walls were of a serious nature. It realized that such cracks were manifestations of structural defects only when it sought the issuance of a municipal occupancy permit. The local building official inspected the cracks and concluded that they compromised the building’s structural safety.

The CA ruled that, upon the discovery of the building’s structural defects, AMA had the right to seek their repair by ICA on the strength of the following stipulations in their contract:8

LESSEE shall comply with any and all laws, ordinances, regulations or orders of national or local governments concerned arising from the occupation and/or sanitation of the leased PROPERTY.

8. REPAIRS – LESSEE hereby agrees that all minor repairs or those caused by the use of the leased PROPERTY or use due to any ordinary wear and tear shall be for the account of the LESSEE while the major repairs or those affecting the structural condition of the building and those due to fortuitous events shall be for the account of the LESSOR. (Underscoring supplied)

The CA ruled that AMA’s demand for ICA to produce a certificate of occupancy covering the building from the local building official amounted to a demand for ICA to undertake a repair of its structural defects.

But this ruling reads from AMA’s letter a demand for repair that was not there. AMA simply asked ICA to produce a certificate of occupancy for the building even when the contract placed on AMA the responsibility for complying with the government’s occupancy requirement. Indeed, it was AMA that applied for the certificate of occupancy.9A demand to repair the defects in the building’s structure, a clearly difficult and costly proposition, cannot be so easily implied from AMA’s demand that ICA produce such certificate.

True, the quoted provision of the lease contract requires ICA to undertake major repairs "affecting the structural condition of the building and those due to fortuitous events." But AMA’s outright rescission of the lease contract and demand that ICA return the deposit and advance rentals it got within 24 hours from such demand precluded ICA, first, from contesting the findings of the local building official or getting some structural specialists to verify such findings or, second, from making the required repair. Clearly, AMA’s hasty rescission of the contract gave ICA no chance to exercise its options.

AMA belatedly invokes Article 1660 of the Civil Code which reads:

Art. 1660. If a dwelling place or any other building intended for human habitation is in such a condition that its use brings imminent and serious danger to life or health, the lessee may terminate the lease at once by notifying the lessor, even if at the time the contract was perfected the former knew of the dangerous condition or waived the right to rescind the lease on account of this condition.

AMA is actually changing its theory of the case. It claimed in its complaint that it was entitled to rescind the contract of lease because ICA fraudulently hid from it the structural defects of its building. The CA did not agree with this theory but held that AMA was nonetheless entitled to rescind the contract for failure of ICA to make the repairs mentioned in the contract. Now, AMA claims that it has a statutory right to rescind the lease contract on the ground mentioned in Article 1660, even if it may be deemed to have initially waived such right.

Article 1660 is evidently intended to protect human lives. If ICA’s building was structurally defective and in danger of crashing down during an earthquake or after it is made to bear the load of a crowd of students, AMA had no right to waive those defects. It can rescind the lease contract under Article 1660. But this assumes that the defects were irremediable and that the parties had no agreement for rectifying them. As pointed out above, the lease contract implicitly gave ICA the option to repair structural defects at its expense. If that had been done as the contract provides, the risk to human lives would have been removed and the right to rescind, rendered irrelevant.

In any event, the fact is that the local building official found ICA’s building structurally defective and unsafe.1avvphi1 Such finding is presumably true.10 For this reason, ICA has no justification for keeping AMA’s deposit and advance rentals. Still, the Court holds that AMA is not entitled to recover more than the return of its deposit and advance rental considering that, contrary to AMA’s claim, ICA acted in good faith and did not mislead it about the condition of the building.

Two. Aside from seeking the dismissal of the complaint, ICA and Dr. Campos separately seek moral and exemplary damages in the amount of P90 million and P10 million plus attorney’s fees and cost of suit.

To be entitled to moral damages, ICA needed to prove that it had a good reputation and that AMA’s action besmirched the same.11 Such proof is wanting in this case. As for Dr. Campos, he has amply proved that he suffered mental anguish, serious anxiety, and social humiliation following AMA’s unfounded accusation that he fraudulently misled AMA regarding the structural condition of ICA’s building. However, due to his untimely demise before the finality of this case, his claim for moral damages does not survive and is not transmissible to his substitutes, for being extremely personal to him.12

Since AMA acted in a reckless, wanton, oppressive, and malevolent manner in imputing fraud and deceit on ICA and Dr. Campos, the Court finds ground for awarding them exemplary damages. Further, the Court holds that, having been compelled to litigate in order to protect their interests, ICA and Dr. Campos are also entitled to attorney’s fees.

WHEREFORE, the Court GRANTS the petition and REVERSES and SETS ASIDE the Decision of the Court of Appeals in CA-G.R. CV 82266 dated February 27, 2006. Further, the Court:

1. DIRECTS petitioner Immaculate Conception Academy to return to respondent AMA Computer College, Inc. its security deposit and advance rentals for the lease of the subject building totaling P4,072,150.00 plus interest of 6% per annum from the date of the finality of this decision until it is fully paid; and

2. DIRECTS respondent AMA Computer College, Inc. to pay the heirs of Dr. Paulo C. Campos, namely, Jose Paulo, Paulo, Jr., and Enrique, all surnamed Campos and the Immaculate Conception AcademyP100,000.00 as exemplary damages and P50,000.00 as attorney’s fees.

SO ORDERED.

G.R. No. 128690 January 21, 1999ABS-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 aside the decision 1 of 31 October 1996 and the resolution 2 of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The former affirmed with modification the decision 3 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 afore-said 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 non-primetime 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" - RBS; Exh. "4" - RBS) including the fourteen (14) films subject of the present case. 4

On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with a prayer for a writ of preliminary injunction and/or temporary restraining order against private respondents Republic Broadcasting Corporation 5 (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 6 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 7 directing the issuance of a writ of preliminary injunction upon ABS-CBN's posting of P35 million bond. ABS-CBN moved for the reduction of the bond, 8 while private respondents moved for reconsideration of the order and offered to put up a counterbound. 9

In the meantime, private respondents filed separate answers with counterclaim. 10 RBS also set up a cross-claim against VIVA..

On 3 August 1992, the RTC issued an order 11 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 12 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 approved in its Order of 15 October 1992. 13

On 19 October 1992, ABS-CBN filed a motion for reconsideration 14 of the 3 August and 15 October 1992 Orders, which RBS opposed. 15

On 29 October 1992, the RTC conducted a pre-trial. 16

Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of Appeals a petition 17challenging 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 18 to enjoin the airing, broadcasting, and televising of any or all of the films involved in the controversy.

On 18 December 1992, the Court of Appeals promulgated a decision 19 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 rendered a decision 20 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 21 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:

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 ABS-CBN after the letter of Mrs. Concio, still the fifteen (15) day period within which ABS-CBN shall exercise its right of first refusal has already expired. 22

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 non-showing 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 Sons Milling, Inc. v. Court of Appeals, 23 which cited Toyota Shaw, Inc. v. Court of Appeals, 24 Ang Yu Asuncion v. Court of Appeals, 25 andVillonco Realty Company v. Bormaheco. Inc. 26

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 an action. 27 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 sufficient evidence, legal technicalities, or a different interpretation of the laws on the matter, the case would lose ground. 28 One who makes use of his own legal right does no injury. 29 If damage results front the filing of the complaint, it is damnum absque injuria. 30 Besides, moral damages are generally not awarded in favor of a juridical person, unless it enjoys a good reputation that was debased by the offending party resulting in social humiliation. 31

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. Camaganacan 32 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, ABS-CBN. It has been held that "where no sufficient showing of bad faith would be reflected in a party' s persistence in a case other than an erroneous conviction of the righteousness of his cause, attorney's fees shall not be recovered as cost." 33

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 for such damages. Citing Tolentino, 34 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 RBScited People v. Manero, 35 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 this case) away from the competition. 36

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 himself to give something or to render some service to another 37 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 the obligation, which is established. 38 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 modification or variation from the terms of the offer annuls the offer. 40

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 ABS-CBN, 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 ofAppeals 41 and Villonco Realty Company v. Bormaheco, Inc., 42 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 ruling was, however, reversed in the resolution of 29 March 1996, 43 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 clarificatory of what had previously been agreed upon. It cited the statement in Stuart v.Franklin Life Insurance Co. 44 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 amount to a rejection of the offer and the tender of a counter-offer." 45However, 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, 46 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 purposes, 47 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 apply. 48 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:

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" and insisted that the film package for 140 films be maintained (Exh. "7-1" - Viva ). 49

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, June 9, 1992, pp. 10-11) 50

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 entitled to compensation for actual damages only for such pecuniary loss suffered by him as he has duly proved. 51 The indemnification shall comprehend not only the value of the loss suffered, but also that of the profits that the obligee failed to obtain. 52 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 for all damages which may be reasonably attributed to the non-

performance of the obligation. 53 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, whether or not such damages has been foreseen or could have reasonably been foreseen by the defendant. 54

Actual damages may likewise be recovered for loss or impairment of earning capacity in cases of temporary or permanent personal injury, or for injury to the plaintiff's business standing or commercial credit. 55

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 suffered actual damages in the amount of P6,621,195.32. 56

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 suffer by reason of the writ are

recoverable from the injunctive bond. 57 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 compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code. 58

The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. 59 They are not to be awarded every time a party wins a suit. The power of the court to award attorney's fees under Article 2208 demands factual, legal, and equitable justification. 60 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 his cause. 61

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 impose a penalty on the wrongdoer. 62 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 proportionate to the suffering inflicted. 63 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 the part of the trial court. 64

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 suffering and mental anguish, which call be experienced only by one having a nervous system. 65 The statement in People v. Manero 66 and Mambulao Lumber Co. v. PNB 67 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 of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. 68 They are recoverable in criminal cases as part of the civil liability when the crime was committed with one or more aggravating circumstances; 69 in quasi-contracts, if the defendant acted with gross negligence;70 and in contracts and quasi-contracts, if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. 71

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 public policy, and (3) and it is done with intent to injure. 72

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 design to do a wrongful act for a dishonest purpose or moral obliquity. 73 Such must be substantiated by evidence. 74

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 absque injuria. 75

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.1âwphi1.nêt

No pronouncement as to costs.

SO ORDERED.

G.R. No. 141994 January 17, 2005FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs.AGO MEDICAL AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE, (AMEC-BCCM) and ANGELITA F. AGO, respondents.

CARPIO, J.:

The Case

This petition for review1 assails the 4 January 1999 Decision2 and 26 January 2000 Resolution of the Court of Appeals in CA-G.R. CV No. 40151. The Court of Appeals affirmed with modification the 14 December 1992 Decision3 of the Regional Trial Court of Legazpi City, Branch 10, in Civil Case No. 8236. The Court of Appeals held Filipinas Broadcasting Network, Inc. and its broadcasters Hermogenes Alegre and Carmelo Rima liable for libel and ordered them to solidarily pay Ago Medical and Educational Center-Bicol Christian College of Medicine moral damages, attorney’s fees and costs of suit.

The Antecedents

"Exposé" is a radio documentary4 program hosted by Carmelo ‘Mel’ Rima ("Rima") and Hermogenes ‘Jun’ Alegre ("Alegre").5 Exposé is aired every morning over DZRC-AM which is owned by Filipinas Broadcasting Network, Inc. ("FBNI"). "Exposé" is heard over Legazpi City, the Albay municipalities and other Bicol areas.6

In the morning of 14 and 15 December 1989, Rima and Alegre exposed various alleged complaints from students, teachers and parents against Ago Medical and Educational Center-Bicol Christian College of Medicine ("AMEC") and its administrators. Claiming that the broadcasts were defamatory, AMEC and Angelita Ago ("Ago"), as Dean of AMEC’s College of Medicine, filed a complaint for damages7 against FBNI, Rima and Alegre on 27 February 1990. Quoted are portions of the allegedly libelous broadcasts:

JUN ALEGRE:

Let us begin with the less burdensome: if you have children taking medical course at AMEC-BCCM, advise them to pass all subjects because if they fail in any subject they will repeat their year level, taking up all subjects including those they have passed already. Several students had approached me stating that they had consulted with the DECS which told them that there is no such regulation. If [there] is no such regulation why is AMEC doing the same?

xxx

Second: Earlier AMEC students in Physical Therapy had complained that the course is not recognized by DECS . xxx

Third: Students are required to take and pay for the subject even if the subject does not have an instructor - such greed for money on the part of AMEC’s administration. Take the subject Anatomy: students would pay for the subject upon enrolment because it is offered by the school. However there would be no instructor for such subject. Students would be informed that course would be moved to a later date because the school is still searching for the appropriate instructor.

xxx

It is a public knowledge that the Ago Medical and Educational Center has survived and has been surviving for the past few years since its inception because of funds support from foreign foundations. If you will take a look at the AMEC premises you’ll find out that the names of the buildings there are foreign soundings. There is a McDonald Hall. Why not Jose Rizal or Bonifacio Hall? That is a very concrete and undeniable evidence that the support of foreign foundations for AMEC is substantial, isn’t it? With the report which is the basis of the expose in DZRC today, it would be very easy for detractors and enemies of the Ago family to stop the flow of support of foreign foundations who assist the medical school on the basis of the latter’s purpose. But if the purpose of the institution (AMEC) is to deceive students at cross purpose with its reason for being it is possible for these foreign foundations to lift or suspend their donations temporarily.8

xxx

On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and the AMEC-Institute of Mass Communication in their effort to minimize expenses in terms of salary are absorbing or continues to accept "rejects". For example how many teachers in AMEC are former teachers of Aquinas University but were removed because of immorality? Does it mean that the present administration of AMEC have the total definite moral foundation from catholic administrator of Aquinas University. I will prove to you my friends, that AMEC is a dumping ground, garbage, not merely of moral and physical misfits. Probably they only qualify in terms of intellect. The Dean of Student Affairs of AMEC is Justita Lola, as the family name implies. She is too old to work, being an old woman. Is the AMEC administration exploiting the very [e]nterprising or compromising and undemanding Lola? Could it be that AMEC is just patiently making use of Dean Justita Lola were if she is very old. As in atmospheric situation – zero visibility – the plane cannot land, meaning she is very old, low pay follows. By the way, Dean Justita Lola is also the chairman of the committee on scholarship in AMEC. She had retired from Bicol University a long time ago but AMEC has patiently made use of her.

xxx

MEL RIMA:

xxx My friends based on the expose, AMEC is a dumping ground for moral and physically misfit people. What does this mean? Immoral and physically misfits as teachers.

May I say I’m sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no longer fit to teach. You are too old. As an aviation, your case is zero visibility. Don’t insist.

xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship committee at that. The reason is practical cost saving in salaries, because an old person is not fastidious, so long as she has money to buy the ingredient of beetle juice. The elderly can get by – that’s why she (Lola) was taken in as Dean.

xxx

xxx On our end our task is to attend to the interests of students. It is likely that the students would be influenced by evil. When they become members of society outside of campus will be liabilities rather than assets.What do you expect from a doctor who while studying at AMEC is so much burdened with unreasonable imposition? What do you expect from a student who aside from peculiar problems – because not all students are rich – in their struggle to improve their social status are even more burdened with false regulations. xxx9(Emphasis supplied)

The complaint further alleged that AMEC is a reputable learning institution. With the supposed exposés, FBNI, Rima and Alegre "transmitted malicious imputations, and as such, destroyed plaintiffs’ (AMEC and Ago) reputation." AMEC and Ago included FBNI as defendant for allegedly failing to exercise due diligence in the selection and supervision of its employees, particularly Rima and Alegre.

On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an Answer10 alleging that the broadcasts against AMEC were fair and true. FBNI, Rima and Alegre claimed that they were plainly impelled by a sense of public duty to report the "goings-on in AMEC, [which is] an institution imbued with public interest."

Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty. Edmundo Cea, collaborating counsel of Atty. Lozares, filed a Motion to Dismiss11 on FBNI’s behalf. The trial court denied the motion to dismiss. Consequently, FBNI filed a separate Answer claiming that it exercised due diligence in the selection and supervision of Rima and Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster should (1) file an application; (2) be interviewed; and (3) undergo an apprenticeship and training program after passing the interview. FBNI likewise claimed that it always reminds its broadcasters to "observe truth, fairness and objectivity in their broadcasts and to refrain from using libelous and indecent language." Moreover, FBNI requires all broadcasters to pass the Kapisanan ng mga Brodkaster sa Pilipinas ("KBP") accreditation test and to secure a KBP permit.

On 14 December 1992, the trial court rendered a Decision12 finding FBNI and Alegre liable for libel except Rima. The trial court held that the broadcasts are libelous per se. The trial court rejected the broadcasters’

claim that their utterances were the result of straight reporting because it had no factual basis. The broadcasters did not even verify their reports before airing them to show good faith. In holding FBNI liable for libel, the trial court found that FBNI failed to exercise diligence in the selection and supervision of its employees.

In absolving Rima from the charge, the trial court ruled that Rima’s only participation was when he agreed with Alegre’s exposé. The trial court found Rima’s statement within the "bounds of freedom of speech, expression, and of the press." The dispositive portion of the decision reads:

WHEREFORE, premises considered, this court finds for the plaintiff. Considering the degree of damages caused by the controversial utterances, which are not found by this court to be really very serious and damaging, and there being no showing that indeed the enrollment of plaintiff school dropped,defendants Hermogenes "Jun" Alegre, Jr. and Filipinas Broadcasting Network (owner of the radio station DZRC), are hereby jointly and severally ordered to pay plaintiff Ago Medical and Educational Center-Bicol Christian College of Medicine (AMEC-BCCM) the amount of P300,000.00 moral damages, plus P30,000.00 reimbursement of attorney’s fees, and to pay the costs of suit.

SO ORDERED. 13 (Emphasis supplied)

Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on the other, appealed the decision to the Court of Appeals. The Court of Appeals affirmed the trial court’s judgment with modification. The appellate court made Rima solidarily liable with FBNI and Alegre. The appellate court denied Ago’s claim for damages and attorney’s fees because the broadcasts were directed against AMEC, and not against her. The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification that broadcaster Mel Rima is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes Alegre.

SO ORDERED.14

FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals denied in its 26 January 2000 Resolution.

Hence, FBNI filed this petition.15

The Ruling of the Court of Appeals

The Court of Appeals upheld the trial court’s ruling that the questioned broadcasts are libelous per se and that FBNI, Rima and Alegre failed to overcome the legal presumption of malice. The Court of Appeals found Rima and Alegre’s claim that they were actuated by their moral and social duty to inform the public of the students’ gripes as insufficient to justify the utterance of the defamatory remarks.

Finding no factual basis for the imputations against AMEC’s administrators, the Court of Appeals ruled that the broadcasts were made "with reckless disregard as to whether they were true or false." The appellate court pointed out that FBNI, Rima and Alegre failed to present in court any of the students who allegedly complained against AMEC. Rima and Alegre merely gave a single name when asked to identify the students. According to the Court of Appeals, these circumstances cast doubt on the veracity of the broadcasters’ claim that they were "impelled by their moral and social duty to inform the public about the students’ gripes."

The Court of Appeals found Rima also liable for libel since he remarked that "(1) AMEC-BCCM is a dumping ground for morally and physically misfit teachers; (2) AMEC obtained the services of Dean Justita Lola to minimize expenses on its employees’ salaries; and (3) AMEC burdened the students with unreasonable imposition and false regulations."16

The Court of Appeals held that FBNI failed to exercise due diligence in the selection and supervision of its employees for allowing Rima and Alegre to make the radio broadcasts without the proper KBP accreditation. The Court of Appeals denied Ago’s claim for damages and attorney’s fees because the libelous remarks were directed against AMEC, and not against her. The Court of Appeals adjudged FBNI, Rima and Alegre solidarily liable to pay AMEC moral damages, attorney’s fees and costs of suit.1awphi1.nét

Issues

FBNI raises the following issues for resolution:

I. WHETHER THE BROADCASTS ARE LIBELOUS;

II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;

III. WHETHER THE AWARD OF ATTORNEY’S FEES IS PROPER; and

IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR PAYMENT OF MORAL DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.

The Court’s Ruling

We deny the petition.

This is a civil action for damages as a result of the allegedly defamatory remarks of Rima and Alegre against AMEC.17 While AMEC did not point out clearly the legal basis for its complaint, a reading of the complaint reveals that AMEC’s cause of action is based on Articles 30 and 33 of the Civil Code. Article 3018 authorizes a separate civil action to recover civil liability arising from a criminal offense. On the other hand, Article 3319 particularly provides that the injured party may bring a separate civil action for damages in cases of defamation, fraud, and physical injuries. AMEC also invokes Article 1920 of the Civil Code to justify its claim for damages. AMEC cites Articles 217621 and 218022 of the Civil Code to hold FBNI solidarily liable with Rima and Alegre.

I.

Whether the broadcasts are libelous

A libel23 is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act or omission, condition, status, or circumstance tending to cause the dishonor, discredit, or contempt of a natural or juridical person, or to blacken the memory of one who is dead.24

There is no question that the broadcasts were made public and imputed to AMEC defects or circumstances tending to cause it dishonor, discredit and contempt. Rima and Alegre’s remarks such as "greed for money on the part of AMEC’s administrators"; "AMEC is a dumping ground, garbage of xxx moral and physical misfits"; and AMEC students who graduate "will be liabilities rather than assets" of the society are libelous per se. Taken as a whole, the broadcasts suggest that AMEC is a money-making institution where physically and morally unfit teachers abound.

However, FBNI contends that the broadcasts are not malicious. FBNI claims that Rima and Alegre were plainly impelled by their civic duty to air the students’ gripes. FBNI alleges that there is no evidence that ill will or spite motivated Rima and Alegre in making the broadcasts. FBNI further points out that Rima and Alegre exerted efforts to obtain AMEC’s side and gave Ago the opportunity to defend AMEC and its administrators. FBNI concludes that since there is no malice, there is no libel.

FBNI’s contentions are untenable.

Every defamatory imputation is presumed malicious.25 Rima and Alegre failed to show adequately their good intention and justifiable motive in airing the supposed gripes of the students. As hosts of a documentary or public affairs program, Rima and Alegre should have presented the public issues "free from inaccurate and misleading information."26 Hearing the students’ alleged complaints a month before the exposé,27 they had sufficient time to verify their sources and information. However, Rima and Alegre hardly made a thorough investigation of the students’ alleged gripes. Neither did they inquire about nor confirm the purported irregularities in AMEC from the Department of Education, Culture and Sports. Alegre testified that he merely went to AMEC to verify his report from an alleged AMEC official who refused to disclose any information. Alegre simply relied on the words of the students "because they were many and not because there is proof that what they are saying is true."28 This plainly shows Rima and Alegre’s reckless disregard of whether their report was true or not.

Contrary to FBNI’s claim, the broadcasts were not "the result of straight reporting." Significantly, some courts in the United States apply the privilege of "neutral

reportage" in libel cases involving matters of public interest or public figures. Under this privilege, a republisher who accurately and disinterestedly reports certain defamatory statements made against public figures is shielded from liability, regardless of the republisher’s subjective awareness of the truth or falsity of the accusation.29 Rima and Alegre cannot invoke the privilege of neutral reportage because unfounded comments abound in the broadcasts. Moreover, there is no existing controversy involving AMEC when the broadcasts were made. The privilege of neutral reportage applies where the defamed person is a public figure who is involved in an existing controversy, and a party to that controversy makes the defamatory statement.30

However, FBNI argues vigorously that malice in law does not apply to this case. Citing Borjal   v.   Court   of Appeals,31 FBNI contends that the broadcasts "fall within the coverage of qualifiedly privileged communications" for being commentaries on matters of public interest. Such being the case, AMEC should prove malice in fact or actual malice. Since AMEC allegedly failed to prove actual malice, there is no libel.

FBNI’s reliance on Borjal is misplaced. In Borjal, the Court elucidated on the "doctrine of fair comment," thus:

[F]air commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander. The doctrine of fair comment means that while in general every discreditable imputation publicly made is deemed false, because every man is presumed innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public official may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. If the comment is an expression of opinion, based on established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.32(Emphasis supplied)

True, AMEC is a private learning institution whose business of educating students is "genuinely imbued with public interest." The welfare of the youth in general and AMEC’s

students in particular is a matter which the public has the right to know. Thus, similar to the newspaper articles in Borjal, the subject broadcasts dealt with matters of public interest. However, unlike in Borjal, the questioned broadcasts are not based on established facts. The record supports the following findings of the trial court:

xxx Although defendants claim that they were motivated by consistent reports of students and parents against plaintiff, yet, defendants have not presented in court, nor even gave name of a single student who made the complaint to them, much less present written complaint or petition to that effect. To accept this defense of defendants is too dangerous because it could easily give license to the media to malign people and establishments based on flimsy excuses that there were reports to them although they could not satisfactorily establish it. Such laxity would encourage careless and irresponsible broadcasting which is inimical to public interests.

Secondly, there is reason to believe that defendant radio broadcasters, contrary to the mandates of their duties, did not verify and analyze the truth of the reports before they aired it, in order to prove that they are in good faith.

Alegre contended that plaintiff school had no permit and is not accredited to offer Physical Therapy courses. Yet, plaintiff produced a certificate coming from DECS that as of Sept. 22, 1987 or more than 2 years before the controversial broadcast, accreditation to offer Physical Therapy course had already been given the plaintiff, which certificate is signed by no less than the Secretary of Education and Culture herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could have easily known this were they careful enough to verify. And yet, defendants were very categorical and sounded too positive when they made the erroneous report that plaintiff had no permit to offer Physical Therapy courses which they were offering.

The allegation that plaintiff was getting tremendous aids from foreign foundations like Mcdonald Foundation prove not to be true also. The truth is there is no Mcdonald Foundation existing. Although a big building of plaintiff school was given the name Mcdonald building, that was only in order to honor the first missionary in Bicol of plaintiffs’ religion, as explained by Dr. Lita Ago. Contrary to the claim of defendants over the air, not a single centavo appears to be received by plaintiff school from the

aforementioned McDonald Foundation which does not exist.

Defendants did not even also bother to prove their claim, though denied by Dra. Ago, that when medical students fail in one subject, they are made to repeat all the other subject[s], even those they have already passed, nor their claim that the school charges laboratory fees even if there are no laboratories in the school. No evidence was presented to prove the bases for these claims, at least in order to give semblance of good faith.

As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers, defendant[s] singled out Dean Justita Lola who is said to be so old, with zero visibility already. Dean Lola testified in court last Jan. 21, 1991, and was found to be 75 years old. xxx Even older people prove to be effective teachers like Supreme Court Justices who are still very much in demand as law professors in their late years. Counsel for defendants is past 75 but is found by this court to be still very sharp and effective.l^vvphi1.net So is plaintiffs’ counsel.

Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally infirmed, but is still alert and docile.

The contention that plaintiffs’ graduates become liabilities rather than assets of our society is a mere conclusion. Being from the place himself, this court is aware that majority of the medical graduates of plaintiffs pass the board examination easily and become prosperous and responsible professionals.33

Had the comments been an expression of opinion based on established facts, it is immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.34 However, the comments of Rima and Alegre were not backed up by facts. Therefore, the broadcasts are not privileged and remain libelousper se.

The broadcasts also violate the Radio Code35 of the Kapisanan ng mga Brodkaster sa Pilipinas, Ink. ("Radio Code"). Item I(B) of the Radio Code provides:

B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES

1. x x x

4. Public affairs program shall present public issues free from personal bias, prejudice and inaccurate and misleading information. x x x Furthermore, the station shall strive to present balanced discussion of issues. x x x.

x x x

7. The station shall be responsible at all times in the supervision of public affairs, public issues and commentary programs so that they conform to the provisions and standards of this code.

8. It shall be the responsibility of the newscaster, commentator, host and announcer to protect public interest, general welfare and good order in the presentation of public affairs and public issues.36 (Emphasis supplied)

The broadcasts fail to meet the standards prescribed in the Radio Code, which lays down the code of ethical conduct governing practitioners in the radio broadcast industry. The Radio Code is a voluntary code of conduct imposed by the radio broadcast industry on its own members. The Radio Code is a public warranty by the radio broadcast industry that radio broadcast practitioners are subject to a code by which their conduct are measured for lapses, liability and sanctions.

The public has a right to expect and demand that radio broadcast practitioners live up to the code of conduct of their profession, just like other professionals. A professional code of conduct provides the standards for determining whether a person has acted justly, honestly and with good faith in the exercise of his rights and performance of his duties as required by Article 1937 of the Civil Code. A professional code of conduct also provides the standards for determining whether a person who willfully causes loss or injury to another has acted in a manner contrary to morals or good customs under Article 2138 of the Civil Code.

II.

Whether AMEC is entitled to moral damages

FBNI contends that AMEC is not entitled to moral damages because it is a corporation.39

A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock.40 The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al.41 to justify the award of moral damages. However, the Court’s statement in Mambulao that "a corporation may have a good reputation which, if besmirched, may also be a ground for the award of moral damages" is an obiter dictum.42

Nevertheless, AMEC’s claim for moral damages falls under item 7 of Article 221943 of the Civil Code. This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages.44

Moreover, where the broadcast is libelous per se, the law implies damages.45 In such a case, evidence of an honest mistake or the want of character or reputation of the party libeled goes only in mitigation of damages.46Neither in such a case is the plaintiff required to introduce evidence of actual damages as a condition precedent to the recovery of some damages.47 In this case, the broadcasts are libelous per se. Thus, AMEC is entitled to moral damages.

However, we find the award of P300,000 moral damages unreasonable. The record shows that even though the broadcasts were libelous per se, AMEC has not suffered any substantial or material damage to its reputation. Therefore, we reduce the award of moral damages from P300,000 to P150,000.

III.

Whether the award of attorney’s fees is proper

FBNI contends that since AMEC is not entitled to moral damages, there is no basis for the award of attorney’s fees. FBNI adds that the instant case does not fall under the enumeration in Article 220848 of the Civil Code.

The award of attorney’s fees is not proper because AMEC failed to justify satisfactorily its claim for attorney’s fees. AMEC did not adduce evidence to warrant the award of attorney’s fees. Moreover, both the trial and appellate courts failed to explicitly state in their respective decisions the rationale for the award of attorney’s fees.49 InInter-Asia Investment Industries, Inc. v. Court of Appeals ,50 we held that:

[I]t is an accepted doctrine that the award thereof as an item of damages is the exception rather than the rule, and counsel’s fees are not to be awarded every time a party wins a suit. The power of the court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal and equitable justification, without which the award is a conclusion without a premise, its basis being improperly left to speculation and conjecture. In all events, the court must explicitly state in the text of the decision, and not only in the decretal portion thereof, the legal reason for the award of attorney’s fees.51 (Emphasis supplied)

While it mentioned about the award of attorney’s fees by stating that it "lies within the discretion of the court and depends upon the circumstances of each case," the Court of Appeals failed to point out any circumstance to justify the award.

IV.

Whether FBNI is solidarily liable with Rima and Alegre for moral damages, attorney’s fees and costs of suit

FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of damages and attorney’s fees because it exercised due diligence in the selection and supervision of its employees, particularly Rima and Alegre. FBNI maintains that its broadcasters, including Rima and Alegre, undergo a "very regimented process" before they are allowed to go on air. "Those who apply for broadcaster are subjected to interviews, examinations and an apprenticeship program."

FBNI further argues that Alegre’s age and lack of training are irrelevant to his competence as a broadcaster. FBNI points out that the "minor deficiencies in the KBP accreditation of Rima and Alegre do not in any way prove that FBNI did not exercise the diligence of a good father of a family in selecting and supervising them." Rima’s accreditation lapsed due to his non-payment of the KBP annual fees while Alegre’s accreditation card was delayed allegedly for reasons attributable to the KBP Manila Office. FBNI claims that membership in the KBP is merely voluntary and not required by any law or government regulation.

FBNI’s arguments do not persuade us.

The basis of the present action is a tort. Joint tort feasors are jointly and severally liable for the tort which they commit.52 Joint tort feasors are all the persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for their benefit.53 Thus, AMEC correctly anchored its cause of action against FBNI on Articles 2176 and 2180 of the Civil Code.1a\^/phi1.net

As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable to pay for damages arising from the libelous broadcasts. As stated by the Court of Appeals, "recovery for defamatory statements published by radio or television may be had from the owner of the station, a licensee, the operator of the station, or a person who procures, or participates in, the making of the defamatory statements."54 An employer and employee are solidarily liable for a defamatory statement by the employee within the course and scope of his or her employment, at least when the employer authorizes or ratifies the defamation.55 In this case, Rima and Alegre were clearly performing their official duties as hosts of FBNI’s radio program Exposé when they aired the broadcasts. FBNI neither alleged nor proved that Rima and Alegre went beyond the scope of their work at that time. There was likewise no showing that FBNI did not authorize and ratify the defamatory broadcasts.

Moreover, there is insufficient evidence on record that FBNI exercised due diligence in the selection andsupervision of its employees, particularly Rima and Alegre. FBNI merely showed that it exercised

diligence in theselection of its broadcasters without introducing any evidence to prove that it observed the same diligence in thesupervision of Rima and Alegre. FBNI did not show how it exercised diligence in supervising its broadcasters. FBNI’s alleged constant reminder to its broadcasters to "observe truth, fairness and objectivity and to refrain from using libelous and indecent language" is not enough to prove due diligence in the supervision of its broadcasters. Adequate training of the broadcasters on the industry’s code of conduct, sufficient information on libel laws, and continuous evaluation of the broadcasters’ performance are but a few of the many ways of showing diligence in the supervision of broadcasters.

FBNI claims that it "has taken all the precaution in the selection of Rima and Alegre as broadcasters, bearing in mind their qualifications." However, no clear and convincing evidence shows that Rima and Alegre underwent FBNI’s "regimented process" of application. Furthermore, FBNI admits that Rima and Alegre had deficiencies in their KBP accreditation,56 which is one of FBNI’s requirements before it hires a broadcaster. Significantly, membership in the KBP, while voluntary, indicates the broadcaster’s strong commitment to observe the broadcast industry’s rules and regulations. Clearly, these circumstances show FBNI’s lack of diligence in selecting andsupervising Rima and Alegre. Hence, FBNI is solidarily liable to pay damages together with Rima and Alegre.

WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January 1999 and Resolution of 26 January 2000 of the Court of Appeals in CA-G.R. CV No. 40151 with the MODIFICATION that the award of moral damages is reduced from P300,000 to P150,000 and the award of attorney’s fees is deleted. Costs against petitioner.

SO ORDERED.

G.R. No. 150304 June 15, 2005QUEZON CITY GOVERNMENT and Engineer RAMIR J. TIAMZON, Petitioners, vs.FULGENCIO DACARA*, Respondent.

PANGANIBAN, J.:

The review of cases under Rule 45 of the Rules of Court is limited to errors of law. Unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous, this Court will not analyze or weigh evidence all over again. Under the circumstance, the factual findings and conclusions of the Court of Appeals affirming those of the trial courts will be conclusive upon the Supreme Court. Furthermore, well-entrenched is the rule that points of law, theories, issues and arguments not brought to the attention of the trial court cannot be raised for the first time on appeal or certiorari. Finally, this Court reiterates the principle that moral damages are designed to compensate the claimant for actual injury suffered, not to impose a penalty on the wrongdoer. Hence, absent any definite finding as to what they consist of, the alleged moral damages suffered would become a penalty rather than a compensation for actual injury suffered.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the February 21, 2001 Decision2and the October 9, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 29392. The challenged Decision disposed as follows:

"WHEREFORE, premises considered, the Decision dated June 29, 1990 in Civil Case No. Q-88-233 should beAFFIRMED, with costs against the appellants."4

The assailed Resolution denied petitioners' Motion for Reconsideration.

The Facts

The CA summarized the facts in this manner:

"Sometime on February 28, 1988 at about 1:00 A.M., Fulgencio Dacara, Jr., son of Fulgencio P. Dacara, Sr. and owner of '87 Toyota Corolla 4-door Sedan with Plate No. 877 (sic), while driving the said vehicle, rammed into a pile of earth/street diggings found at Matahimik St., Quezon City, which was then being repaired by the Quezon City government. As a result, Dacarra (sic), Jr. allegedly sustained bodily injuries and the vehicle suffered extensive damage for it turned turtle when it hit the pile of earth.

"Indemnification was sought from the city government (Record, p. 22), which however, yielded negative results. Consequently, Fulgencio P. Dacara (hereinafter referred to as FULGENCIO), for and in behalf of his minor son, Jr., filed a Complaint (Record, p. 1) for damages against the Quezon City and Engr. Ramir Tiamzon, as defendants, before the Regional Trial Court, National Capital Judicial Region, Branch 101, Quezon City, docketed as Civil Case No. Q-88-233. FULGENCIO prayed that the amount of not less than P20,000.00 actual or compensatory damages, P150,000.00 moral damages, P30,000.00 exemplary damages, and P20,000.00 attorney's fees and costs of the suit be awarded to him.

"In an Answer with Affirmative and/or Special Defenses (Record, p. 11), defendants admitted the occurrence of the incident but alleged that the subject diggings was provided with a moun[d] of soil and barricaded with reflectorized traffic paint with sticks placed before or after it which was visible during the incident on February 28, 1988 at 1:00 A.M. In short, defendants claimed that they exercised due care by providing the area of the diggings all necessary measures to avoid accident. Hence, the reason why Fulgencio Dacara, Jr. fell into the diggings was precisely because of the latter's negligence and failure to exercise due care."5

After trial on the merits, the Regional Trial Court (RTC), Branch 101, Quezon City, rendered its Decision6 dated June 29, 1990. The evidence proffered by the complainant (herein respondent) was found to be sufficient proof of the negligence of herein petitioners. Under Article 2189 of the Civil Code,7 the latter were held liable as follows:

"WHEREFORE, premises above considered, based on the quantum of evidence presented by the plaintiff which tilts in their favor elucidating the negligent acts of the city government together with its employees when considered

in the light of Article 2189, judgment is hereby rendered ordering the defendants to indemnify the plaintiff the sum of twenty thousand pesos as actual/compensatory damages, P10,000.00 as moral damages,P5,000.00 as exemplary damages, P10,000.00 as attorney's fees and other costs of suit."8

In their appeal to the CA, petitioners maintained that they had observed due diligence and care in installing preventive warning devices, and that it was in fact the plaintiff who had failed to exercise prudence by driving too fast to avoid the diggings. Moreover, the lower court allegedly erred in using Article 2189 of the Civil Code, which supposedly applied only to liability for the death or injuries suffered by a person, not for damage to property.

Ruling of the Court of Appeals

The CA agreed with the RTC's finding that petitioners' negligence was the proximate cause of the damage suffered by respondent.9 Noting the failure of petitioners to present evidence to support their contention that precautionary measures had indeed been observed, it ruled thus:

"x x x. Sadly, the evidence indicates that [petitioners] failed to show that they placed sufficient and adequate precautionary signs at Matahimik Street to minimize or prevent the dangers to life and limb under the circumstances. Contrary to the testimony of the witnesses for the [petitioners], namely Engr. Ramir Tiamzon, Ernesto Landrito and Eduardo Castillo, that there were signs, gasera which was buried so that its light could not be blown off by the wind and barricade, none was ever presented to stress and prove the sufficiency and adequacy of said contention."10

Further upholding the trial court's finding of negligence on the part of herein petitioners, the CA gave this opinion:

"x x x. As observed by the trial court, the negligence of [petitioners] was clear based on the investigation report of Pfc. William P. Villafranca stating to the effect 'that the subject vehicle rammed into a pile of earth from a deep excavation thereat without any warning devi[c]e whatsoever and as a consequence thereof, Dacara, Jr. lost control of his driven car and finally turned-turtle causing

substantial damage to the same.' As a defense against liability on the basis of quasi-delict, one must have exercised the diligence of a good father of a family which [petitioners] failed to establish in the instant case."11

Whether Article 2189 is applicable to cases in which there has been no death or physical injury, the CA ruled in the affirmative:

"x x x. More importantly, we find it illogical to limit the liability to death or personal injury only as argued by appellants in the case at bar applying the foregoing provisions. For, injury is an act that damages, harms or hurts and mean in common as the act or result of inflicting on a person or thing something that causes loss, pain, distress, or impairment. Injury is the most comprehensive, applying to an act or result involving an impairment or destruction of right, health, freedom, soundness, or loss of something of value."12

Hence, this Petition.13

Issues

Petitioners raise the following issues for our consideration:

"1. The Honorable Court of Appeals decided a question of law/substance contrary to applicable law and jurisprudence when it affirmed the award of moral damage suit (sic) the amount of P10,000.00.

2. The Honorable Court of Appeals decided a question of law/substance contrary to applicable law and jurisprudence when it affirmed the award of exemplary damage sin (sic) the amount of P5,000.00 and attorney's fee in the [a]mount of P10,000.00.

3. The Honorable Court of Appeals gravely erred and/;or (sic) had acted with grave abuse of discretion amounting to lack and/or excess of jurisdiction when it refused to hold that respondent's son in the person of Fulgencio Dacara, Jr. was negligent at the time of incident."14

Because the issues regarding the liability of petitioners for moral and exemplary damages presuppose that their negligence caused the vehicular accident, we first resolve the question of negligence or the proximate cause of the incident.

The Court's Ruling

The Petition is partly meritorious.

First Issue:

Negligence

Maintaining that they were not negligent, petitioners insist that they placed all the necessary precautionary signs to alert the public of a roadside construction. They argue that the driver (Fulgencio Dacara Jr.) of respondent's car was overspeeding, and that his own negligence was therefore the sole cause of the incident.

Proximate cause is defined as any cause that produces injury in a natural and continuous sequence, unbroken by any efficient intervening cause, such that the result would not have occurred otherwise.15 Proximate cause is determined from the facts of each case, upon a combined consideration of logic, common sense, policy and precedent.16

What really caused the subject vehicle to turn turtle is a factual issue that this Court cannot pass upon, absent any whimsical or capricious exercise of judgment by the lower courts or an ample showing that they lacked any basis for their conclusions.17 The unanimity of the CA and the trial court in their factual ascertainment that petitioners' negligence was the proximate cause of the accident bars us from supplanting their findings and substituting these with our own. The function of this Court is limited to the review of the appellate court's alleged errors of law. It is not required to weigh all over again the factual evidence already considered in the proceedings below.18Petitioners have not shown that they are entitled to an exception to this rule.19 They have not sufficiently demonstrated any special circumstances to justify a factual review.

That the negligence of petitioners was the proximate cause of the accident was aptly discussed in the lower court's finding, which we quote:

"Facts obtaining in this case are crystal clear that the accident of February 28, 1988 which caused almost the life and limb of Fulgencio Dacara, Jr. when his car turned turtle was the existence of a pile of earth from a digging done relative to the base failure at Matahimik Street nary a lighting device or a reflectorized barricade or sign perhaps which could have served as an adequate warning to motorist especially during the thick of the night where darkness is pervasive.

"Contrary to the testimony of the witnesses for the defense that there were signs, gasera which was buried so that its light could not be blown off by the wind and barricade, none was ever presented to stress the point that sufficient and adequate precautionary signs were placed at Matahimik Street. If indeed signs were placed thereat, how then could it be explained that according to the report even of the policeman which for clarity is quoted again,none was found at the scene of the accident.

x x x x x x x x x

"Negligence of a person whether natural or juridical over a particular set of events is transfixed by the attending circumstances so that the greater the danger known or reasonably anticipated, the greater is the degree of care required to be observed.

x x x x x x x x x

"The provisions of Article 2189 of the New Civil Code capsulizes the responsibility of the city government relative to the maintenance of roads and bridges since it exercises the control and supervision over the same. Failure of the defendant to comply with the statutory provision found in the subject-article is tantamount to negligence per se which renders the City government liable. Harsh application of the law ensues as a result thereof but the state assumed the responsibility for the maintenance and repair of the roads and bridges and neither exception nor exculpation from liability would deem just and equitable."20 (Emphasis supplied)

Petitioners belatedly point out that Fulgencio Jr. was driving at the speed of 60 kilometers per hour (kph) when he met the accident. This speed was allegedly well above the maximum limit of 30 kph allowed on "city streets with light traffic, when not designated 'through streets,'" as provided under the Land Transportation and Traffic Code (Republic Act 4136). Thus, petitioners assert that Fulgencio Jr., having violated a traffic regulation, should be presumed negligent pursuant to Article 218521 of the Civil Code.22

These matters were, however, not raised by petitioners at any time during the trial. It is evident from the records that they brought up for the first time the matter of violation of RA 4136 in their Motion for Reconsideration23 of the CA Decision dated February 21, 2001. It is too late in the day for them to raise this new issue. It is well-settled that points of law, theories or arguments not brought out in the original proceedings cannot be considered on review or appeal.24 To consider their belatedly raised arguments at this stage of the proceedings would trample on the basic principles of fair play, justice, and due process.25

Indeed, both the trial and the appellate courts' findings, which are amply substantiated by the evidence on record, clearly point to petitioners' negligence as the proximate cause of the damages suffered by respondent's car. No adequate reason has been given to overturn this factual conclusion.

Second Issue:

Moral Damages

Petitioners argue that moral damages are recoverable only in the instances specified in Article 221926 of the Civil Code. Although the instant case is an action for quasi-delict, petitioners contend that moral damages are not recoverable, because no evidence of physical injury were presented before the trial court.27

To award moral damages, a court must be satisfied with proof of the following requisites: (1) an injury -- whether physical, mental, or psychological -- clearly sustained by the claimant; (2) a culpable act or omission factually established; (3) a wrongful act or omission of the defendant as the proximate cause of the injury sustained

by the claimant; and (4) the award of damages predicated on any of the cases stated in Article 2219.28

Article 2219(2) specifically allows moral damages to be recovered for quasi-delicts, provided that the act or omission caused physical injuries. There can be no recovery of moral damages unless the quasi-delict resulted in physical injury.29 This rule was enunciated in Malonzo v. Galang30 as follows:

"x x x. Besides, Article 2219 specifically mentions 'quasi-delicts causing physical injuries,' as an instance when moral damages may be allowed, thereby implying that all other quasi-delicts not resulting in physical injuries are excluded, excepting of course, the special torts referred to in Art. 309 (par. 9, Art. 2219) and in Arts. 21, 26, 27, 28, 29, 30, 32, 34 and 35 on the chapter on human relations (par. 10, Art. 2219)."

In the present case, the Complaint alleged that respondent's son Fulgencio Jr. sustained physical injuries. The son testified that he suffered a deep cut on his left arm when the car overturned after hitting a pile of earth that had been left in the open without any warning device whatsoever.

It is apparent from the Decisions of the trial and the appellate courts, however, that no other evidence (such as a medical certificate or proof of medical expenses) was presented to prove Fulgencio Jr.'s bare assertion of physical injury. Thus, there was no credible proof that would justify an award of moral damages based on Article 2219(2) of the Civil Code.

Moreover, the Decisions are conspicuously silent with respect to the claim of respondent that his moral sufferings were due to the negligence of petitioners. The Decision of the trial court, which summarizes the testimony of respondent's four witnesses, makes no mention of any statement regarding moral suffering, such as mental anguish, besmirched reputation, wounded feelings, social humiliation and the like.

Moral damages are not punitive in nature, but are designed to compensate and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,

social humiliation, and similar injury unjustly inflicted on a person.31 Intended for the restoration of the psychological or emotional status quo ante, the award of moral damages is designed to compensate emotional injury suffered, not to impose a penalty on the wrongdoer.

For the court to arrive upon a judicious approximation of emotional or moral injury, competent and substantial proof of the suffering experienced must be laid before it. Essential to this approximation are definite findings as to what the supposed moral damages suffered consisted of; otherwise, such damages would become a penalty rather than a compensation for actual injury suffered.32

Furthermore, well-settled is the rule that moral damages cannot be awarded -- whether in a civil33 or a criminal case34 -- in the absence of proof of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury.35 The award of moral damages must be solidly anchored on a definite showing that respondent actually experienced emotional and mental sufferings. Mere allegations do not suffice; they must be substantiated by clear and convincing proof.36

Third Issue:

Exemplary Damages

Petitioners argue that exemplary damages and attorney's fees are not recoverable. Allegedly, the RTC and the CA "did not find that petitioners were guilty of gross negligence in the performance of their duty and responsibilities."37

Exemplary damages cannot be recovered as a matter of right.38 While granting them is subject to the discretion of the court, they can be awarded only after claimants have shown their entitlement to moral, temperate or compensatory damages.39 In the case before us, respondent sufficiently proved before the courts a quo that petitioners' negligence was the proximate cause of the incident, thereby establishing his right to actual or compensatory damages. He has adduced adequate proof to justify his claim for the damages caused his car. The question that remains, therefore, is whether exemplary

damages may be awarded in addition to compensatory damages.

Article 2231 of the Civil Code mandates that in cases of quasi-delicts, exemplary damages may be recovered if the defendant acted with gross negligence.40 Gross negligence means such utter want of care as to raise a presumption that the persons at fault must have been conscious of the probable consequences of their carelessness, and that they must have nevertheless been indifferent (or worse) to the danger of injury to the person or property of others.41 The negligence must amount to a reckless disregard for the safety of persons or property. Such a circumstance obtains in the instant case.

A finding of gross negligence can be discerned from the Decisions of both the CA and the trial court. We quote from the RTC Decision:

"Sad to state that the City Government through its instrumentalities have (sic) failed to show the modicum of responsibility, much less, care expected of them (sic) by the constituents of this City. It is even more deplorable that it was a case of a street digging in a side street which caused the accident in the so-called 'premier city.'"421avvphi1.zw+

The CA reiterated the finding of the trial court that petitioners' negligence was clear, considering that there was no warning device whatsoever43 at the excavation site.

The facts of the case show a complete disregard by petitioners of any adverse consequence of their failure to install even a single warning device at the area under renovation. Considering further that the street was dimly lit,44 the need for adequate precautionary measures was even greater. By carrying on the road diggings without any warning or barricade, petitioners demonstrated a wanton disregard for public safety. Indeed, the February 28, 1988 incident was bound to happen due to their gross negligence. It is clear that under the circumstances, there is sufficient factual basis for a finding of gross negligence on their part.

Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example or correction for the public good. The award of these damages is meant

to be a deterrent to socially deleterious actions.45Public policy requires such imposition to suppress wanton acts of an offender.46 It must be emphasized that local governments and their employees should be responsible not only for the maintenance of roads and streets, but also for the safety of the public. Thus, they must secure construction areas with adequate precautionary measures.

Not only is the work of petitioners impressed with public interest; their very existence is justified only by public service. Hence, local governments have the paramount responsibility of keeping the interests of the public foremost in their agenda. For these reasons, it is most disturbing to note that the present petitioners are the very parties responsible for endangering the public through such a rash and reckless act.

WHEREFORE, the Petition is hereby PARTLY GRANTED. The Decision of the Court of Appeals is AFFIRMED, with the MODIFICATION that the award of moral damages is DELETED. No costs.

SO ORDERED.