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Chao

Producer's bank of Phil v CA


Marikina Autoline v People
Reylan
Baliwag Transit v CA
Villa Rey Transit v CA
Dangwa Transportation v CA
Nilsy
People v Quilaton
People v Sia
Eastern Shipping v CA
Daniel
Policarpio v CA
Citibank v Cabamongan

SECOND DIVISION
[G.R. No. 116110. May 15,1996]
BALIWAG TRANSIT, INC., petitioner, vs. COURT OF APPEALS, SPOUSES ANTONIO
GARCIA
&
LETICIA
GARCIA,
A
&
J
TRADING,
AND
JULIO
RECONTIQUE, respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; SPECIAL CONTRACTS; COMMON CARRIERS; LIABILITY
FOR DAMAGES; ESTABLISHED IN CASE AT BAR. As a common carrier, Baliwag
breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan
Garcia to their destination safe and sound. A common carrier is bound to carry its
passengers safely as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with due regard for all the circumstances. In a contract
of carriage, it is presumed that the common carrier was at fault or was negligent when a
passenger dies or is injured. Unless the presumption is rebutted, the court need not even
make an express finding of fault or negligence on the part of the common carrier. This
statutory presumption may only be overcome by evidence that the carrier exercised
extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. The
records are bereft of any proof to show that Baliwag exercised extraordinary diligence. On
the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia testified
that the bus was running at a very high speed despite the drizzle and the darkness of the
highway. The passengers pleaded for its driver to slow down, but their plea was

ignored. Leticia also revealed that the driver was smelling of liquor. She could smell him as
she was seated right behind the driver. Another passenger, Felix Cruz testified that
immediately before the collision, the bus driver was conversing with a co-employee. All
these prove the bus driver's wanton disregard for the physical safety of his passengers,
which make Baliwag as a common carrier liable for damages under Article 1759 of the Civil
Code.
2. ID.; ID.; ID.; ID.; LAND TRANSPORTATION AND TRAFFIC CODE; SECTION 34(g)
THEREOF; SUBSTANTIALLY COMPLIED WITH IN CASE AT BAR. Baliwag cannot evade
its liability by insisting that the accident was caused solely by the negligence of A & J
Trading and Julio Recontique. It harps on their alleged non use of early warning device as
testified to by Col. Demetrio dela Cruz, the station commander of Gapan, Nueva Ecija who
investigated the incident, and Francisco Romano, the bus conductor. The records do not
bear out Baliwag's contention. Col. dela Cruz and Romano testified that they did not see
any early warning device at the scene of the accident. They were referring to the triangular
reflectorized plates in red and yellow issued by the Land Transportation Office. However,
the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the
edge of the road, near the rear portion of the truck to serve as an early warning device. This
substantially complies with Section 34 (g) of the Land Transportation and Traffic Code, to
wit: "(g) lights and reflector when parked or disabled. Appropriate parking lights or flares
visible one hundred meters away shall be displayed at the corner of the vehicle whenever
such vehicle is parked on highways or in places that are not well-lighted or, is placed in
such manner as to endanger passing traffic. Furthermore, every motor vehicle shall be
provided at all times with built-in reflectors or other similar warning devices either pasted,
painted or attached at its front and back which shall likewise be visible at night at least one
hundred meters away. No vehicle not provided with any of the requirements mentioned in
this subsection shall be registered." Baliwag's argument that the kerosene lamp or torch
does not substantially comply with the law is untenable. The aforequoted law clearly allows
the use not only of an early warning device of the triangular reflectorized plates variety but
also parking lights or flares visible one hundred meters away. Indeed, Col. dela Cruz
himself admitted that a kerosene lamp is an acceptable substitute for the reflectorized
plates. No negligence, therefore, may be imputed to A & J Trading and its driver,
Recontique.
3. ID.; DAMAGES; To PROVE ACTUAL DAMAGES, THE BEST EVIDENCE AVAILABLE TO
THE PARTIES MUST BE PRESENTED. The propriety of the amount awarded as
hospitalization and medical fees. The award of P25,000.00 is not supported by the
evidence on record. The Garcias presented receipts marked as Exhibits "B-1 " to "B-42" but
their total amounted only to P5,017.74. To be sure, Leticia testified as to the extra amount
spent for her medical needs but without more reliable evidence, her lone testimony cannot
justify the award of P25,000.00. To prove actual damages, the best evidence available to
the injured party must be presented. The court cannot rely on uncorroborated testimony
whose truth is suspect, but must depend upon competent proof that damages have been

actually suffered. Thus, we reduce the actual damages for medical and hospitalization
expenses to P5,017.74.
4. ID.; ID.; MORAL DAMAGES; RECOVERABLE IF THE CARRIER THROUGH ITS AGENT,
ACTED FRAUDULENTLY OR IN BAD FAITH. The award of moral damages is in accord
with law. In a breach of contract of carriage, moral damages are recoverable if the carrier,
through its agent, acted fraudulently or in bad faith. The evidence shows the gross
negligence of the driver of Baliwag bus which amounted to bad faith. Without doubt, Leticia
and Allan experienced physical suffering, mental anguish and serious anxiety by reason of
the accident.
APPEARANCES OF COUNSEL
Leopoldo C. Sta. Maria for Baliwag Transit, Inc.
Arturo D. Vallar for Sps. Antonio & Leticia Garcia.
Allan A. Leynes for A & J Trading, and Julio Recontique.
DECISION
PUNO, J.:
This is a petition for certiorari to review the Decision[1] of the Court of Appeals in CA-G.R.
CV-31246 awarding damages in favor of the spouses Antonio and Leticia Garcia for breach of
contract of carriage.[2] filed by the spouses Garcia questioning the same Court of Appeals'
Decision which reduced their award of damages. On November 13, 1995, we denied their
petition for review.
The records show that on July 31, 1980, Leticia Garcia, and her five-year old son, Allan
Garcia, boarded Baliwag Transit Bus No. 2036 bound for Cabanatuan City driven by Jaime
Santiago. They took the seat behind the driver.
At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus passengers saw a
cargo truck parked at the shoulder of the national highway. Its left rear portion jutted to the outer
lane, the shoulder of the road was too narrow to accommodate the whole truck. A kerosene
lamp appeared at the edge of the road obviously to serve as a warning device. The truck driver,
Julio Recontique, and his helper, Arturo Escala, were then replacing a flat tire. The truck is
owned by respondent A & J Trading.
Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck
and the kerosene lamp at the edge of the road. Santiago's passengers urged him to slow down
but he paid them no heed. Santiago even carried animated conversations with his coemployees while driving. When the danger of collision became imminent, the bus passengers
shouted "Babangga tayo!". Santiago stepped on the brake, but it was too late. His bus rammed

into the stalled cargo truck. It caused the instant death of Santiago and Escala, and injury to
several others. Leticia and Allan Garcia were among the injured passengers.
Leticia suffered a fracture in her pelvis and right leg. They rushed her to the provincial
hospital in Cabanatuan City where she was given emergency treatment. After three days, she
was transferred to the National Orthopedic Hospital where she was confined for more than a
month.[3] She underwent an operation for partial hip prosthesis.[4]
Allan, on the other hand, broke a leg. He was also given emergency treatment at the
provincial hospital.
Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and Julio
Recontique for damages in the Regional Trial Court of Bulacan. [5] Leticia sued as an injured
passenger of Baliwag and as mother of Allan. At the time of the complaint, Allan was a minor,
hence, the suit initiated by his parents in his favor.
Baliwag, A & J Trading and Recontique disclaimed responsibility for the mishap. Baliwag
alleged that the accident was caused solely by the fault and negligence of A & J Trading and its
driver, Recontique. Baliwag charged that Recontigue failed to place an early warning device at
the corner of the disabled cargo truck to warn oncoming vehicles. [6] On the other hand, A & J
Trading and Recontique alleged that the accident was the result of the negligence and reckless
driving of Santiago, bus driver of Baliwag.[7]
After hearing, the trial court found all the defendants liable, thus:
xxxxxxxxx
"In view thereof, the Court holds that both defendants should be held liable; the defendant
Baliwag Transit, Inc. for having failed to deliver the plaintiff and her son to their point of
destination safely in violation of plaintiff's and defendant Baliwag Transit's contractual relation.
The defendant A & J and Julio Recontique for failure to provide its cargo truck with an early
warning device in violation of the Motor Vehicle Law."[8]
The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and severally
the Garcia spouses the following: (1) P25,000.00 hospitalization and medication fee, (2)
P450,000.00 loss of earnings in eight (8) years, (3) P2,000.00 for the hospitalization of their son
Allan Garcia, (4) P50,000.00 moral damages, and (5) P30,000.00 attorney's fee.[9]
On appeal, the Court of Appeals modified the trial court's Decision by absolving A & J
Trading from liability and by reducing the award of attorney's fees to P10,000.00 and loss of
earnings to P300,000.00, respectively.[10]
Baliwag filed the present petition for review raising the following issues:

1. Did the Court of Appeals err in absolving A & J Trading from liability and holding Baliwag
solely liable for the injuries suffered by Leticia and Allan Garcia in the accident?
2. Is the amount of damages awarded by the Court of Appeals to the Garcia spouses correct?
We affirm the factual findings of the Court of Appeals.
I
As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its
passengers, Leticia and Allan Garcia to their destination safe and sound. A common carrier is
bound to carry its passengers safely as far as human care and foresight can provide, using the
utmost diligence of a very cautious person, with due regard for all the circumstances. [11] In a
contract of carriage, it is presumed that the common carrier was at fault or was negligent when
a passenger dies or is injured. Unless the presumption is rebutted, the court need not even
make an express finding of fault or negligence on the part of the common carrier. This statutory
presumption may only be overcome by evidence that the carrier exercised extraordinary
diligence as prescribed in Articles 1733 and 1755 of the Civil Code.[12]
The records are bereft of any proof to show that Baliwag exercised extraordinary
diligence. On the contrary, the evidence demonstrates its driver's recklessness. Leticia Garcia
testified that the bus was running at a very high speed despite the drizzle and the darkness of
the highway. The passengers pleaded for its driver to slow down, but their plea was ignored.
[13]
Leticia also revealed that the driver was smelling of liquor.[14] She could smell him as she was
seated right behind the driver. Another passenger, Felix Cruz testified that immediately before
the collision, the bus driver was conversing with a co-employee.[15] All these prove the bus
driver's wanton disregard for the physical safety of his passengers, which makes Baliwag as a
common carrier liable for damages under Article 1759 of the Civil Code:
Art. 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willfull acts of the former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers do not cease upon proof that they exercised all the
diligence of a good father of a family in the selection or supervision of their employees.
Baliwag cannot evade its liability by insisting that the accident was caused solely by the
negligence of A & J Trading and Julio Recontique. It harps on their alleged non use of an early
warning device as testified to by Col. Demetrio dela Cruz, the station commander of Gapan,
Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor.
The records do not bear out Baliwag's contention. Col. dela Cruz and Romano testified that
they did not see any early warning device at the scene of the accident.[16] They were referring to
the triangular reflectorized plates in red and yellow issued by the Land Transportation
Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or

torch at the edge of the road, near the rear portion of the truck to serve as an early warning
device.[17] This substantially complies with Section 34 (g) of the Land Transportation and Traffic
Code, to wit:
(g) Lights and reflector when parked or disabled. Appropriate parking lights or flares visible
one hundred meters away shall be displayed at the corner of the vehicle whenever such
vehicle is parked on highways or in places that are not well-lighted or, is placed in such manner
as to endanger passing traffic. Furthermore, every motor vehicle shall be provided at all times
with built-in reflectors or other similar warning devices either pasted, painted or attached at its
front and back which shall likewise be visible at night at least one hundred meters away. No
vehicle not provided with any of the requirements mentioned in this subsection shall be
registered. (Italics supplied)
Baliwag's argument that the kerosene lamp or torch does not substantially comply with the
law is untenable. The aforequoted law clearly allows the use not only of an early warning device
of the triangular reflectorized plates variety but also parking lights or flares visible one hundred
meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable
substitute for the reflectorized plates.[18] No negligence, therefore, may be imputed to A & J
Trading and its driver, Recontique.
Anent this factual issue, the analysis of evidence made by the Court of Appeals deserves
our concurrence, viz:
xxx xxx xxx
In the case at bar, both the injured passengers of the Baliwag involved in the accident testified
that they saw some sort of kerosene or a torch on the rear portion of the truck before the
accident. Baliwag Transit's conductor attempted to defeat such testimony by declaring that he
noticed no early warning device in front of the truck.
Among the testimonies offered by the witnesses who were present at the scene of the
accident, we rule to uphold the affirmative testimonies given by the two injured passengers and
give less credence to the testimony of the bus conductor who solely testified that no such early
warning device exists.
The testimonies of injured passengers who may well be considered as disinterested
witness appear to be natural and more probable than the testimony given by Francisco Romano
who is undoubtedly interested in the outcome of the case, being the conductor of the defendantappellant Baliwag Transit Inc.
It must be borne in mind that the situation then prevailing at the time of the accident was
admittedly drizzly and all dark. This being so, it would be improbable and perhaps impossible on
the part of the truck helper without the torch nor the kerosene to remove the flat tires of the
truck. Moreover, witness including the bits conductor himself admitted that the passengers
shouted, that they are going to bump before the collision which consequently caused the bus

driver to apply the brake 3 to 4 meters away from the truck. Again, without the kerosene nor the
torch in front of the truck, it would be improbable for the driver, more so the passengers to
notice the truck to be bumped by the bus considering the darkness of the place at the time of
the accident.
xxxxxxxxx
While it is true that the investigating officer testified that he found no early warning device at
the time of his investigation, We rule to give less credence to such testimony insofar as he
himself admitted on cross examination that he did not notice the presence of any kerosene
lamp at the back of the truck because when he arrived at the scene of the accident, there were
already many people surrounding the place (TSN, Aug, 22, 1989, p. 13). He further admitted
that there exists a probability that the lights of the truck may have been smashed by the bus at
the time of the accident considering the location of the truck where its rear portion was
connected with the front portion of the bus (TSN, March 29, 1985, pp. 11-13). Investigator's
testimony therefore did not confirm nor deny the existence of such warning device, making his
testimony of little probative value.[19]
II
We now review the amount of damages awarded to the Garcia spouses.
First, the propriety of the amount awarded as hospitalization and medical fees. The award
of P25,000.00 is not supported by the evidence on record. The Garcias presented receipts
marked as Exhibits B-1 to B 42 but their total amounted only to P5,017.74. To be sure, Leticia
testified as to the extra amount spent for her medical needs but without more reliable evidence,
her lone testimony cannot justify the award of P25,000.00. To prove actual damages, the best
evidence available to the injured party must be presented. The court cannot rely on
uncorroborated testimony whose truth is suspect, but must depend upon competent proof that
damages have been actually suffered[20] Thus, we reduce the actual damages for medical and
hospitalization expenses to P5,017.74.
Second, we find as reasonable the award of P300,000.00 representing Leticia's lost
earnings. Before the accident, Leticia was engaged in embroidery, earning P5,000.00 per
month.[21] Her injuries forced her to stop working. Considering the nature and extent of her
injuries and the length of time it would take her to recover, [22] we find it proper that Baliwag
should compensate her lost income for five (5) years.[23]
Third, the award of moral damages is in accord with law. In a breach of contract of carriage,
moral damages are recoverable if the carrier, through its agent, acted fraudulently or in bad
faith.[24] The evidence shows the gross negligence of the driver of Baliwag bus which amounted
to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and
serious anxiety by reason of the accident. Leticia underwent an operation to replace her broken
hip bone with a metal plate. She was confined at the National Orthopedic Hospital for 45
days. The young Allan was also confined in the hospital for his foot injury. Contrary to the

contention of Baliwag, the decision of the trial court as affirmed by the Court of Appeals
awarded moral damages to Antonio and Leticia Garcia not in their capacity as parents of
Allan. Leticia was given moral damages as an injured party. Allan was also granted moral
damages as an injured party but because of his minority, the award in his favor has to be given
to his father who represented him in the suit.
Finally, we find the award of attorney's fees justified. The complaint for damages was
instituted by the Garcia spouses on December 15, 1982, following the unjustified refusal of
Baliwag to settle their claim. The Decision was promulgated by the trial court only on January
29, 1991 or about nine years later. Numerous pleadings were filed before the trial court, the
appellate court and to this Court. Given the complexity of the case and the amount of damages
involved,[25] the award of attorney's fee for P10,000.00 is just and reasonable.
IN VIEW WHEREOF, the Decision of the respondent Court of Appeals in CA-G.R. CV31246 is AFFIRMED with the MODIFICATION reducing the actual damages for hospitalization
and medical fees to P5,017.74. No costs.
SO ORDERED.
Regalado (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.

THIRD DIVISION
[G.R. No. 111584. September 17, 2001]
PRODUCERS BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and
SPOUSES SALVADOR Y. CHUA and EMILIA U. CHUA, respondents.
DECISION
MELO, J.:
The instant petition assails the decision of the Court of Appeals in its CA-G.R.CV No.
20220, dated October 31, 1991, affirming with modification the decision of Branch 48 of the
Regional Trial Court of the 6th Judicial Region stationed in Bacolod City, as well as the resolution
dated
August
12,
1993
denying
petitioners
motion
for
partial
consideration. Undersigned ponente was given this case in pursuance of A. M. No. 00-9-03-SC
dated February 27, 2001 distributing the so-called back-log cases.
The generative facts of the case may be chronicled as follows:
Sometime in April, 1982, respondent Salvador Chua was offered by Mr. Jimmy Rojas,
manager of petitioner bank, to transfer his account from Pacific Banking Corporation to herein

petitioner Producers Bank of the Philippines. In view of Rojas' assurances of longer loan terms
and lower rates of interest, respondent spouses opened and maintained substantial savings and
current deposits with the Bacolod branch of petitioner bank. Likewise, private respondents
obtained various loans from petitioner bank, one of which was a loan for P2,000,000.00 which
was secured by a real estate mortgage and payable within a period of three (3) years or from
1982 to 1985. On January 20, 1984, private respondents deposited with petitioner bank the total
sum of P960,000.00, which was duly entered in private respondents' savings account
passbook. However, petitioner bank failed to credit this deposit in private respondents' savings
account due to the fact that its Branch Manager, Sixto Castillo, absconded with the money of the
bank's depositors. Also, petitioner bank dishonored the checks drawn out by private
respondents in favor of their various creditors on the ground of insufficient funds, despite the
fact that at that time, the balance of private respondents' deposit was in the amount of
P1,051,051.19. These events prompted private respondents to request for copies of their
ledgers covering their savings and current accounts, but petitioner bank refused. Due to
petitioner bank's refusal to furnish private respondents copies of their ledgers, private
respondents instituted on January 30, 1984 an action for damages against petitioner bank which
was docketed as Civil Case No. 2718. On the other hand, petitioner bank filed with the City
Sheriff of Bacolod a petition for extrajudicial foreclosure of the real estate mortgage during the
pendency of Civil Case No.2718. As a result, private respondents filed a complaint for injunction
and damages docketed as Civil Case No. 3276, alleging that the petition for extajudicial
foreclosure was without basis and was instituted maliciously in order to harass private
respondents. On April 26, 1988, the trial court rendered its decision on the latter case, the
dispositive portion of which reads:
WHEREFORE, from the evidence adduced, judgment is hereby rendered in favor of plaintiff
ordering the defendant as follows:
1) To pay plaintiff the sum of P2,000,000.00 as moral damages, with legal rate of
interest; the sum of P90,000.00 per month and P18,000.00 per month representing
plaintiff's unrealized profits from his cement and gasoline station business,
respectively, to commence from October 16, 1984, with legal rate of interest until
fully paid; the sum of P250,000.00 as exemplary damages;
2) To off-set the sum of P960,000.00 deposited by plaintiff on January 20, 1984 and
entered in his Passbook No. 38240, together with its incremental interests computed
at banking rate and to commence from January 20, 1984 with his agricultural loan
account in the sum of P1,300,000.00 with interest thereon computed at fourteen
(14%) percent per annum, to commence from January 4, 1984, covered by a real
estate mortgage, both of which shall have a cut-off time frame on the date of this
decision;
3) That should the said savings deposit and its interest be sufficient to cover the offsetting, compensation shall take place and to be taken from the amounts awarded to
plaintiff in the form of moral, actual and compensatory damages;

4) That the time loan in the sum of P175,000.00 and the clean loan of P400,000.00,
both without interest, shall be off-settled by the moral, actual and compensatory
damages herein awarded to plaintiff;
5) That after compensation or set-off had taken place, to pay plaintiff the balance of the
adjudged moral, actual and compensatory damages, with legal rate of interest until
fully paid;
6) To render an accounting to plaintiff with respect to his Account Nos. 0142-0014-0
and 042-0014-1 for the period covering January to December, 1982;
7) That in order to make the bank's record complete, to reform the deed of real estate
mortgage conformably with the agreement by stipulating in the said document that
the maturity date of the agricultural loan is April 1 5, 1987 at the same rate of
interest of fourteen (14%) percent per annum, deducting from the original amount of
the loan the payments made on the principal and interests; this reformation shall
take place simultaneously with the off-setting of accounts;
8) To pay plaintiff the sum equivalent to fifteen (15%) percent of the amount
representing the balance of the sums awarded as moral, actual and compensatory
damages as attorney's fees;
9) To pay plaintiff the cots of suit;
10) The writ of preliminary injunction issued by this Court is rendered permanent; and
11) The counterclaim is hereby dismissed.
SO ORDERED.
(Rollo, pp. 261-263.)
On October 31, 1991, upon appeal by petitioner bank, the Court of Appeals modified the
decision of the trial court as follows:
WHEREFORE, from the evidence adduced, judgment is hereby rendered as follows:
1. Ordering the defendant a. To pay plaintiff the sum of P500,000.00 as moral and exemplary damages;
b. To pay the sum of P18,000.00 per month representing plaintiffs' unrealized profits from his
gasoline station business to commence from October 16, 1984, with legal rate of interest, until
fully paid;

c. To allow the plaintiffs to offset their financial obligation with the defendant bank by the moral,
exemplary, actual and compensatory damages herein awarded in favor of the aforesaid
plaintiffs;
d. If, after the off-setting, a balance remains in favor of the plaintiffs, to pay the said plaintiffs
such balance of the adjudged moral, exemplary, actual and compensatory damages, with legal
rate of interest until fully paid, as of the time of off-setting;
e. To render an accounting to plaintiffs with respect to their Account Nos. 0142-0014-0 and 0420014-1 for the period covering January to December, 1982;
f. To pay plaintiffs the sum of P100,000.00 as attorney's fees.
g. To pay the costs of suit.
2. Ordering the plaintiffsa. To settle their loan obligation with the defendant bank within 90 days from the finality of this
decision, subject to the resolution of this Court to the effect that they shall be relieved from the
payment of penalties and surcharges on heir outstanding balance starting January 20, 1984;
3. The plaintiffs' prayer for reformation of their mortgage contract or annulment thereof is hereby
denied;
4. The counterclaim of defendant-appellant are hereby dismissed.
SO ORDERED.
(Rollo, pp. 86-87.)
Petitioner moved for a partial reconsideration of the above decision but the same was
denied on August 12, 1993. Hence, the instant petition with the following submissions which
allegedly warrant our review of the assailed decision, viz.:
1. The Court of Appeals erred in not ruling that the application for extrajudicial
foreclosure of real estate mortgage is legal and valid;
2. The Court of Appeals erred in not granting petitioner bank its right to foreclose
extrajudicially the real estate mortgage and to proceed with its application for
extrajudicial foreclosure of real estate mortgage;
3. The Court of Appeals erred in ruling that private respondents be relieved from the
payment of penalties and surcharges on their outstanding balance starting January
20, 1984;

4. The Court of Appeals erred in awarding moral and exemplary damages of


P500,000.00, unrealized profit of P18,000.00 per month, and attorney's fees of
P100,000.00 against petitioner bank;
5. The Court of Appeals erred in ordering an accounting to private respondents with
respect to their Account Nos. 0142-0014-0 and 042-0014-1 for the period covering
January to December, 1982.
It should at once be apparent that except for the first and second imputed errors which
involve petitioner bank's right to foreclose extrajudicially the real estate mortgage, the resolution
of the assigned errors entails a review of the factual conclusions of the appellate court and the
evidentiary bases thereof. Such an assessment is not, as a rule, proper in appeals from the
Court of Appeals which should be confined to a consideration and determination only of issues
of law as its findings of fact are deemed conclusive (Villanueva vs. Court of Appeals, 294 SCRA
90 [1998]) especially so in this case because the findings of fact of the appellate court concur
with those of the trial court. To reiterate, this Court's jurisdiction is only limited to reviewing errors
of law in the absence of any showing that the findings complained of are totally devoid of
support in the record or they are glaringly erroneous as to constitute serious abuse of
discretion. Nonetheless, considering the amount involved, as well as for the satisfaction of the
parties who have vigorously pursued this case since 1984, the Court, in the exercise of its
discretion, examined the factual bases, particularly with respect to the propriety of the damages
awarded to private respondents.
The first and second assignments of error, being interrelated, shall be jointly discussed.
Petitioner contends that it has the right to foreclose the real estate mortgage executed by
private respondents in its favor as the loan under the real estate mortgage contract had become
due and demandable. This argument is not well-taken. Foreclosure is but a necessary
consequence of non-payment of a mortgage indebtedness. As a rule, the mortgage can be
foreclosed only when the debt remains unpaid at the time it is due (Gov't. of the P.I. vs.
Espejo, 57 Phil. 496 [1932]). As found by the trial court and the Court of Appeals, and as borne
by the evidence on record, private respondents were constantly paying their loan obligations
with petitioner bank. In fact the amount of P960,000.00 was properly deposited with petitioner
bank as evidenced by the corresponding deposit slip and the entry made in private respondents'
savings account passbook. It is, therefore, not the fault of private respondents that their
payment amounting to P960,000.00 was not credited to their account. Thus, it is certain that the
loan which was secured by a real estate mortgage cannot be considered as unpaid so as to
warrant foreclosure on the mortgage.
Clearly, private respondents have not yet defaulted on the payment of their
loans. Moreover, the term of the loan, as agreed upon by the parties, is three years, or from
1982 to 1985. But petitioner filed its application for extrajudicial foreclosure on October 15,
1984. Indisputably, the application for foreclosure of the mortgage on October 15, 1984 was
premature because by then, private respondents' loan was not yet due and demandable.

Likewise, both the Court of Appeals and the trial court found that private respondents are
entitled to moral and exemplary damages. We agree. Moral and exemplary damages may be
awarded without proof of pecuniary loss. In awarding such damages, the court shall take into
account the circumstances obtaining in the case and assess damages according to its
discretion. As borne out by the record of this case, private respondents are engaged in several
businesses, such as rice and corn trading, cement dealership, and gasoline proprietorship. The
dishonor of private respondents' checks and the foreclosure initiated by petitioner adversely
affected the credit standing as well as the business dealings of private respondents as their
suppliers discontinued credit lines resulting in the collapse of their businesses. In the case
of Leopoldo Araneta vs. Bank of America (40 SCRA 144 [1971]), we held that:
"The financial credit of a businessman is a prized and valuable asset, it being a significant part
of the foundation of his business. Any adverse reflection thereon constitutes some financial loss
to him."
The damage to private respondents' reputation and social standing entitles them to moral
damages. Article 2217, in relation to Article 2220, of the Civil Code explicitly provides that "moral
damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury." Obviously,
petitioner bank's wrongful act caused serious anxiety, embarrassment, and humiliation to private
respondents for which they are entitled to recover moral damages in the amount of P300,000.00
which we deem to be reasonable.
The award of exemplary damages is in order in view of the malicious and unwarranted
application for extrajudicial foreclosure by petitioner which was obviously done to harass,
embarrass, annoy, or ridicule private respondents. Likewise, petitioner, in its application for
extrajudicial foreclosure, included the other loans of private respondents which were not
covered by the real estate mortgage agreement, such as the loan of P175,000.00 which was a
time loan, and the amount of P400,000.00 which was a clean loan. Moreover, petitioner
unjustifiably refused to give private respondents copies of their account ledgers which would
show the deposits made by them. Also, petitioner bank's failure to credit the deposit in the
account of private respondents constituted gross negligence in the performance of its
contractual obligation which amounts to evident bad faith. Verily, all these acts of petitioner were
accompanied by bad faith and done in wanton, fraudulent and malevolent manner warranting
the award of exemplary damages in favor of private respondents, in accordance with Article
2232 of the Civil Code which provides:
ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
Of course, a plaintiff need not prove the actual extent of exemplary damages, for its
determination is addressed to the sound discretion of the court upon proof of the plaintiff's
entitlement to moral, temperate, or compensatory damages (Article 2234, Civil Code). In the
instant case, exemplary damages in the amount of P150,000.00 are proper.

Anent the award of actual damages, the Court of Appeals granted private respondents the
amount of P18,000.00 per month representing private respondents' unrealized profits from his
gasoline station business, to commence from October 16, 1984. Under Articles 2199 and 2200
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. There are two kinds of actual or
compensatory damages: one is the loss of what a person already possesses, and the other is
the failure to receive as a benefit that which would have pertained to him (Tolentino, Civil Code
of the Phil., Vol. V, 1992 ed., pp. 633-636). In the latter instance, the familiar rule is that
damages consisting of unrealized profits, frequently referred as "ganacias frustradas" or "lucrum
cessans," are not to be granted on the basis of mere speculation, conjecture, or surmise, but
rather by reference to some reasonably definite standard such as market value, established
experienced, or direct inference from known circumstances (Talisay-Silay Milling Co., Inc. vs.
Asociacion de Agricultores de Talisay-Silay, Inc., 247 SCRA 361 [1995]).
In the case at bar, actual damages in the form of unrealized profits were awarded on the
basis of the sole testimony of private respondent Salvador Chua, to wit:
Atty. Chua:
Q: You mentioned earlier during your direct testimony that you are engaged in gasoline
business. Do you have a gasoline station.
A: Yes, sir.
Q: Where is that located?
A: It is located at Corner Araneta-San Sebastian Sts.
Q: Before the filing of the Extra Judicial Foreclosure, how much more or less, you earned
from that gasoline station by way of conservative estimate?
A: In my gasoline business, based on my record, I have an average of 114,000 liters.
Q: Do you mean to say you can dispose 114,000 liters a month?
A: Yes, sir.
Q: How much is the mark up per liter?
A: Before the publication of the Extra Judicial Foreclosure the markup is P0.27 per liter. So, it
comes out that the profit is P30,78.00 (sic).
Q: How much is your overhead for disposing that much liters of gasoline every month?

A: The overhead is about 12,280.00.


Q: That will give you an average of P18,000.00 a month?
A: Yes; sir.
Q: After the filing of the Extra Judicial Foreclosure, what happened to your gasoline
business?
A: Because of the publication of the Extra Judicial Foreclosure I did not have credit line
anymore. Since I have no capital I was forced to sell my right to operate to my relatives.
(tsn, March 25, 1986, pp. 9-12)
However, other than the testimony of Salvador Chua, private respondents failed to present
documentary evidence which is necessary to substantiate their claim for actual or compensatory
damages. In order to recover this kind of damages, the injured party must prove his case, thus:
When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has absolutely failed
to perform is of necessity to some extent, a matter of speculation, but the injured party is not to
be denied for that reason alone. He must produce the best evidence of which his case is
susceptible and if that evidence warrants the inference that he has been damaged by the loss of
profits which he might with reasonable certainty have anticipated but for the defendant's
wrongful act, he is entitled to recover. (Cerreno vs. Tan Chuco, 28 Phil. 312 [1914] quoted
in Central Bank of the Philippines vs. Court of Appeals, 63 SCRA 431 [1975])
Applying the foregoing test to the instant case, the Court finds the evidence of private
respondents insufficient to be considered within the purview of "best evidence." The bare
assertion of private respondent Salvador Chua that he lost an average of P18,000.00 per month
is inadequate if not speculative and should be admitted with extreme caution especially because
it is not supported by independent evidence. Private respondents could have presented such
evidence as reports on the average actual profits earned by their gasoline business, their
financial statements, and other evidence of profitability which could aid the court in arriving with
reasonable certainty at the amount of profits which private respondents failed to earn. Private
respondents did not even present any instrument or deed evidencing their claim that they have
transferred their right to operate their gasoline station to their relatives. We cannot, therefore,
sustain the award of P18,000.00 a month as unrealized profits commencing from October 16,
1984 because this amount is not amply justified by the evidence on record.
Further, well-settled is the rule that even if the petition for extrajudicial foreclosure filed by
petitioner against private respondents is clearly unfounded, this does not necessarily mean, in
the absence of specific facts proving damages, that actual damage has been sustained. The
Court cannot rely on speculations as to the fact and amount of damages. It must depend on

actual proof of the damages alleged to have been suffered (Perfecto vs. Gonzales, 128 SCRA
635 [1984]).
Finally, the award of attorney's fees as part of damages is deemed just and equitable under
the circumstances. Attorney's fees may be awarded when a party is compelled to litigate or to
incur expenses to protect his interest by reason of an unjustified act of the other party (Ching
Sen Ben vs. Court of Appeals, 314 SCRA 762 [ 1999]). In this case, petitioner bank's act of not
crediting private respondents' deposit of P960,000.00, as well as the premature filing of the
extrajudicial foreclosure, have compelled private respondents to institute an action for injunction
and damages primarily in order to protect their rights and interests. The award of attorney's fees
is also justified under Article 2208 of the Civil Code which provides:
ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than
judicial costs, cannot be recovered, except:
(1) when exemplary damages are awarded;
(2) when the defendant's act or omission has compelled the plaintiff to litigate with third persons
or to incur expenses to protect his interest;
WHEREFORE, the decision of the Court of Appeals in its CA-G.R. CV No. 20220 is
affirmed with MODIFICATION only as to the award of damages in that petitioner bank is ordered
to pay private respondents the following:
1. Three Hundred Thousand Pesos (P300,000.00) as moral damages;
2. One Hundred Fifty Thousand Pesos (P150,000.00) as exemplary damages; and
3. One Hundred Thousand Pesos (P100,000.00) as attorneys fees and litigation
expenses.
In all other respects, the said judgment is affirmed.
SO ORDERED.
Vitug, Panganiban, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

FIRST DIVISION
MARIKINA AUTO LINE G.R. No. 152040
TRANSPORT CORPORATION
and FREDDIE L. SUELTO, Present:
Petitioners,

PANGANIBAN, C.J., Chairperson,


YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
PEOPLE OF THE PHILIPPINES Promulgated:
and ERLINDA V. VALDELLON,
Respondents. March 31, 2006
x--------------------------------------------------x
DECISION
CALLEJO, SR., J.:
Before the Court is a Petition for Review on Certiorari of the Decision[1] 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 owneroperator of a passenger bus with Plate Number NCV-849. Suelto, its employee, was assigned
as the regular driver of the bus.[2]
At around 2:00 p.m. on October 3, 1992, Suelto was driving the aforementioned passenger bus
along Kamias Road, Kamuning, Quezon City, going towards Epifanio de los Santos Avenue
(EDSA). The bus suddenly swerved to the right and struck the terrace of the commercial
apartment owned by Valdellon located along Kamuning Road.[3] Upon Valdellons request, the
court ordered Sergio Pontiveros, the Senior Building Inspection Officer of the City Engineers
Office, to inspect the damaged terrace. Pontiveros submitted a report enumerating and
describing the damages:
(1) The front exterior and the right side concrete columns of the covered terrace
were vertically displaced from its original position causing exposure of the vertical
reinforcement.
(2) The beams supporting the roof and parapet walls are found with cracks on
top of the displaced columns.

(3) The 6 CHB walls at [the] right side of the covered terrace were found with
cracks caused by this accident.
(4) The front iron grills and concrete balusters were found totally damaged and
the later [sic] beyond repair.[4]
He recommended that since the structural members made of concrete had been displaced, the
terrace would have to be demolished to keep its monolithicness, and to insure the safety and
stability of the building.[5]
Photographs[6] 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 of P148,440.00, within 10 days from receipt thereof, to cover the cost of the
damage to the terrace.[8] The bus company and Suelto offered a P30,000.00 settlement which
Valdellon refused.[9]
Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property
against Suelto. After the requisite preliminary investigation, an Information was filed with the
RTC of Quezon City. The accusatory portion of the Information reads:
That on or about the 3rd day of October 1992, in Quezon City, Philippines, the
said accused, being then the driver and/or person in charge of a Marikina Auto
Line bus bearing Plate No. NVC-849, did then and there unlawfully, and
feloniously drive, manage, and operate the same along Kamias Road, in said
City, in a careless, reckless, negligent, and imprudent manner, by then and there
making the said vehicle run at a speed greater than was reasonable and proper
without taking the necessary precaution to avoid accident to person/s and
damage to property, and considering the condition of the traffic at said place at
the time, causing as a consequence of his said carelessness, negligence,
imprudence and lack of precaution, the said vehicle so driven, managed and
operated by him to hit and bump, as in fact it hit and bump a commercial
apartment belonging to ERLINDA V. VALDELLON located at No. 31 Kamias
Road, this City, thereby causing damages to said apartment in the total amount
of P171,088.46, Philippine Currency, to her damage and prejudice in the total
amount aforementioned.
CONTRARY TO LAW.[10]

Valdellon also filed a separate civil complaint against Suelto and the bus company for
damages. She prayed that after due proceedings, judgment be rendered in her favor, thus:
WHEREFORE, it is respectfully prayed of this Honorable Court to issue a writ of
preliminary attachment against the defendants upon approval of plaintiffs bond,
and after trial on the merits, to render a decision in favor of the plaintiff, ordering
the defendants, jointly and severally, to pay
a) the total sum of P171,088.46 constituting the expenses for the repair of the
damaged apartment of plaintiff, with interests to be charged thereon at the legal
rate from the date of the formal demand until the whole obligation is fully paid;
b) the sum of not less than P20,000.00 each as compensatory and exemplary
damages;
c) the sum of P20,000.00 as attorneys fees and the sum of P1,000.00 for each
appearance of plaintiffs counsel; and costs of suit;
PLAINTIFF further prays for such other reliefs as may be just and equitable in the
premises.[11]
A joint trial of the two cases was ordered by the trial court.[12]
The trial court conducted an ocular inspection of the damaged terrace, where defendants
offered to have it repaired and restored to its original state. Valdellon, however, disagreed
because she wanted the building demolished to give way for the construction of a new one.[13]
During the trial, Valdellon testified on the damage caused to the terrace of her apartment, and,
in support thereof, adduced in evidence a receipt for P35,000.00, dated October 20, 1993,
issued by the BB Construction and Steel Fabricator for carpentry, masonry, welding job and
electrical [work].[14]
Pontiveros of the Office of the City Engineer testified that there was a need to change the
column of the terrace, but that the building should also be demolished because if concrete is
destroyed, [one] cannot have it restored to its original position.[15]
Engr. Jesus Regal, Jr., the proprietor of the SSP Construction, declared that he
inspected the terrace and estimated the cost of repairs, including labor, at P171,088.46.

Suelto testified that at 2:00 p.m. on October 3, 1992, he was driving the bus on its way
to Ayala Avenue, Makati, Metro Manila. When he reached the corner of K-H Streetat Kamias
Road, Quezon City, a passenger jeepney suddenly crossed from EDSA going to V. Luna and
swerved to the lane occupied by the bus. Suelto had to swerve the bus to the right upon which it
hit the side front of the terrace of Valdellons two-door apartment. [16] Based on his estimate, the
cost to the damage on the terrace of the apartment amounted to P40,000.00.[17] On crossexamination, Suelto declared that he saw the passenger jeepney when it was a meter away
from the bus. Before then, he had seen some passenger jeepneys on the right trying to overtake
one another.[18]
Architect Arnulfo Galapate testified that the cost of the repair of the damaged terrace
amounted to P55,000.00.[19]
On April 28, 1994, the trial court rendered judgment finding Suelto guilty beyond
reasonable doubt of reckless imprudence resulting in damage to property, and ordered MALTC
and Suelto to pay, jointly and severally, P150,000.00 to Valdellon, by way of actual and
compensatory damages, as well as attorneys fees and costs of suit. The fallo of the decision
reads:
WHEREFORE, finding the accused FREDDIE SUELTO Y LIWAG guilty beyond
reasonable doubt of the crime of Reckless Imprudence Resulting in Damage to
Property, said accused is hereby sentenced to suffer imprisonment of ONE (1)
YEAR.
With respect to the civil liability, judgment is hereby rendered in favor of plaintiff
Erlinda Valdellon and against defendant Marikina Auto Line Transport
Corporation and accused Freddie Suelto, where both are ordered, jointly and
severally, to pay plaintiff:
a. the sum of P150,000.00, as reasonable compensation sustained by
plaintiff for her damaged apartment;
b. the sum of P20,000.00, as compensatory and exemplary damages;

c. the sum of P20,000.00, as attorneys fees; and,


d. the costs of suit.
SO ORDERED.[20]
MALTC and Suelto, now appellants, appealed the decision to the CA, alleging that the
prosecution failed to prove Sueltos guilt beyond reasonable doubt. They averred that the
prosecution merely relied on Valdellon, who testified only on the damage caused to the terrace
of her apartment which appellants also alleged was excessive. Appellant Suelto further alleged
that he should be acquitted in the criminal case for the prosecutions failure to prove his guilt
beyond reasonable doubt. He maintained that, in an emergency case, he was not, in law,
negligent. Even if the appellate court affirmed his conviction, the penalty of imprisonment
imposed on him by the trial court is contrary to law.
In its Brief for the People of the Philippines, the Office of the Solicitor General (OSG)
submitted that the appealed decision should be affirmed with modification. On Sueltos claim that
the prosecution failed to prove his guilt for the crime of reckless imprudence resulting in damage
to property, the OSG contended that, applying the principle ofres ipsa loquitur, the prosecution
was able to prove that he drove the bus with negligence and recklessness. The OSG averred
that the prosecution was able to prove that Sueltos act of swerving the bus to the right was the
cause of damage to the terrace of Valdellons apartment, and in the absence of an explanation
to the contrary, the accident was evidently due to appellants want of care. Consequently, the
OSG posited, the burden was on the appellant to prove that, in swerving the bus to the right, he
acted on an emergency, and failed to discharge this burden. However, the OSG averred that the
trial court erred in sentencing appellant to a straight penalty of one year, and recommended a
penalty of fine.
On June 20, 2000, the CA rendered judgment affirming the decision of the trial court, but the
award for actual damages was reduced to P100,000.00. The fallo of the decision reads:
WHEREFORE, premises considered, the decision dated April 28, 1994, rendered
by the court a quo is AFFIRMED with the modification that the sum
of P150,000.00 as compensation sustained by the 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 respondents apartment. However, the prosecution failed to discharge its burden. On the
other hand, petitioner Suelto was able to prove that he acted in an emergency when a
passenger jeepney coming from EDSA towards the direction of the bus overtook another vehicle
and, in the process, intruded into the lane of the bus.
On the second issue, petitioners insist that private respondent was able to prove only the
amount of P35,000.00 by way of actual damages; hence, the award of P100,000.00 is barren of
factual basis.
On the third issue, petitioner Suelto posits that the straight penalty of imprisonment
recommended by the trial court, and affirmed by the CA, is contrary to Article 365 of the Revised
Penal Code.
The petition is partially granted.
On the first issue, we find and so resolve that respondent People of the Philippines was able to
prove beyond reasonable doubt that petitioner Suelto swerved the bus to the right with
recklessness,

thereby

causing

damage

to

the

terrace

of

private

respondents

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

time of mishap, he was violating any traffic regulation. By his own admission, petitioner Suelto
violated the Land Transportation and Traffic Code when he suddenly swerved the bus to the
right, thereby causing damage to the property of private respondent.
However, the trial court correctly rejected petitioner Sueltos defense, in light of his
contradictory testimony vis--vis his Counter-Affidavit submitted during the preliminary
investigation:
It is clear from the photographs submitted by the prosecution (Exhs. C, D,
G, H & I) that the commercial apartment of Dr. Valdellon sustained heavy
damage caused by the bus being driven by Suelto. It seems highly improbable
that the said damages were not caused by a strong impact. And, it is quite
reasonable to conclude that, at the time of the impact, the bus was traveling at a
high speed when Suelto tried to avoid the passenger jeepney. Such a conclusion
finds support in the decision of the Supreme Court in People vs. Ison, 173 SCRA
118, where the Court stated that physical evidence is of the highest order. It
speaks more eloquently than a hundred witnesses. The pictures submitted do not
lie, having been taken immediately after the incident. The damages could not
have been caused except by a speeding bus. Had the accused not been
speeding, he could have easily reduced his speed and come to a full stop when
he noticed the jeep. Were he more prudent in driving, he could have avoided the
incident or even if he could not avoid the incident, the damages would have been
less severe.
In addition to this, the accused has made conflicting statements in his
counter-affidavit and his testimony in court. In the former, he stated that the
reason why he swerved to the right was because he wanted to avoid the
passenger jeepney in front of him that made a sudden stop. But, in his testimony
in court, he said that it was to avoid a passenger jeepney coming from EDSA that
was overtaking by occupying his lane. Such glaring inconsistencies on material
points render the testimony of the witness doubtful and shatter his
credibility. Furthermore, the variance between testimony and prior statements
renders the witness unreliable. Such inconsistency results in the loss in the
credibility of the witness and his testimony as to his prudence and diligence.
As already maintained and concluded, the severe damages sustained
could not have resulted had the accused acted as a reasonable and prudent man
would. The accused was not diligent as he claims to be. What is more probable
is that the accused had to swerve to the right and hit the commercial apartment
of the plaintiff because he could not make a full stop as he was driving too fast in
a usually crowded street.[24]
Moreover, if the claim of petitioners were true, they should have filed a third-party complaint
against the driver of the offending passenger jeepney and the owner/operator thereof.

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

On the second issue, we agree with the contention of petitioners that respondents failed to
prove that the damages to the terrace caused by the incident amounted to P100,000.00. The
only evidence adduced by respondents to prove actual damages claimed by private respondent
were the summary computation of damage made by Engr. Jesus R. Regal, Jr. amounting
to P171,088.46 and the receipt issued by the BB Construction and Steel Fabricator to private
respondent for P35,000.00 representing cost for carpentry works, masonry, welding, and
electrical works. Respondents failed to present Regal to testify on his estimation. In its five-page
decision, the trial court awardedP150,000.00 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 of P150,000.00 as reasonable compensation sustained by
plaintiff for her damaged apartment. The appellate court, for its part, failed to explain how it
arrived at the amount of P100,000.00 in its three-page decision. Thus, the appellate court
merely declared:
With respect to the civil liability of the appellants, they contend that there was no
urgent necessity to completely demolish the apartment in question considering
the nature of the damages sustained as a result of the accident. Consequently,
appellants continue, the award of P150,000.00 as compensation sustained by
the plaintiff-appellee for her damaged apartment is an unconscionable amount.
The damaged portions of the apartment in question are not disputed.
Considering the aforesaid damages which are the direct result of the accident,
the reasonable, and adequate compensation due is hereby fixed at P100,000.00.
[25]

Under Article 2199 of the New Civil Code, actual damages include all the natural and
probable consequences of the act or omission complained of, classified as one for the loss of
what a person already possesses (dao emergente) and the other, for the failure to receive, as a
benefit, that which would have pertained to him (lucro cesante). As expostulated by the Court
in PNOC Shipping and Transport Corporation v. Court of Appeals:[26]

Under Article 2199 of the Civil Code, actual or compensatory damages are those
awarded in satisfaction of, or in recompense for, loss or injury sustained. They
proceed from a sense of natural justice and are designed to repair the wrong that
has been done, to compensate for the injury inflicted and not to impose a
penalty. In actions based on torts or quasi-delicts, actual damages include all the
natural and probable consequences of the act or omission complained of. There
are two kinds of actual or compensatory damages: one is the loss of what a
person already possesses (dao emergente), and the other is the failure to
receive as a benefit that which would have pertained to him (lucro cesante).[27]
The burden of proof is on the party who would be defeated if no evidence would be
presented on either side. The burden is to establish ones case by a preponderance of evidence
which means that the evidence, as a whole, adduced by one side, is superior to that of the
other. Actual damages are not presumed. The claimant must prove the actual amount of loss
with a reasonable degree of certainty premised upon competent proof and on the best evidence
obtainable. Specific facts that could afford a basis for measuring whatever compensatory or
actual damages are borne must be pointed out. Actual damages cannot be anchored on mere
surmises, speculations or conjectures. As the Court declared:
As stated at the outset, to enable an injured party to recover actual or
compensatory damages, he is required to prove the actual amount of loss with
reasonable degree of certainty premised upon competent proof and on the best
evidence available. The burden of proof is on the party who would be defeated if
no evidence would be presented on either side. He must establish his case by a
preponderance of evidence which means that the evidence, as a whole, adduced
by one side is superior to that of the other. In other words, damages cannot be
presumed and courts, in making an award, must point out specific facts that
could afford a basis for measuring whatever compensatory or actual damages
are borne.[28]
The Court further declared that where goods are destroyed by the wrongful act of defendant, the
plaintiff is entitled to their value at the time of the destruction, that is, normally, the sum of
money which he would have to pay in the market for identical or essentially similar goods, plus
in a proper case, damages for the loss of the use during the period before replacement.[29]
While claimants bare testimonial assertions in support of their claims for damages should not be
discarded altogether, however, the same should be admitted with extreme caution. Their
testimonies should be viewed in light of claimants self-interest, hence, should not be taken as
gospel truth. Such assertion should be buttressed by independent evidence. In the language of
the Court:

For this reason, Del Rosarios claim that private respondent incurred losses in the
total amount of P6,438,048.00 should be admitted with extreme caution
considering that, because it was a bare assertion, it should be supported by
independent evidence. Moreover, because he was the owner of private
respondent corporation whatever testimony he would give with regard to the
value of the lost vessel, its equipment and cargoes should be viewed in the light
of his self-interest therein. We agree with the Court of Appeals that his testimony
as to the equipment installed and the cargoes loaded on the vessel should be
given credence considering his familiarity thereto. However, we do not subscribe
to the conclusion that his valuation of such equipment, cargo, and the vessel
itself should be accepted as gospel truth. We must, therefore, examine the
documentary evidence presented to support Del Rosarios claim as regards the
amount of losses.[30]
An estimate of the damage cost will not suffice:
Private respondents failed to adduce adequate and competent proof of the
pecuniary loss they actually incurred. It is not enough that the damage be
capable of proof but must be actually proved with a reasonable degree of
certainty, pointing out specific facts that afford a basis for measuring whatever
compensatory damages are borne. Private respondents merely sustained
an estimated amount needed for the repair of the roof of their subject
building. What is more, whether the necessary repairs were caused only by
petitioners alleged negligence in the maintenance of its school building, or
included the ordinary wear and tear of the house itself, is an essential question
that remains indeterminable.[31]
We note, however, that petitioners adduced evidence that, in their view, the cost of the damage
to the terrace of private respondent would amount to P55,000.00.[32] Accordingly, private
respondent is entitled to P55,000.00 actual damages.
We also agree with petitioner Sueltos contention that the trial court erred in sentencing
him to suffer a straight penalty of one (1) year. This is so because under the third paragraph of
Article 365 of the Revised Penal Code, the offender must be sentenced to pay a fine when the
execution of the act shall have only resulted in damage to property.The said provision reads in
full:
ART. 365. Imprudence and negligence. Any person who, by reckless
imprudence, shall commit any act which, had it been intentional, would constitute
a grave felony, shall suffer the penalty of arresto mayor in its maximum period,
to prision correccional in its medium period; if it would have constituted a less
grave felony, the penalty of arresto mayor in its minimum and medium periods
shall be imposed; if it would have constituted a light felony, the penalty of arresto
menor in its maximum period shall be imposed.

Any person who, by simple imprudence or negligence, shall commit an act which
would, otherwise, constitute a grave felony, shall suffer the penalty of arresto
mayor in its medium and maximum periods; if it would have constituted a less
serious felony, the penalty of arresto mayor in its minimum period shall be
imposed.
When the execution of the act covered by this article shall have only
resulted in damage to the property of another, the offender shall be
punished by a fine ranging from an amount equal to the value of said
damages to three times such value, but which shall in no case be less than
25 pesos.
A fine not exceeding two hundred pesos and censure shall be imposed upon any
person who, by simple imprudence or negligence, shall cause some wrong
which, if done maliciously, would have constituted a light felony.
In the imposition of these penalties, the courts shall exercise their sound
discretion, without regard to the rules prescribed in Article 64 (Emphasis
supplied).
In the present case, the only damage caused by petitioner Sueltos act was to the terrace of
private respondents apartment, costing P55,000.00. Consequently, petitioners contention that
the CA erred in awarding P100,000.00 by way of actual damages to private respondent is
correct. We agree that private respondent is entitled to exemplary damages, and find that the
award given by the trial court, as affirmed by the CA, is reasonable. Considering the attendant
circumstances, we rule that private respondent Valdellon is entitled to only P20,000.00 by way
of exemplary damages.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The joint decision
of the Regional Trial Court of Quezon City is AFFIRMED WITH THE MODIFICATION that
petitioner Suelto is sentenced to pay a fine 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.
G.R. No. L-25499 February 18, 1970
VILLA REY TRANSIT, INC., petitioner,
vs.
THE COURT OF APPEALS, TRINIDAD A. QUINTOS, PRIMA A. QUINTOS, AND JULITA A.
QUINTOS,respondents.

Laurea and Pison for petitioner.


Bonifacio M. Abad, Jr. for 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-14871Bulacan 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-14871Bulacan, 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.
SECOND DIVISION
[G.R. No. 95582. October 7, 1991.]
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y
MALECDAN,Petitioners, v. COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA
CUDIAMAT BANDOY, FERNANDO CUDIAMAT, MARRIETA CUDIAMAT, NORMA CUDIAMAT,
DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late
Pedrito Cudiamat represented by Inocencia Cudiamat, Respondents.
Francisco S. Reyes Law Office, for Petitioners.

Antonio C. de Guzman for private-respondents.


SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE COURT OF APPEALS; RULE
AND EXCEPTION. It is an established principle that the factual findings of the Court of
Appeals as a rule are final and may not be reviewed by this Court on appeal. However, this is
subject to settle exceptions, one which is when the findings of the appellate court are contrary to
those of the trial court, in which case a reexamination of the facts and evidence may be
undertaken.
2. CIVIL LAW; COMMON CARRIERS; LIABLE FOR INJURIES SUFFERED BY BOARDING
PASSENGERS RESULTING FROM THE PREMATURE ACCELERATION OF THEIR
CONVEYANCES. The contention of petitioners that the driver and the conductor had no
knowledge that the victim would ride on the bus, since the latter had supposedly not manifested
his intention to board the same, does not merit consideration. When the bus is not motion there
is no necessity for a person who wants to ride the same to signal his intention to board. A public
utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes
the duty of the driver and the conductor, every time the bus stops, to do no act that would have
the effect of increasing the peril to a passenger while he was attempting to board the same. The
premature acceleration of the bus in this case was a breach of such duty. It is the duty of
common carriers of passengers, including common carriers by railroad train, streetcar, or
motorbus, to stop their conveyances a reasonable length of time in order to afford passengers
an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are
doing so.
3. ID.; ID.; ID.; BOARDING AND ALIGHTING FROM A SLOWLY MOVING VEHICLE; NOT A
NEGLIGENCE PER SE. It is not negligence per se, or as a matter of law, for one to attempt
to board a train or streetcar which is moving slowly. An ordinarily prudent person would have
made the attempt to board the moving conveyance under the same or similar circumstances.
The fact that passengers board and alight from a slowly moving vehicle is a matter of common
experience and both the driver and conductor in this case could not have been unaware of such
an ordinary practice.
4. ID.; ID.; ID.; LIABILITY THEREOF; EXTENDS TO PERSONS BOARDING THE VEHICLE AS
WELL AS THOSE ALIGHTING THEREFROM. The victim herein, by stepping and standing
on the platform of the bus, is already considered a passenger and is entitled to all the rights and
protection pertaining to such a contractual relation. Hence, it has been held that the duty which
the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to
those alighting therefrom. (Del Prado v. Manila Electric Co., supra.)
5. ID.; ID.; ID.; BOUND TO OBSERVE EXTRAORDINARY DILIGENCE FOR THE SAFETY OF
THE PASSENGERS TRANSPORTED BY THEM. Common carriers, from the nature of their
business and for reasons of public policy, are bound to observe extraordinary diligence for the
safety of the passengers transported by them, according to all the circumstances of each case.
A common carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the

circumstances. (Art. 1755, Civil Code.)


6. ID.; DAMAGES; ACTION BASED ON A CONTRACT OF CARRIAGE; FINDING OF FAULT
OR NEGLIGENCE ON THE PART OF CARRIER NEED NOT BE EXPRESS. It has also
been repeatedly held that in an action based on a contract of carriage, the court need not make
an express finding of fault or negligence on the part of the carrier in order to hold it responsible
to pay the damages sought by the passenger. By the contract of carriage, the carrier assumes
the express obligation to transport the passenger to destination safety and to observe
extraordinary diligence with a cure regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the carrier. This
is an exception to the general rule that negligence must be proved, and it is therefore incumbent
upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles
1733 and 1755 of the Civil Code.
7. ID.; ID.; ID.; ACTUAL OR COMPENSATORY DAMAGES; RULE IN DETERMINING THE
AMOUNT THEREOF. With respect to the award of damages, an oversight was, however,
committed by respondent Court of Appeals in computing the actual damages based on the
gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a
tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which
the beneficiary would have received. In other words, only net earnings, not gross earnings, are
to be considered, that is, the total of the earnings less expenses necessary in the creation of
such earnings or income and minus living and other incidental expenses.
DECISION
REGALADO, J.:
On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for
the death of Pedrito Cudiamat as a result of a vehicular accident which occurred on March 25,
1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said date,
while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner
corporation in a reckless and imprudent manner and without due regard to traffic rules and
regulations and safety to persons and property, it ran over its passenger, Pedrito Cudiamat.
However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter
bad faith and without regard to the welfare of the victim, first brought his other passengers and
cargo to their respective destinations before bringing said victim to the Lepanto Hospital where
he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the
supervision of the employees, even as they add that they are not absolute insurers of the safety
of the public at large. Further, it was alleged that it was the victims own carelessness and
negligence which gave rise to the subject incident, hence they prayed for the dismissal of the
complaint plus an award of damages in their favor by way of a
counterclaim.chanrobles.com:cralaw:red
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this
decretal portion:jgc:chanrobles.com.ph

"IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat
was negligent, which negligence was the proximate cause of his death. Nonetheless,
defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of
P10,000.00 which approximates the amount defendants initially offered said heirs for the
amicable settlement of the case. No costs.
"SO ORDERED." 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a
decision 3 in CA-G.R CV No. 19504 promulgated on August 14, 1990, set aside the decision of
the lower court, and ordered petitioners to pay private respondents:jgc:chanrobles.com.ph
"1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim
Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and
compensatory damages;
4. The costs of this suit." 4
Petitioners motion for reconsideration was denied by the Court of Appeals in its resolution dated
October 4, 1990, 5 hence this petition with the central issue herein being whether respondent
court erred in reversing the decision of the trial court and in finding petitioners negligent and
liable for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final
and may not be reviewed by this Court on appeal. However, this is subject to settled exceptions,
one of which is when the findings of the appellate court are contrary to those of the trial court, in
which case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeals have discordant positions as to who
between the petitioners and the victim is guilty of negligence. Perforce, we have had to conduct
an evaluation of the evidence in this case for the proper calibration of their conflicting factual
findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following
findings:jgc:chanrobles.com.ph
"This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle,
especially with one of his hands holding an umbrella. And, without having given the driver or the
conductor any indication that he wishes to board the bus. But defendants can also be found
wanting of the necessary diligence. In this connection, it is safe to assume that when the
deceased Cudiamat attempted to board defendants bus, the vehicles door was open instead of
being closed. This should be so, for it is hard to believe that one would even attempt to board a
vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendants lack of
diligence. Under such circumstances, equity demands that there must be something given to
the heirs of the victim to assuage their feelings. This, also considering that initially, defendant
common carrier had made overtures to amicably settle the case. It did offer a certain monetary

consideration to the victims heirs." 7


However, respondent court, in arriving at a different opinion, declares
that:jgc:chanrobles.com.ph
"From the testimony of appellees own witness in the person of Vitaliano Safarita, it is evident
that the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it
was precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover,
contrary to the assertion of the appellees, the victim did indicate his intention to board the bus
as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat
was no longer walking and made a sign to board the bus when the latter was still at a distance
from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform
of the bus when the latter made a sudden jerk movement (as) the driver commenced to
accelerate the bus.chanrobles.com.ph : virtual law library
"Evidently, the incident took place due to the gross negligence of the appellee-driver in
prematurely stepping on the accelerator and in not waiting for the passenger to first secure his
seat especially so when we take into account that the platform of the bus was at the time
slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their
duty and obligation as common carrier to the end that they should observe extra-ordinary
diligence in the vigilance over the goods and for the safety of the passengers transported by
them according to the circumstances of each case (Article 1733, New Civil Code)." 8
After a careful review of the evidence on record, we find no reason to disturb the above holding
of the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners own
witnesses. One of them, Virginia Abalos, testified on cross-examination as
follows:jgc:chanrobles.com.ph
"Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident,
there is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses." 9
The bus conductor, Martin Anglog, also declared:jgc:chanrobles.com.ph
"Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court
if there was any unusual incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between
Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we
stopped we went out because I saw an umbrella about a split second and I signalled again the
driver, so the driver stopped and we went down and we saw Pedrito Cudiamat asking for help
because he was lying down.

Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down
from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front
or at the back?
A At the back, sir." 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the
passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court
of Appeals that the bus was at full stop when the victim boarded the same is correct. They
further confirm the conclusion that the victim fell from the platform of the bus when it suddenly
accelerated forward and was run over by the rear right tires of the vehicle, as shown by the
physical evidence on where he was thereafter found in relation to the bus when it stopped.
Under such circumstances, it cannot be said that the deceased was guilty of
negligence.chanrobles law library
The contention of petitioners that the driver and the conductor had no knowledge that the victim
would ride on the bus, since the latter had supposedly not manifested his intention to board the
same, does not merit consideration. When the bus is not in motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the
driver and the conductor, every time the bus stops, to do no act that would have the effect of
increasing the peril to a passenger while he was attempting to board the same. The premature
acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by
boarding passengers resulting from the sudden starting up or jerking of their conveyances while
they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same
cannot be considered negligent under the circumstances. As clearly explained in the testimony
of the aforestated witness for petitioners, Virginia Abalos, the bus had "just started" and "was
still in slow motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one to attempt to board a train or streetcar
which is moving slowly. 14 An ordinarily prudent person would have made the attempt to board
the moving conveyance under the same or similar circumstances. The fact that passengers
board and alight from a slowly moving vehicle is a matter of common experience and both the
driver and conductor in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled to all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier of passengers owes to its patrons
extends to persons boarding the cars as well as to those alighting therefrom. 15

Common carriers, from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence for the safety of the passengers transported by them,
according to all the circumstances of each case. 16 A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need
not make an express finding of fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By the contract of carriage, the
carrier assumes the express obligation to transport the passenger to his destination safely and
to observe extraordinary diligence with a due regard for all the circumstances, and any injury
that might be suffered by the passenger is right away attributable to the fault or negligence of
the carrier. This is an exception to the general rule that negligence must be proved, and it is
therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the
gravely injured victim immediately to the hospital for medical treatment is a patent and
incontrovertible proof of their negligence. It defies understanding and can even be stigmatized
as callous indifference. The evidence shows that after the accident the bus could have forthwith
turned at Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk
70 to allow a passenger to alight and to deliver a refrigerator, despite the serious condition of
the victim. The vacuous reason given by petitioners that it was the wife of the deceased who
caused the delay was tersely and correctly confuted by respondent court:jgc:chanrobles.com.ph
". . . The pretension of the appellees that the delay was due to the fact that they had to wait for
about twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is
rather scandalous and deplorable for a wife whose husband is at the verge of dying to have the
luxury of dressing herself up for about twenty minutes before attending to help her distressed
and helpless husband." 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was
to inform the victims family of the mishap, since it was not said bus driver nor the conductor but
the companion of the victim who informed his family thereof. 20 In fact, it was only after the
refrigerator was unloaded that one of the passengers thought of sending somebody to the
house of the victim, as shown by the testimony of Virginia Abalos again, to
wit:jgc:chanrobles.com.ph
"Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house and when I went
down and asked somebody to bring down the refrigerator, I also asked somebody to call the
family of Mr. Cudiamat.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
COURT:chanrob1es virtual 1aw library
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr.
Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir." 21
With respect to the award of damages, an oversight was, however, committed by respondent
Court of Appeals in computing the actual damages based on the gross income of the victim. The
rule is that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire
earnings, but rather the loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings, not gross earnings, are to be considered, that is, the
total of the earnings less expenses necessary in the creation of such earnings or income and
minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly
and reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or
compensatory damages, respondent court found that the deceased was 48 years old, in good
health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a
year. Using the gross annual income as the basis, and multiplying the same by 12 years, it
accordingly awarded P288,000. Applying the aforestated rule on computation based on the net
earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in
accordance with prevailing jurisprudence, the death indemnity is hereby increased to
P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of
respondent Court of Appeals are hereby AFFIRMED in all other respects.chanrobles law library :
red
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.
G.R. No. L-69666 January 23, 1992
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
GUMERCINDO QUILATON y EBAROLA, defendant-appellant.
The Solicitor General for plaintiff-appellee.
Public Attorney's Office for accused-appellant

FELICIANO, J.:
Appellant Gumercindo Quilaton was found guilty of murder and sentenced to suffer the penalty
of reclusion perpetua, and required to pay the heirs of the offended party various amounts of
money.

Appellant was tried and convicted under the following information:


That on or about the 16th day of August, 1983, in the municipality of San Simon,
province of Pampanga, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused GUMERCINDO QUILATON y EBAROLA alias
"ROBERTO SANDOVAL" armed with a knife (balisong), with deliberate intent to
kill, by means of treachery and with evident premeditation, did then and there
wilfully, unlawfully and feloniously attack, assault and wound ROLANDO S.
MANAHAN, thereby inflicting upon him serious and fatal injuries, which directly
caused the death of the said Rolando S. Manahan.
All contrary to law. 1
Appellant pleaded not guilty on arraignment and the case proceeded to trial. In time, the trial
court rendered adecision with the following dispositive portion:
WHEREFORE, premises considered, the Court hereby finds the accused
GUMERCINDO QUILATON y ERABOLA, also known as Roberto Sandoval
guilty beyond reasonable doubt of the crime of Murder as charged in the
Information and hereby sentences him to suffer the penalty of Reclusion
Perpetua.
The Court further sentences him to indemnify the heirs of Rolando S. Manahan
the sum of One Hundred Thousand (P100,000.00) Pesos, Philippine Currency,
for the death of Rolando S. Manahan, the sum of Twenty Six Thousand Four
Hundred Forty Five (P26,445.00) Pesos, Philippine Currency, for actual damages
incurred for burial and other expenses of the deceased, the sum of Two Hundred
Fifty Thousand (P250,000.00) Pesos, Philippine Currency, for moral damages.
The Court further orders the accused to pay the costs.
SO ORDERED. 2
Appellant has assigned the following errors in his brief:
1. The court a quo gravely erred in not finding that the victim was armed with a
bladed weapon and was the aggressor.
2. The court a quo gravely erred in finding that the killing of the victim was
qualified by treachery.
3. The court a quo gravely erred in not finding that the accused-appellant acted in
self-defense. 3
The evidence for the prosecution discloses that the appellant was a laborer in the Bureau of
Forest Development assigned at the PROFEM Nursery in San Agustin, San Simon, Pampanga

until 3 June 1983 when his services were terminated. While still a laborer and occasionally after
his termination, appellant would spend the night in one of the rooms of the PROFEM office. The
PROFEM office, it seemed, was converted by appellant into sleeping quarters during the night.
On 16 August 1983, between the hours of 6:00 and 9:00 o'clock in the evening, Rolando
Manahan, then officer-in-charge of the PROFEM, called for appellant to see Manahan at the
latter's office. Appellant, who was around the PROFEM office at that time, refused to see
Manahan at his office. Rolando Manahan came out of his office and proceeded to admonish
appellant to discontinue his practice of sleeping inside the office, sometimes with women
brought from the town. Appellant was reported to have replied: "yes, sir, and from now on I will
not bring girls inside the office." A heated exchange of words then ensued between Rolando
Manahan and appellant.
Appellant who remained outside the office later requested Lamberto Abugan, an employee of
the PROFEM, to give him his (appellant's) bag of clothes which had been left inside the room.
Lamberto Abugan initially refused, but on instructions of Rolando Manahan, complied. With his
bag of clothes, appellant left the office.
Rolando Manahan, however, decided to follow appellant, apparently to make certain that
appellant would in fact leave the premises of the Nursery. Lamberto Abugan, who had noticed
Rolando Manahan leave the office, also went out to look after them. Lamberto Abugan caught
up with the two (2) at the provincial road where he saw Rolando Manahan kick appellant's
shoes which were lying on the road; the heated altercation between the two (2) continued.
Moments later, appellant pulled a fan knife (balisong) from his right hip and told Rolando
Manahan: "this time I am going to kill you, I shall not forgive you." Rolando Manahan started to
run away; appellant chased him.
Lamberto Abugan also ran from the scene to seek help. He proceeded to the police
headquarters in San Simon, Pampanga and from there returned to the provincial road aboard a
tricycle in the company of Pfc. Nicolas Yambao. They saw Rolando Manahan lying on the road,
already dead. Appellant, upon the other hand, was found in Sampaloc, Apalit, Pampanga where
he was arrested and searched. A fan knife and a bloodstained shirt were recovered from the
possession of appellant. 4
A post mortem examination of the cadaver of Rolando Manahan was conducted by Dra. Maria
Theresa Santos, Municipal Health Officer of San Simon, Pampanga. Dra. Santos' report
indicated that Rolando Manahan sustained seven (7) wounds, two (2) of which, located in the
chest, were fatal. 5
Appellant submitted a different version of the facts. He alleged that on the night of 16 August
1983 when he left the PROFEM office, he became alarmed upon noting that Rolando Manahan
was following him. Appellant quickened his steps but because the road was slippery, he fell on
the ground with the bag he was carrying, and his shoes spilled onto the road. Rolando Manahan
kicked his shoes away and continued walking. As Rolando Manahan came nearer, appellant ran
away only to be stopped in a fenced area. Rolando Manahan there attacked him with a bladed

weapon but appellant was able to wrest possession of the bladed weapon. Appellant then
instinctively stabbed Rolando Manahan until the latter died. Appellant claims that after the
incident, he walked towards Apalit, Pampanga to surrender as he did not know where the
municipal building of San Simon, Pampanga was. He was on his way to surrender when the
police authorities arrested him. 6
The principal contention of appellant is that he had acted in self-defense when he stabbed
Rolando Manahan to death. He imputes unlawful aggression to Rolando Manahan who, he
claims, deeply resented him as a cumulative result of antecedent events namely: (1) Rolando
Manahan had been reprimanded for his inaction on the report that had reached the Central
Office that appellant was bringing girls during the night inside the PROFEM office; and (2)
Rolando Manahan, as officer-in-charge of the PROFEM, was humiliated by appellant's lack of
respect in refusing to see the former at his office. Thus, according to appellant, Rolando
Manahan pursued him even as he had left the PROFEM office during the night of 16 August
1983.
By invoking self-defense as a justifying circumstance, appellant in effect admitted that he had
indeed killed Rolando Manahan. In order that he may be relieved of criminal liability, he is
obliged to establish the presence of the following requisites: (1) unlawful aggression; (2)
reasonable necessity of the means employed to prevent or repel it; and (3) lack of sufficient
provocation on the part of the person defending himself. 7 In so doing, appellant must rely on the
strength of his own evidence and not on the weakness of that of the prosecution for even if the
prosecution's evidence were weak, it cannot be disbelieved after appellant has admitted the
killing. 8
The evidence of appellant on his claim of self-defense consisted solely of his own testimony.
The trial court rejected that testimony, firstly, because it was not supported by convincing
corroborative evidence and, secondly, because the trial court had perceived appellant to be
a liar.
During trial of the case, the prosecution had marked and offered in evidence the letter of the INP
Station Commander in Dalaguete, Cebu informing the INP Station Commander in San Simon,
Pampanga that appellant had two (2) pending cases in Dalaguete, Cebu. One of those cases
was for murder and the other for double murder. Certified true copies of the alias warrants for
the arrest of appellant in both cases were also marked in evidence by the
prosecution. 9 Appellant had denied the pendency of the cases. On cross-examination, he
testified as follows:
Q Mr. Quilaton, in your town in Dalaguete, Cebu your Mayor is
Paz Wong?
A I do not know her, sir.
Q And who is the mayor whom you know in your town?

A Legaspi, sir.
Q Who was your Station Commander when you left Dalaguete,
Cebu?
A I do not know his name, sir.
Q Mr. Quilaton, is it not a fact that you have a pending case of
double murder in the Municipal Trial Court of Dalaguete, Cebu
docketed as Crim. Case No. 3032 before the Honorable Judge
Buenconsejo?
A I do not know that, sir.
Q You do not also know that there is also another pending murder
case docketed as Crim. Case No. 2710 before the Hon.
Dominador Tumulak?
A I do not know that, sir.
Q Will you deny that you have also another pending case before
the RTC, Branch 26 of Ardaos, Cebu?
A None, sir.
Q You mean you have no pending case in Cebu?
A None, sir.
Q Is it not a fact Mr. Quilaton that you were a convict-escapee in
the Provincial Jail of Cebu?
A No, sir.
Q Since you left Cebu, have you returned to Cebu?
A Not yet, sir. 10
The trial court instead gave credence to the testimony of Lamberto Abugan who had seen
appellant initiate a deadly assault on the victim Roland Manahan by drawing a fan knife from his
right hip and by announcing his intention to kill Manahan. The ordinary rule is that findings of
fact of the trial court on the credibility of witnesses are entitled to great respect considering that
the trial court was in a position to evaluate the deportment of witnesses while testifying. 11 The
Court does not see any compelling reason to depart from the general rule.

This Court, however, agrees with the Solicitor General that appellant should be convicted of
homicide only. The information here filed specified treachery and evident premeditation as
qualifying circumstances. The trial court disregarded evident premeditation, holding that the
prosecution had not adequately established the presence of that circumstance. But it
considered appellant's act of stabbing the unarmed Rolando Manahan as treachery and took
this into account in convicting appellant of murder.
Treachery cannot be appreciated in the absence of evidence of the mode of attack; 12 it cannot
be presumed but must be proven positively. 13 This is so because treachery exists only "when
the offender commits any of the crimes against the person, employing means, methods, or
forms in the execution thereof which tend directly and specially to insure its execution, without
risk to himself arising from any defense which the offended party might make." 14
The sole eyewitness to the incident which started inside the PROFEM Nursery and ended on
the provincial road was Lamberto Abugan. Lamberto Abugan had testified about a "falling out"
or quarrel between Rolando Manahan and appellant after the former confronted appellant and
told him to desist from sleeping inside the PROFEM office and from bringing women sleeping
companions therein. This culminated in a heated argument that led appellant to leave the office
in haste and anger. The verbal dispute continued up to the provincial road where Rolando
Manahan had followed appellant. Lamberto Abugan, however, did not witness the actual
stabbing by appellant of Rolando Manahan as he ran away just then to seek help.
The testimony of Lamberto Abugan offers no sufficient basis for reasonably inferring that
treachery attended the commission of the crime. On the contrary, considering that the attack
was preceded by a heated argument, it cannot be fairly regarded as sudden and unexpected.
The tense and hostile atmosphere should have sufficiently put Rolando Manahan on guard
against physical violence; Rolando Manahan should have been aware that he was in effect
inviting trouble in following appellant into the provincial road and kicking the latter's shoes that
had fallen to the ground.
The trial court had ordered appellant to pay the heirs of Rolando Manahan P26,445.00 as actual
damages, representing interment and related expenses incurred by the heirs of Rolando
Manahan. The brother of Rolando Manahan testified on this matter and submitted various
receipts in support of their claim for actual damages; appellant did not controvert this claim nor
the amount thereof.
The amount of P100,000.00 awarded to the heirs of Rolando Manahan as indemnity for death
must, however, be reduced to P50,000.00 conformably with prevailing jurisprudence on the
matter. 15 The propriety of the award of P250,000.00 by the trial court in concept of moral
damages needs some analysis.
The monetary liabilities of a person accused and convicted of a crime are specified in Article
2206 of the Civil Code:

Art. 2206. The amount of damages for death caused by a crime or quasi-delict
shall be at least three thousand pesos, even though there may have been
mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter; such
indemnity shall in every case be assessed and awarded by the court, unless the
deceased on account of permanent physical disability not caused by the
defendant, had no earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of
article 291, the recipient who is not an heir called to the decedent's inheritance by
the law of testate or intestate succession, may demand support from the person
causing the death, for a period not exceeding five years, the exact duration to be
fixed by the court;
(3) The spouses, legitimate and illegitimate descendants and ascendants may
demand moral damages for mental anguish by reason of the death of the
deceased. (Emphasis supplied)
Aside, therefore, from the ordinary indemnity for death which is currently set by case law at
P50,000.00, appellant is obliged: (1) to compensate the heirs of Rolando Manahan for the
latter's loss of earning capacity; (2) to give support in the form of expenses for education to the
sisters of Rolando Manahan who had been dependent on him therefor; and (3) to pay the heirs
of Rolando Manahan moral damages for the mental anguish suffered by them. 16 In the instant
case, the trial court lumped these monetary obligations into what it called "moral damages."
The more important variables taken into account in determining the compensable amount of lost
earnings are: (1) the number of years for which the victim would otherwise have lived; and (2)
the rate of loss sustained by the heirs of the deceased. 17 In Villa Rey-Transit, Inc. v. Court ofAppeals (supra), the Court computed the first factor, i.e., life expectancy, by applying the
formula (2/3 x [80 - age at death) adopted in the American Expectancy Table of Mortality or the
actuarial Combined Experience Table of Mortality. That formula was followed by the Court in
cases subsequent to VillaRey Transit, e.g. Philippine Airlines v. Court of Appeals; 18 People
v. Daniel (supra); and Dangwa Transportation Co., Inc. v.Court of Appeals. 19 The Court notes
that the formula used in Villa Rey Transit was based on a table derived from actuarial
experience prior to 1970 when the decision in Villa Rey Transit was promulgated. Actuarial
experience subsequent to 1970 has, however, changed and indicates a longer life expectancy in
the Philippines due to conditions including, among other things, advances in medical science,
improved nutrition and food supply, diet consciousness and health maintenance. The 1970
mortality table was updated in 1980 to reflect the changes of conditions. 20
Considering that Rolando Manahan was 26 years of age at the time of death, he was expected
to live for another 46 years. This is derived by using the generally accepted formula in
computing for life expectancy, based on the 1980 CSO table:

S (Lx + 1, Lx + 2, . . ., Lx + n), where n = 100 - x


x = age upon death
Lx L = number of people in
sample surviving after x number of years
But a man does not normally continue working to earn money up to the final month or year of
his life; hence 46 years could be reasonably reduced to 39 years. 21 Besides, Rolando Manahan
was a government employee who is expected to retire at the age of 65. If there are 261 working
days in a year 22 and Rolando Manahan was receiving P23.00 a day, 23 Rolando Manahan's
gross earnings would be approximately P234,000.00. A reasonable amount must be deducted
therefrom that would represent Rolando Manahan's necessary expenses had he been living, in
this case P120,000.00. The net or compensable earnings lost by reason of Rolando Manahan's
death is, accordingly, P114,000.00.
Finally, the Court in the exercise of its discretion, considers it appropriate and reasonable to
award the amount of P20,000.00 to the heirs of Rolando Manahan by way of moral damages.
Ruben Manahan, brother of Rolando Manahan, testified that their mother suffered a mild stroke
upon learning of Rolando Manahan's slaying; this eventually resulted in the mother's semiparalysis. 24
WHEREFORE, the Decision of the Regional Trial Court, Branch 54, Macabebe, Pampanga is
hereby SET ASIDE; the Court instead finds appellant Gumercindo Quilaton guilty of HOMICIDE.
Applying the Indeterminate Sentence Law, appellant is hereby SENTENCED to suffer
imprisonment for an indeterminate period ranging from ten (10) years as minimum to seventeen
(17) years and four (4) months as maximum. Appellant is ORDERED to pay the heirs of
Rolando Manahan the following amounts:
1. P50,000.00 as indemnity for death;
2. P26,445.00 as actual damages;
3. P114,000.00 by way of lost earnings;
4. P10,000.00 by way of educational assistance to Rolando Manahan's two (2) sisters; and
5. P20,000.00 as moral damages.
Costs against appellant.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

EN BANC
[G.R. No. 137457. November 21, 2001]
PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROSAURO SIA y DICHOSO,
JOHNNY BALALIO y DEZA, JIMMY PONCE y TOL and JOHN DOE @ PEDRO MUOZ
(at large), accused-appellants.
DECISION
YNARES-SANTIAGO, J.:
Christian Bermudez was beaten to death and the taxicab he was driving was taken by the
assailants. His lifeless body, wrapped in a carton box, was recovered several days later in a
fishpond in Meycauayan, Bulacan. For the felonies, the above-named accused were indicted for
violation of R.A. 6539, otherwise known as the Anti-Carnapping Law, and Murder in two (2)
separate Informations, to wit:
Criminal Case No. Q-95-63962 for Violation of the Anti-Carnapping Law:
That on or about August 23, 1995, in the City of Quezon, Metro Manila, Philippines and within
the jurisdiction of this Honorable Court, herein accused, conspiring, confederating and mutually
helping one another did then and there willfully, unlawfully and feloniously take, steal, and carry
away one (1) motor vehicle described as Toyota Tamaraw FX; Motor No. 2C-2983302; Chassis
No. CF50-0014375; Plate No. NYT-243, owned by BIENVENIDO CRUZ, killing the driver
Christian Bermudez in the process, to the damage and prejudice of the registered owner thereof
and the heirs of Christian Bermudez.
CONTRARY TO LAW.[1]
Criminal Case No. Q-95-63963 for Murder:
That on or about 23 August 1995, in the City of Quezon, Metro Manila, Philippines, and within
the jurisdiction of this Honorable Court, the above-named accused with intent to kill qualified by
treachery, evident premeditation, taking advantage of superior strength, employing means to
weaken the defense or of means of persons to insure or afford impunity, conspiring,
confederating and mutually helping one another, did then and there willfully, unlawfully and
feloniously attack, assault and use violence upon the person of CHRISTIAN BERMUDEZ by
beating him on the head and other parts of the body, thereby causing his death.
CONTRARY TO LAW.[2]

At the arraignment, only Johnny Balalio y Deza and Jimmy Ponce y Tol appeared and
pleaded Not Guilty.[3] The third accused, Rosauro Sia y Dichoso, escaped from police custody
while on the way to the hospital for treatment.[4] As a consequence, the two (2) cases were
subsequently consolidated and jointly tried against accused Johnny Balalio and Jimmy Ponce
only.
After trial, the court a quo rendered judgment against both accused imposing upon them
the supreme penalty of Death, thus:
WHEREFORE, premises considered, judgment is hereby rendered finding the accused Johnny
Balalio and Jimmy Ponce GUILTY beyond reasonable doubt as principals by conspiracy of
violation of R.A. No. 6539, as amended and hereby sentences them to suffer the penalty of
DEATH.
Accused are likewise adjudged jointly and severally [liable] to pay to Agripina Bermudez, the
mother of the deceased Christian Bermudez the sums of:
a. P50,000.00 as compensatory damages for the death of Christian Bermudez;
b. P200,000.00 as burial and other expenses incurred in connection with the death of
Christian; and
c. P3,307,199.60 (2/3 x [80-27] x 300 per day x 26 days (excluding Sundays) x 12
months) representing the loss of earning capacity of Christian Bermudez as taxi
driver.
Costs against accused.
The cases of accused Rosauro Sia who escaped from custody before he was arraigned and as
against Peter Doe who was never apprehended and whose identity has never been known are
hereby ordered ARCHIVED, subject to activation when they are arrested and brought before the
bar of justice.
SO ORDERED.[5]
On automatic review before this Court, accused-appellants raised the lone assigned error
that:
THE COURT A QUO ERRED IN CONVICTING THE ACCUSED-APPELLANTS FOR
VIOLATION OF RA 6539 (ANTI-CARNAPPING LAW) SOLELY ON THE BASIS OF THE
EXTRA-JUDICIAL CONFESSIONS OF ACCUSED ROSAURO SIA AND JIMMY PONCE
(EXHIBITS C AND D, RESPECTIVELY) WHICH ARE INADMISSIBLE IN EVIDENCE. [6]
The facts as summed up by the trial court are as follows:

The vehicle claimed as carnapped is registered in the name of complainant Bienvenido C. Cruz
of No. 1125 Primero de Mayo Street, Tondo, Manila[7] and operated as a taxi being Unit 2 of
KIRBEE TAXI and bearing the following description:
Make/Type : Toyota Tamaraw FX Wagon
Motor Number : 2-C 2983302
Chassis No. : CF 50-0014375
Plate No. : NYT-243
Color : Maroon
The said taxi was taken from the garage and driven by its regular driver, Christian Bermudez,
the alleged murder victim at about 6:00 a.m. on August 23, 1995. The taxi was last seen at the
vicinity of the Pegasus Night Club in Quezon City at about 10:30 p.m. on the said date with an
unidentified passenger who surfaced later as the accused Rosauro Sia, whose true name is
allegedly Antonio Labrador (Mang Tony) and who resides at San Francisco Del Monte. Accused
Rosauro Sia appears to have gypped driver Christian Bermudez to service him the following day
(August 24, 1995) in the morning and to be paid P150.00 per hour which was apparently
accepted because Rosauro gave instructions to accused Johnny Balalio and Jimmy Ponce to
wait for him (Christian) that following morning. When Christian returned to Sias residence in San
Francisco Del Monte that morning, he was told to come back in the afternoon because that was
the instruction given him by accused Rosauro Sia. When Christian returned in the afternoon in
the Sia residence, he was asked to get inside. As soon as he alighted from the Tamaraw FX taxi
he was driving, his hands were tied by Johnny Balalio and was handed to a certain Pedro, the
accused Peter Doe who has not been arrested and who told Johnny Balalio and Johnny (sic)
Ponce Ako nang bahala dito. Christian was taken to accused Rosauro and shortly afterwards,
the latter was seen lugging with him a big carton box from which blood was dripping. Accused
Jimmy Ponce saw Rosauro hand the carton-wrapped lifeless body of Christian inside the
carnapped FX taxi. Before leaving with the lifeless body of Christian loaded in the taxi, accused
Sia gave P3,000.00 each to Jimmy Ponce, Johnny Balalio and Pedro and admonished them not
to say anything about what happened. The ring taken from Christian[8] was given to accused
Jimmy Ponce by Rosauro Sia.
On August 26, 1995, the lifeless body of Christian Bermudez was found and retrieved from a
fishpond in Meycauayan, Bulacan. This fact was broadcast over the radio and, after hearing the
same, Agripina Bermudez went to see the lifeless body retrieved from the fishpond and
confirmed it to be that of Christian, whom she claims is her eldest son who was earning about
P650.00 a day as a taxi driver.
Photographs were taken on the carton-wrapped body of Christian including one position which
shows the latters body.[9]

Dr. Benito Caballero, Medico Legal Officer of Bulacan, conducted a postmortem examination of
the deceased body of Christian and found that the latters death was due to shock caused by
massive external and intracranial hemorrhage on account of multiple lacerations on the head
and fracture of the skull due to use of hard object, possibly iron, for which he issued certificates
of death and postmortem death certificate.[10]
In the meantime, Bienvenido Cruz, the owner of the carnapped vehicle, reported to the police
authorities in Camp Crame the loss of his taxi.[11] On September 21, 1995, at about 10:30 p.m.,
the carnapped taxi was intercepted being driven by accused Rosauro Sia, who was immediately
placed in custody of the anti-carnapping authorities. While in custody, Rosauro Sia managed to
escape but he was recaptured on November 15, 1995 by the manhunt team created for that
purpose. As accused Rosauro Sia claimed that he bought the hot car from his co-accused
Johnny Balalio and Jimmy Ponce, the latter were picked up from their residence in Baseco, Isla
Tawid, Port Area, Tondo, Manila and investigated. Sworn Statement of the accused Rosauro Sia
and Jimmy Ponce were taken[12]narrating their respective participations such as Sias instruction
to Jimmy to guard his (Sias) gate to deter passersby from snooping around and describing what
transpired inside Sias residence at San Francisco Del Monte when Christian was tied and
killed. The Sworn Statement of Bienvenido Cruz, owner of the missing vehicle, was likewise
taken. On the basis of the sworn statements of accused Rosauro Sia and Jimmy Ponce, Dr.
Benito Caballero, Provincial Health Officer of Bulacan, together with the Certificate of
Registration of the FX Taxi and the Death and Postmortem Certificates mentioned heretofore,
the Special Operations Unit, Traffic Management Command, PNP, Camp Crame, referred the
matter to the authorities of the Department of Justice who, after finding probable cause in the
preliminary investigation, filed these cases of Violation of R.A. 6539, as amended, and of
Murder against the above-named accused which were consolidated together in this Branch for
joint trial.[13]
In their lone assigned error, accused-appellants contend in sum that the extra-judicial
confessions of accused Rosauro Sia and Johnny Balalio, which the trial court heavily relied
upon, are inadmissible in evidence since they were executed in violation of their right to
counsel. Specifically, accused-appellants argue that the said extra-judicial statements are
inadmissible because they were obtained without compliance with the requirements of the law
for their admissibility.[14]
The Solicitor General agrees, stating that during the custodial investigation, Ponce and Sia
were not assisted by counsel as required by the Constitution. The trial courts finding that Sia
and Ponce were assisted by Prosecutor Pormento when they executed their extrajudicial
confessions did not meet the requirement of the law. The Solicitor General further contends that,
during his testimony, Ponce vehemently denied having voluntarily executed his alleged
statement; rather, he maintained that he was coerced to sign the same and that he did not even
know its contents.
Extrajudicial confessions must conform to the requirements of the Constitution. [15] Indeed, a
suspects confession, whether verbal or non-verbal when taken without the assistance of

counsel without a valid waiver of such assistance regardless of the absence of such coercion or
the fact that it had been voluntarily given, [16] is inadmissible in evidence,[17] even if appellants
confession were gospel truth.[18]
Be that as it may, the inadmissibility of the extra-judicial statements of Sia and Ponce will
not absolve accused-appellants from criminal liability because, as pointed out by the Solicitor
General, there still is independent evidence to establish their authorship of the victims killing on
the occasion of the carnapping. The Solicitor General asserts that while there was no
prosecution witness who positively identified accused-appellants as particeps criminis, their
culpability was nonetheless proven through circumstantial evidence.
We agree.
Direct evidence of the commission of the crime is not the only matrix wherefrom a court
may draw its conclusions and findings of guilt. [19] The rules on evidence[20]and case law sustain
the conviction of the accused through circumstantial evidence when the following requisites
concur: (1) there must be more than one circumstance; (2) the facts from which the inferences
are derived are proven; and (3) the combination of all circumstances is such as to produce a
conviction beyond reasonable doubt of the guilt of the accused.[21]
A circumspect scrutiny of the testimonies of the witnesses of both prosecution and defense
shows adequate evidentiary bases to establish the aforementioned circumstances.
First, when the police apprehended accused Rosauro Sia while he was in possession of the
carnapped vehicle, he immediately pointed to accused-appellants as his accomplices in taking
away the victims vehicle.[22] Notably, accused-appellants claimed to have met Sia for the first
time on August 24, 1995, when Sia supposedly passed by them looking for a certain
person. They saw Sia for the second time on November 15, 1995, when Sia and some
policemen came to their place to arrest them. If accused-appellants did not actually participate
in the perpetration of the crime, it certainly defies reason why Sia would implicate them in so
serious an offense when they were practically strangers to him. In this regard, it must be borne
in mind that the fact that a witness may have been a co-conspirator in the commission of the
offense is not in itself sufficient to dilute the credibility of or, much less, be a ground to disregard
altogether his testimony.[23] Indeed:
By way of exception, the testimony of a co-conspirator may, even if uncorroborated, be sufficient
as when it is shown to be sincere in itself, because given unhesitatingly and in a straightforward
manner, and is full of details which by their nature could not have been the result of deliberate
afterthought.[24]
Second, defense witness Porferio Fernando testified that accused-appellants were with
Rosauro Sia from August 25-28, 1995. [25] When accused-appellants came back on August 28,
1995, they informed him that they were to guard a bodega owned by Sia, which contained a
carnapped vehicle.[26] This testimony of Fernando confirms the fact that accused-appellants
were in the company of Rosauro Sia during that critical period when the crime was perpetrated.

Third, upon his arrest, accused-appellant Jimmy Ponce voluntarily surrendered to the police
authorities a ring,[27] admittedly belonging to the victim.[28] It is a well-settled rule that when a
person is found in possession of a thing taken in the doing of a recent wrongful act, he is
presumed to be the taker and doer of the whole act. [29] Thus, when property stolen is found in
the possession of a person who is unable to give a satisfactory explanation of his possession
thereof, he may be deemed to have committed the crime of theft of said property.
[30]
More apropos to the peculiar facts prevailing herein is the case of People v. Prado,[31] where
we stated:
In the absence of an explanation of how one has come into the possession of stolen effects
belonging to a person wounded and treacherously killed, he must necessarily be considered the
author of the aggression and death of the said person and of the robbery committed on him.
The application of this presumption validly applies to a case of carnapping for, indeed, the
concept of unlawful taking in theft, robbery and carnapping is the same and, had it not been for
the enactment of the Anti-Carnapping Act, the unlawful taking of the motor vehicle would
certainly fall within the purview of either theft or robbery.[32]
All told, the Court finds no reason to reverse the ruling of the court a quo insofar as the
crimes were committed. What remains to be determined is the propriety of the penalty imposed
on accused-appellants.
In connection with the penalty imposed, the Solicitor General invites the Courts attention to
the erroneous imposition by the trial court of death on the accused-appellants. He points out
that while the sentence was meted upon a finding that the aggravating circumstances of
treachery, abuse of superior strength and evident premeditation attended the commission of the
crime, these were not duly established in the case at bar.
The observation is well-taken. Qualifying and aggravating circumstances which are taken
into consideration for the purpose of increasing the degree of the penalty imposed must be
proven with equal certainty as the commission of the act charged as criminal offense.[33]
With regard to alevosia, there is treachery when the offender commits any of the crimes
against persons, employing means, methods or forms in the execution thereof which tend
directly and specially to insure its execution, without risk to himself arising from the defense
which the offended party might make.[34] Treachery is considered present when: (1) there is
employment of means of execution that gives the person attacked no opportunity to defend
himself or to retaliate; and (2) the means or method of execution was deliberately or consciously
adopted by the culprit.[35] For treachery to be appreciated, it must be present and seen by the
witness right at the inception of the attack.[36] Where no particulars are known as to how the
killing began, its perpetration with treachery cannot merely be supposed.[37]
In this case, there was neither a description of how the attack was commenced whether it
was sudden, unexpected and whether the victim was caught totally unaware nor has there been
a showing that the method of execution in the commission of the crime was consciously or

deliberately adopted by the malefactors. To reiterate, alevosia cannot be established where no


particulars are known regarding the manner in which the aggression was carried out or how it
developed.[38] It must be based on positive or conclusive proof, not mere suppositions or
speculations,[39] and must be proved as clearly and as convincingly as the killing itself.[40]
Similarly, the elements of evident premeditation must be established with equal certainty as
the criminal act itself before it can be appreciated as a qualifying circumstance. [41] These
elements are: (1) the time when the accused determined to commit the crime; (2) an overt act
manifestly indicating that they clung to their determination to commit the crime; and (3) a
sufficient lapse of time between the decision to commit the crime and the execution thereof to
allow the accused to reflect upon the consequences of their act.[42] The essence of evident
premeditation is that the execution of the criminal act is preceded by cool thought and reflection
upon the resolution to carry out the criminal intent within a space of time sufficient to arrive at a
calm judgment.[43]
In this case, there is no showing that the killing of Christian Bermudez was the product of
cool thought and reflection. There is absolutely no showing how and when the plan was hatched
or how long a time had elapsed before the crime was carried out. On the contrary, what appears
very much evident is that he was killed on the occasion of the carnapping itself. Without such
evidence, mere presumptions and inferences, no matter how logical and probable, will not
suffice to warrant the appreciation of this qualifying circumstance of evident premeditation.[44]
Abuse of superior strength cannot likewise be appreciated. In People v. Flores,[45] this Court
pointed out that this aggravating circumstance necessitates the showing of the relative disparity
in physical characteristics, usually translating into the age, gender, the physical size and the
strength of the aggressor and the victim. There is no proof that accused-appellant utilized any
notorious inequality to his advantage. In other words, mere superiority in number is not enough
to constitute superior strength.[46]
To be appreciated as a qualifying circumstance, what should be considered is not that there
were three or more assailants of one victim, but whether the aggressors purposely took
advantage of their combined strength in order to consummate the offense. [47] In this case, the
prosecution did not present any direct proof that there was a deliberate intent on the part of
accused-appellants to take advantage of the obvious inequality of force between them and the
victim.
In the absence of any qualifying or aggravating circumstances which would merit the
imposition of death, the proper imposable penalty should be reclusion perpetua, pursuant to
Section 14 of R.A. No. 6539, viz:
Penalty for Carnapping. Any person who is found guilty of carnapping, as the term is defined in
Section Two of this Act, shall, irrespective of the value of the motor vehicle taken, be punished
by imprisonment of not less than fourteen years and eight months and not more than seventeen
years and four months, when the carnapping is committed without violence or intimidation of
persons, or force upon things; and by imprisonment for not less than seventeen years and four

months and not more than thirty years, when the carnapping is committed by means of violence
against or intimidation of any person, or force upon things; and the penalty of reclusion
perpetua to death shall be imposed when the owner, driver or occupant of the carnapped motor
vehicle is killed or raped in the course of the commission of the carnapping or on the occasion
thereof. (Underscoring ours)
On the other hand, Article 63 (2) of the Revised Penal Code states:
Rules for the application of indivisible penalties. In all cases in which the law prescribes a single
indivisible penalty, it shall be applied by the courts regardless of any mitigating or aggravating
circumstances that may have attended the commission of the deed.
In all cases in which the law prescribes a penalty composed of two indivisible penalties, the
following rules shall be observed in the application thereof:
xxxxxxxxx
2. When there are neither mitigating nor aggravating circumstances in the commission of the
deed, the lesser penalty shall be applied.
Anent the civil indemnity award, this Court finds the amount of P50,000.00 as death
indemnity proper, following prevailing jurisprudence,[48] and in line with controlling policy.[49] The
award of civil indemnity may be granted without any need of proof other than the death of the
victim.[50] Though not awarded by the trial court, the victims heirs are likewise entitled to moral
damages, pegged at P50,000.00 by controlling case law,[51] taking into consideration the pain
and anguish of the victims family[52]brought about by his death.[53]
However, the award of P200,000.00 as burial and other expenses incurred in connection
with the death of the victim must be deleted. The records are bereft of any receipt or voucher to
justify the trial courts award of burial and other expenses incurred in connection with the victims
death. The rule is that every pecuniary loss must be established by credible evidence before it
may be awarded.[54] Credence can be given only to claims which are duly supported by receipts
or other credible evidence.[55]
The trial court was correct in awarding damages for loss of earning capacity despite the
non-availability of documentary evidence.[56] Damages representing net earning capacity have
been awarded by the Court based on testimony in several cases. [57] However, the amount of the
trial courts award needs to be recomputed and modified accordingly.
In determining the amount of lost income, the following must be taken into account: (1) the
number of years for which the victim would otherwise have lived; and (2) the rate of the loss
sustained by the heirs of the deceased. The second variable is computed by multiplying the life
expectancy by the net earnings of the deceased, meaning total earnings less expenses
necessary in the creation of such earnings or income less living and other incidental
expenses. Considering that there is no proof of living expenses of the deceased, net earnings

are computed at fifty percent (50%) of the gross earnings. [58] The formula used by this Court in
computing loss of earning capacity is:
Net Earning Capacity = [2/3 x (80 age at time of death) x (gross annual income reasonable
and necessary living expenses)][59]
In this case, the Court notes that the victim was 27 years old at the time of his death and his
mother testified that as a driver of the Tamaraw FX taxi, he was earning P650.00 a day.
[60]
Hence, the damages payable for the loss of the victims earning capacity is computed thus:
Gross Annual Earnings = P650 x 261 working days in a year
= P169,650.00
Net Earning Capacity = 2/3 x (80-27) x [P169,650.00 P84,825.00]
= 35.33 x 84,825.00
= P2,996,867.20
Based on the foregoing computation, the award of the trial court with regard to lost income
is thus modified accordingly.
WHEREFORE, the decision of the Regional Trial Court of Quezon City, Branch 85, in
Criminal Cases No. Q-95-63963, finding accused-appellant guilty beyond reasonable doubt of
violation of Republic Act No. 6539 (The Anti-Carnapping Law) is AFFIRMED with
MODIFICATIONS. Accused-appellants are SENTENCED to suffer the penalty of reclusion
perpetua; and are ORDERED, jointly and severally, to pay the heirs of the victim Christian
Bermudez the sum of P50,000.00 as civil indemnity, the sum of P50,000.00 as moral damages,
and the sum of P2,996,867.20 representing lost earnings.The award of P200,000.00 as burial
and other expenses is DELETED for lack of substantial proof.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban,
Quisumbing, Pardo, Buena, De Leon, Jr., Sandoval-Gutierrez, and Carpio, JJ., concur.
G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC., respondents.
Alojada & Garcia and Jimenea, Dala & Zaragoza for petitoner.

Zapa Law Office for private respondent.

VITUG, J.:
The issues, albeit not completely novel, are: (a) whether or not a claim for damage sustained on
a shipment of goods can be a solidary, or joint and several, liability of the common carrier, the
arrastre operator and the customs broker; (b) whether the payment of legal interest on an award
for loss or damage is to be computed from the time the complaint is filed or from the date the
decision appealed from is rendered; and (c) whether the applicable rate of interest, referred to
above, is twelve percent (12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals, on the antecedent and
undisputed facts that have led to the controversy are hereunder reproduced:
This is an action against defendants shipping company, arrastre operator and
broker-forwarder for damages sustained by a shipment while in defendants'
custody, filed by the insurer-subrogee who paid the consignee the value of such
losses/damages.
On December 4, 1981, two fiber drums of riboflavin were shipped from
Yokohama, Japan for delivery vessel "SS EASTERN COMET" owned by
defendant Eastern Shipping Lines under Bill of Lading
No. YMA-8 (Exh. B). The shipment was insured under plaintiff's Marine Insurance
Policy No. 81/01177 for P36,382,466.38.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged
unto the custody of defendant Metro Port Service, Inc. The latter excepted to one
drum, said to be in bad order, which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation received the
shipment from defendant Metro Port Service, Inc., one drum opened and without
seal (per "Request for Bad Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage Corporation made
deliveries of the shipment to the consignee's warehouse. The latter excepted to
one drum which contained spillages, while the rest of the contents was
adulterated/fake (per "Bad Order Waybill" No. 10649, Exh. E).
Plaintiff contended that due to the losses/damage sustained by said drum, the
consignee suffered losses totaling P19,032.95, due to the fault and negligence of
defendants. Claims were presented against defendants who failed and refused to
pay the same (Exhs. H, I, J, K, L).

As a consequence of the losses sustained, plaintiff was compelled to pay the


consignee P19,032.95 under the aforestated marine insurance policy, so that it
became subrogated to all the rights of action of said consignee against
defendants (per "Form of Subrogation", "Release" and Philbanking check, Exhs.
M, N, and O). (pp. 85-86, Rollo.)
There were, to be sure, other factual issues that confronted both courts. Here, the appellate
court said:
Defendants filed their respective answers, traversing the material allegations of
the complaint contending that: As for defendant Eastern Shipping it alleged that
the shipment was discharged in good order from the vessel unto the custody of
Metro Port Service so that any damage/losses incurred after the shipment was
incurred after the shipment was turned over to the latter, is no longer its liability
(p. 17, Record); Metroport averred that although subject shipment was
discharged unto its custody, portion of the same was already in bad order (p. 11,
Record); Allied Brokerage alleged that plaintiff has no cause of action against it,
not having negligent or at fault for the shipment was already in damage and bad
order condition when received by it, but nonetheless, it still exercised extra
ordinary care and diligence in the handling/delivery of the cargo to consignee in
the same condition shipment was received by it.
From the evidence the court found the following:
The issues are:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained while in
the custody of defendants (in whose respective custody, if
determinable);
3. Whether or not defendant(s) should be held liable for the
losses/damages (see plaintiff's pre-Trial Brief, Records, p. 34;
Allied's pre-Trial Brief, adopting plaintiff's Records, p. 38).
As to the first issue, there can be no doubt that the shipment
sustained losses/damages. The two drums were shipped in good
order and condition, as clearly shown by the Bill of Lading and
Commercial Invoice which do not indicate any damages drum that
was shipped (Exhs. B and C). But when on December 12, 1981
the shipment was delivered to defendant Metro Port Service, Inc.,
it excepted to one drum in bad order.

Correspondingly, as to the second issue, it follows that the


losses/damages were sustained while in the respective and/or
successive custody and possession of defendants carrier
(Eastern), arrastre operator (Metro Port) and broker (Allied
Brokerage). This becomes evident when the Marine Cargo Survey
Report (Exh. G), with its "Additional Survey Notes", are
considered. In the latter notes, it is stated that when the shipment
was "landed on vessel" to dock of Pier # 15, South Harbor, Manila
on December 12, 1981, it was observed that "one (1) fiber drum
(was) in damaged condition, covered by the vessel's Agent's Bad
Order Tally Sheet No. 86427." The report further states that when
defendant Allied Brokerage withdrew the shipment from defendant
arrastre operator's custody on January 7, 1982, one drum was
found opened without seal, cello bag partly torn but contents
intact. Net unrecovered spillages was
15 kgs. The report went on to state that when the drums reached
the consignee, one drum was found with adulterated/faked
contents. It is obvious, therefore, that these losses/damages
occurred before the shipment reached the consignee while under
the successive custodies of defendants. Under Art. 1737 of the
New Civil Code, the common carrier's duty to observe
extraordinary diligence in the vigilance of goods remains in full
force and effect even if the goods are temporarily unloaded and
stored in transit in the warehouse of the carrier at the place of
destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art.
1738, NCC). Defendant Eastern Shipping's own exhibit, the "TurnOver 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 viceversa, nor that attendant facts in a given case may not vary the rule. The instant petition has
been brought solely by Eastern Shipping Lines, which, being the carrier and not having been
able to rebut the presumption of fault, is, in any event, to be held liable in this particular case. A
factual finding of both the court a quo and the appellate court, we take note, is that "there is
sufficient evidence that the shipment sustained damage while in the successive possession of
appellants" (the herein petitioner among them). Accordingly, the liability imposed on Eastern
Shipping Lines, Inc., the sole petitioner in this case, is inevitable regardless of whether there are
others solidarily liable with it.
It is over the issue of legal interest adjudged by the appellate court that deserves more than just
a passing remark.
Let us first see a chronological recitation of the major rulings of this Court:

The early case of Malayan Insurance Co., Inc., vs. Manila Port
Service, 2 decided 3 on 15 May 1969, involved a suit for recovery of money arising out of short
deliveries and pilferage of goods. In this case, appellee Malayan Insurance (the plaintiff in the
lower court) averred in its complaint that the total amount of its claim for the value of the
undelivered goods amounted to P3,947.20. This demand, however, was neither established in
its totality nor definitely ascertained. In the stipulation of facts later entered into by the parties, in
lieu of proof, the amount of P1,447.51 was agreed upon. The trial court rendered judgment
ordering the appellants (defendants) Manila Port Service and Manila Railroad Company to pay
appellee Malayan Insurance the sum of P1,447.51 with legal interest thereon from the date the
complaint was filed on 28 December 1962 until full payment thereof. The appellants then
assailed,inter alia, the award of legal interest. In sustaining the appellants, this Court ruled:
Interest upon an obligation which calls for the payment of money, absent a
stipulation, is the legal rate. Such interest normally is allowable from the date of
demand, judicial or extrajudicial. The trial court opted for judicial demand as the
starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be
recovered upon unliquidated claims or damages, except when the demand can
be established with reasonable certainty." And as was held by this Court
in Rivera vs. Perez, 4 L-6998, February 29, 1956, if the suit were for
damages, "unliquidated and not known until definitely ascertained, assessed and
determined by the courts after proof (Montilla c. Corporacion de P.P. Agustinos,
25 Phil. 447; Lichauco v. Guzman,
38 Phil. 302)," then, interest "should be from the date of the decision." (Emphasis
supplied)
The case of Reformina vs. Tomol, 5 rendered on 11 October 1985, was for "Recovery of
Damages for Injury to Person and Loss of Property." After trial, the lower court decreed:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and third
party defendants and against the defendants and third party plaintiffs as follows:
Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to
pay jointly and severally the following persons:
xxx xxx xxx
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of
P131,084.00 which is the value of the boat F B Pacita III together with its
accessories, fishing gear and equipment minus P80,000.00 which is the value of
the insurance recovered and the amount of P10,000.00 a month as the estimated
monthly loss suffered by them as a result of the fire of May 6, 1969 up to the time
they are actually paid or already the total sum of P370,000.00 as of June 4, 1972
with legal interest from the filing of the complaint until paid and to pay attorney's

fees of P5,000.00 with costs against defendants and third party plaintiffs.
(Emphasis supplied.)
On appeal to the Court of Appeals, the latter modified the amount of damages awarded
but sustained the trial court in adjudging legal interest from the filing of the complaint
until fully paid. When the appellate court's decision became final, the case was
remanded to the lower court for execution, and this was when the trial court issued its
assailed resolution which applied the 6% interest per annum prescribed in Article 2209 of
the Civil Code. In their petition for review on certiorari, the petitioners contended that
Central Bank Circular
No. 416, providing thus
By virtue of the authority granted to it under Section 1 of Act 2655, as amended,
Monetary Board in its Resolution No. 1622 dated July 29, 1974, has prescribed
that the rate of interest for the loan, or forbearance of any money, goods, or
credits and the rate allowed in judgments, in the absence of express contract as
to such rate of interest, shall be twelve (12%) percent per annum. This Circular
shall take effect immediately. (Emphasis found in the text)
should have, instead, been applied. This Court 6 ruled:
The judgments spoken of and referred to are judgments in litigations involving
loans or forbearance of any money, goods or credits. Any other kind of monetary
judgment which has nothing to do with, nor involving loans or forbearance of any
money, goods or credits does not fall within the coverage of the said law for it is
not within the ambit of the authority granted to the Central Bank.
xxx xxx xxx
Coming to the case at bar, the decision herein sought to be executed is one
rendered in an Action for Damages for injury to persons and loss of property and
does not involve any loan, much less forbearances of any money, goods or
credits. As correctly argued by the private respondents, the law applicable to the
said case is Article 2209 of the New Civil Code which reads
Art. 2209. If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of
interest agreed upon, and in the absence of stipulation, the legal
interest which is six percent per annum.
The above rule was reiterated in Philippine Rabbit Bus Lines, Inc., v. Cruz, 7 promulgated on 28
July 1986. The case was for damages occasioned by an injury to person and loss of property.
The trial court awarded private respondent Pedro Manabat actual and compensatory damages
in the amount of P72,500.00 with legal interest thereon from the filing of the complaint until fully

paid. Relying on the Reformina v. Tomol case, this Court 8 modified the interest award from 12%
to 6% interest per annum but sustained the time computation thereof, i.e., from the filing of the
complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals, 9 the trial court, in an action for the recovery of
damages arising from the collapse of a building, ordered,
inter alia, the "defendant United Construction Co., Inc. (one of the petitioners)
. . . to pay the plaintiff, . . . , the sum of P989,335.68 with interest at the legal rate from
November 29, 1968, the date of the filing of the complaint until full payment . . . ." Save from the
modification of the amount granted by the lower court, the Court of Appeals sustained the trial
court's decision. When taken to this Court for review, the case, on 03 October 1986, was
decided, thus:
WHEREFORE, the decision appealed from is hereby MODIFIED and considering
the special and environmental circumstances of this case, we deem it reasonable
to render a decision imposing, as We do hereby impose, upon the defendant and
the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art.
1723, Civil Code, Supra.
p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception to attorney's
fees) occasioned by the loss of the building (including interest charges and lost
rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as
and for attorney's fees, the total sum being payable upon the finality of this
decision. Upon failure to pay on such finality, twelve (12%) per cent interest per
annum shall be imposed upon aforementioned amounts from finality until paid.
Solidary costs against the defendant and third-party defendants (Except Roman
Ozaeta). (Emphasis supplied)
A motion for reconsideration was filed by United Construction, contending that "the
interest of twelve (12%) per cent per annum imposed on the total amount of the
monetary award was in contravention of law." The Court 10 ruled out the applicability of
the Reformina and Philippine Rabbit Bus Lines cases and, in its resolution of 15 April
1988, it explained:
There should be no dispute that the imposition of 12% interest pursuant to
Central Bank Circular No. 416 . . . is applicable only in the following: (1) loans; (2)
forbearance of any money, goods or credit; and
(3) rate allowed in judgments (judgments spoken of refer to judgments involving
loans or forbearance of any money, goods or credits. (Philippine Rabbit Bus
Lines Inc. v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139 SCRA
260 [1985]). It is true that in the instant case, there is neither a loan or a
forbearance, but then no interest is actually imposed provided the sums referred
to in the judgment are paid upon the finality of the judgment. It is delay in the
payment of such final judgment, that will cause the imposition of the interest.

It will be noted that in the cases already adverted to, the rate of interest is
imposed on the total sum, from the filing of the complaint until paid; in other
words, as part of the judgment for damages. Clearly, they are not applicable to
the instant case. (Emphasis supplied.)
The subsequent case of American Express International, Inc., vs. Intermediate Appellate
Court 11 was a petition for review on certiorari from the decision, dated 27 February 1985, of the
then Intermediate Appellate Court reducing the amount of moral and exemplary damages
awarded by the trial court, to P240,000.00 and P100,000.00, respectively, and its resolution,
dated 29 April 1985, restoring the amount of damages awarded by the trial court, i.e.,
P2,000,000.00 as moral damages and P400,000.00 as exemplary damages with interest
thereon at 12% per annum from notice of judgment, plus costs of suit. In a decision of 09
November 1988, this Court, while recognizing the right of the private respondent to recover
damages, held the award, however, for moral damages by the trial court, later sustained by the
IAC, to be inconceivably large. The Court 12 thus set aside the decision of the appellate court
and rendered a new one, "ordering the petitioner to pay private respondent the sum of One
Hundred Thousand (P100,000.00) Pesos as moral damages, with
six (6%) percent interest thereon computed from the finality of this decision until paid.
(Emphasis supplied)
Reformina came into fore again in the 21 February 1989 case of Florendo v. Ruiz 13 which arose
from a breach of employment contract. For having been illegally dismissed, the petitioner was
awarded by the trial court moral and exemplary damages without, however, providing any legal
interest thereon. When the decision was appealed to the Court of Appeals, the latter held:
WHEREFORE, except as modified hereinabove the decision of the CFI of
Negros Oriental dated October 31, 1972 is affirmed in all respects, with the
modification that 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.
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo,
Melo, Quiason, Puno and Kapunan, JJ., concur.
Mendoza, J., took no part.
G.R. No. 94563

March 5, 1991

MEYNARDO C. POLICARPIO and LOURDES POLICARPIO, petitioners,


vs.
HONORABLE COURT OF APPEALS, EVELYN Q. CATABAS, ROMULO Q. CATABAS and
CLEMENTE CATABAS, respondents.
Julian S. Yap for petitioners.
Manuel S. Fonacier, Jr. for private respondents.
GUTIERREZ, JR., J.:
This petition asks for the setting aside of the April 30, 1990 decision of the Court of Appeals in
CA-G.R. Civil Case No. 16069 the dispositive portion of which reads:
WHEREFORE, the appealed decision is SET ASIDE and in lieu thereof another one is
hereby entered.
(1) Ordering appellees, (1) to authorize Philippine Commercial International Bank (PCIB)
to release their mortgaged TCT No. 501812 upon payment by Urban Development Bank
(URBAN Bank) of their mortgage loan obligation with said PCIB; and thereafter (2) to
transfer the title in appellant's name;
(2) Ordering appellants, (1) to pay appellees a monthly rent of P2,500.00 for their use of
the subject property during the period from December 18, 1983 to the filing of the
complaint a quo on January 5, 1985 when the judicial demand was made on appellees,
or P31,250 for 125 months at 12% interest per annum; (2) to reimburse appellees
P2,812.60 for the capital gains tax, stamps and other related expenses paid for by

appellees; and (3) to pay and/or authorize Urban Bank to pay to appellees the proceeds
of the loan granted to appellants to the extent of P145,000.00 (unpaid balance of the
purchase price) less whatever amount is to be paid to PCIB for the outstanding
mortgage loan obligation of appellees with said bank. (Rollo, p. 54)
On November 25,1983, petitioners-spouses Meynardo C. Policarpio and Lourdes Policarpio and
private respondents Evelyn Romulo and Clemente, all surnamed Catabas executed a "Contract
to Sell" whereby the private respondents agreed to buy and the petitioners-spouses to sell a
residential lot of about 300 square meters with a house and other improvements located at
Servillana Street, UE Village, Cainta, Rizal. The property is covered by Transfer Certificate of
Title No. 501812 Registry of Deeds, Province of Rizal. The agreed purchase price was the
amount of P270,000 payable as follows: (1) P10,000.00 upon signing of the Contract to Sell;
and (2) the balance of P260,000.00 to be paid from the proceeds of the private respondents'
PAG-IBIG loan thru its designated bank, the Urban Bank and which they guarantee and warrant
to be approved and thereafter release on or before the first week of December 1983; and to
deliver to the petitioners-spouses the whole amount of P260,000.00 on or before the first week
of December 1983.
The "Contract to Sell" also provides that failure on the part of the vendees to pay the balance on
the first week of December, 1983 will automatically annul the contract and the vendors shall
immediately return the downpayment and that after full payment of the purchase price the
vendors shall execute a deed of absolute sale in favor of the vendee.
The private respondents were not able to pay the balance price on the first week of December
1983. However, the petitioners-spouses did not return the P10,000 downpayment. The private
respondents continued to make partial payments which were received by the petitionersspouses. All in all, the private respondents made partial payments of P75,000.00 broken down
as follows: (1) P10,000.00 at the time of the execution of the Contract to Sell; (2) P50,000.00 on
May 9, 1984; (3) Pl0,000.00 on June 4, 1984 and (4) P5,000.00 on June 7, 1984.
On April 9, 1984, the parties executed a deed of absolute sale over the subject property.
Thereafter, the petitioners-spouses delivered physical possession of the property to the private
respondents.
On March 1, 1985, the private respondents filed with the Regional Trial Court of Pasig, Metro
Manila a case for specific performance and damages against the petitioners-spouses. They
claimed that in view of the fact that their PAG-IBIG loan was not processed on time without fault
on their part, the parties executed a Deed of Absolute Sale over the same property. They also
claimed that the balance of P195,000.00 which is to be paid out of the proceeds of the PAGIBIG loan was already processed, approved and ready for availment provided all the required
documents and title to the property in the names of the private respondents are delivered to the
Urban Bank. However, the petitioners-spouses motivated by a desire to increase the contract
price refused to deliver and transfer the title of the property to the private respondents. They,
therefore, prayed that the petitioners- spouses be ordered to confirm the transfer to the private

respondents of Transfer Certificate of Title No. 501812 covering the property, subject matter of
the "Deed of Absolute Sale" in order that the same may be used as collateral for the approved
PAG-IBIG loan; to execute all other documents and furnish the private respondents certificate of
clearance pursuant to existing laws so as to secure TCT No. 501812 in the name of the private
respondents. In addition, the private respondents asked for damages.
On the other hand, the petitioners-spouses averred that the Contract to Sell was automatically
cancelled when the private respondents violated the terms of the contract: (1) the balance of the
purchase price was not paid on or before the first week of December 1983; (2) the capital gains
tax and documentary stamps for the sale of the property were not paid by the private
respondents. They, however, allowed the private respondents to occupy the property when the
latter agreed to the following terms:
a) The purchase price of the property shad be adjusted to P330,000.00 to cope with the
adverse effects of devaluation and full payment of the remaining balance shall be on or
before May 30, 1984.
b) That within one (1) month plaintiffs (private respondents) would secure from other
private sources at least P90,000.00 so that defendants (petitioners) could pay their loan
with the PCIB where the subject property is mortgaged to enable the plaintiffs to pursue
their PAG-IBIG loan, if they still so desire with the defendants' title as security. (page
35, Rollo)
In accordance with the new terms, the parties allegedly executed the simulated Absolute Deed
of Sale dated April 9, 1984 and the petitioners-spouses accepted additional partial payment of
P50,000.00. The consideration stated in the deed of sale was undervalued to only P230,000.00
upon request of the private respondents in order to save on expenses related to the
transactions and also upon the private respondents' representation that P230,000.00 was the
maximum amount of loan they could obtain. However, the private respondents failed to pay the
remaining balance on or before May 30, 1984. Nevertheless, the private respondents paid on
two separate occasions the amount of P15,000.00 which the petitioners-spouses accepted
when the former promised that full payment would be made within July 1984, regardless of the
outcome of their PAG-IBIG loan. The petitioners-spouses asserted that the private respondents'
failure to obtain their PAG-IBIG loan was their own fault and that the private respondents have
never acquired title or ownership of the subject property despite the Deed of Absolute Sale.
They averred that the Deed is subject to the terms and conditions of the Contract to Sell and/or
the additional agreement of the parties. They also filed a counterclaim for damages. After due
trial, the trial court found for the petitioners-spouses. The complaint was dismissed. The
dispositive portion of the decision reads:
WHEREFORE, and in view of the foregoing considerations, decision is hereby rendered
dismissing plaintiffs' Complaint and rendering judgment in favor of defendants on their
compulsory counterclaim, as follows:

1) The Contract to Sell which has been superseded by a simulated Deed of Absolute
Sale entered into by and between the parties are (sic) hereby declared of no further legal
force and effect, provided that the P75,000.00 which the plaintiffs paid as downpayment
for subject property shall, up to that amount, be applied to the pecuniary awards in favor
of defendants, to wit:
2) Plaintiffs are directed to vacate defendants' house and lot No. 22, Block 5 Servillana
St., UE Village, Cainta, Rizal, and to pay to defendants P2,500.00 monthly as
reasonable value for the use and occupation of the same since December 18, 1983 until
possession thereof shall have been restored to the defendants;
3) Plaintiffs shall reimburse defendants the sum of P6,500.00 paid by the latter as
downpayment for a lot in Mandaluyong, which was, however, forfeited, with 12% interest
thereon per annum from date said downpayment was made until the same shall have
been fully reimbursed;
4) Plaintiffs shall pay to defendants P30,000.00 as moral damages; P20,000.00 as
exemplary damages; P30,000.00 for and as attorney's fees; and
5) Costs of suit. (Rollo, pp. 91-92)
As stated earlier, the trial court's decision was reversed and set aside by the Court of Appeals. A
motion for reconsideration was denied. Hence, this petition.
In view of the conflicting findings of facts of the trial court and the appellate court we have
decided to review the evidence on record in order to arrive at the correct findings based on the
record. (Robleza v. Court of Appeals, 174 SCRA 354 [1989]).
It is to be observed that the parties' conflicting evidence centers on the Contract to Sell and
Deed of Absolute Sale executed by the parties on April 9, 1984. The parties introduced
conflicting testimonies regarding the true nature of the subject documents. This, in effect results
in the non-application of the Parol Evidence Rule under Section 9, Rule 130 of the Rules of
Court, to wit:
Sec. 9. Evidence of written agreements.When the terms of an agreement have been
reduced to writing, it is considered as containing all the terms agreed upon and there
can be between the parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.
The record shows that neither of the parties objected to the different testimonies. Hence, the
trial court had no option but to admit these conflicting testimonies. The issue was, therefore,
reduced to the credibility of witnesses.
After a thorough examination of the record we are constrained to reverse the findings of the
appellate court.

The appellate court's conclusion that the petitioners-spouses were at fault in the non-release of
the private respondents' PAG-IBIG loan thru Urban Bank, has no factual basis.
The subject property was mortgaged to the Philippine Commercial and Industrial Bank (PCIB).
This fact was known to the private respondents. In such a case, it may be assumed that the
PCIB would not release the title of the land without first getting paid. Consequently, the
petitioners-spouses' contention that payment of the balance price of the subject parcel of land
was not dependent upon the release of their title from the PCIB which would be used as
collateral by the private respondents to secure their PAG-IBIG loan thru Urban Bank, is more
credible.
Moreover, the Urban Bank letter signed by Assistant Manager Ms. Liza M. de los Reyes to PCIB
dated July 2, 1984 (Exhibits G and G-1) shows that there is no basis for the conclusion that the
petitioner-spouses " . . . reneged on their agreement that Urban Bank would pay their mortgage
loan obligation with PCIB so that their TCT No. 501812 over the subject property could be
released free of encumbrance and transferred in appellants' name as the latter intended to use
the title as collateral for their loan from Urban Bank." (page 45, Rollo) The pertinent portion of
the letter reads:
This is with reference to the real estate property of Meynardo C. Policarpio located at Servillana
St., U.E. Employees Village, Cainta, Rizal more particularly described as Lot 22, Block 5
covered by TCT No. 501812, which is presently mortgaged in your favor to secure his loan with
you.
Please be advised that Miss Evelyn Q. Catabas, who is purchasing the above-mentioned
property has an approved Pag-Ibig loan with us, part of which shall be used to settle Mr.
Policarpio's loan with you.
Per the request of our client, with the conformity of Mr. Policarpio herein given, we shall release
to you the amount of NINETY SIX THOUSAND THREE HUNDRED THIRTY SEVEN & 94/100
(P96,337.94) PESOS upon transfer of title under the borrower's name, registration of mortgage
in our favor and upon loan approval and takeout of National Home Mortgage Finance
Corporation.
Any difference between the above-mentioned amount and the outstanding obligation shall be for
the account of Miss Catabas and shall be transacted directly with you. This letter supersedes
our letter of Guaranty to Mr. Policarpio on February 01, 1984.
We trust that this is satisfactory to you. Thank you.
Very truly yours,
URBAN DEVELOPMENT BANK. (Rollo, pp. 45-46)

We find no relation between the supposed agreement on the part of the petitioners-spouses to
have the payment of the balance price dependent on the release of the PAG-IBIG loan and their
alleged obligation to have the title released by PCIB. On the contrary, this letter enhances the
stand of the petitioners-spouses that they signified their conformity to the letter upon the request
of the private respondents to facilitate the release of the PAG-IBIG loan.
According to the appellate court, the letter also disproves petitioners-spouses' "claim that the
appellants (private respondents) failed or refused to pay the defendants (petitioners-spouses)
the P90,000.00 on time with which to pay the latter's PCIB loan resulting in the plaintiffs' (private
respondents') failure to secure the release of their PAG-IBIG loan of P260,000.00 which is due
the defendants (petitioner-spouses) on or before the first week of December, 1983 as stipulated
in the Contract to Sell" (Paragraph 15, Answer, Record, p. 35). (Page 46, Rollo)
We find the appellate court's conclusion unwarranted. The evidence on record shows that the
private respondents themselves did not blame the petitioners-spouses for the non-release of the
PAG-IBIG loan on December 1983 and that it was "due to time constraint the loan was not
approved and released before the deadline to pay the balance which expired the first week of
December 1983." (page 82, Rollo) In fact in their Memorandum the private respondents stated
that: "private respondents failed to meet the "First Week of December 1983" deadline so that
the "Contract to Sell" would have been cancelled as therein provided were it not for the fact that
petitioners still pursued the sale and private respondents were still willing to buy." (pp. 145146, Rollo)
Moreover, the appellate court gave credence to the private respondents' contention that the
petitioners-spouses' main reason for reneging on the inter-bank arrangement between Urban
Bank and PCIB was due to the latter's insistence that the price of the subject property shall be
increased to P330,000.00.
On the other hand, the petitioners-spouses maintain that there was an oral agreement between
them and the private respondents as regards the increased price.
On this matter, we are inclined to give more credence to the trial court's findings as they are
borne by the evidence on record, to wit:
The Court finds credence in the defendants' claim that the parties verbally agreed to
increase the consideration to P330,000.00. The price under the Contract to Sell which
precluded transfer of possession to the plaintiffs until after full payment in effect, was
P270,000.00. The default of the plaintiffs under the said contract, the non-availment by
the defendants of the automatic cancellation clause when the plaintiffs defaulted; the
moving of the plaintiffs into the premises on December 18, 1983 invariably necessitating
the defendants to transfer elsewhere, the devaluation of the peso, the longer waiting
period imposed upon the defendants, their conformity to the letter from Urban Bank
(Exh. "G") to PCIB and, finally, the execution of the Deed of Absolute Sale even without
plaintiffs paying for the price in full all taken together in their entirety, swing the pendulum
of credibility towards the fact of agreement of the parties to increase the price. Besides,

it is highly improbable that after all the rigors and the hassles the defendants had been
exposed to, before and after the execution of the simulated Deed of Absolute Sale, the
defendants would agree to lower the price of P270,000.00 in the Contract to sell to
P230,000.00 in the Deed of Absolute Sale. (Rollo, p. 89)
xxx

xxx

xxx

Furthermore the mere fact that the plaintiffs offered in their letter (Exh. "L") dated
November 23, 1984 to pay P312,000.00 which the defendants rejectedreinforces
the truth of defendants' claim that the parties, indeed, verbally agreed to increase the
pace to P330,000.00. This intention must prevail and the eleventh-hour repudiation by
the plaintiffs, who under the present situation would continue enriching themselves at the
expense of the defendants cannot prevent its enforcement. At any rate, the Deed of
Absolute Sale executed by and between the parties is admittedly simulated, whereupon
it cannot be a valid basis as in this case, for an action for Specific Performance. (Rollo,
p. 90)
It is to be noted that the appellate court questions the existence of Exhibit "L". The appellate
court states:
The trial court revealed the pivotal factor upon which it based its choice in reposing
greater belief in appellee Meynardo Policarpio's testimony. It is this factor, the trial court
said, that reinforced the truth of appellee's claim regarding the existence of an oral
agreement to increase the purchase price. Said the trial court:
xxx

xxx

xxx

Unfortunately, no such 'Exh. "L" exists in the record. The actual 'Exh. "L" included among
the documentary evidence on record is a letter dated November 7, 1985 signed jointly by
Urban Bank's Assistant Vice-President Prudeno L. Natividad and Mortgage Supervisor
Marie Celine R. Gorres and addressed to appellee Evelyn Catabas. (Rollo, pp. 48-49)
The record, however, reveals the existence of Exhibit L. In fact, the private respondents
themselves confirm the existence of the November 23, 1984 letter which they reproduced in
their Memorandum, to wit:
We are aware of our mutual endeavor to exhaust all possible means to find a solution to
our problem of finalizing our purchase of your house and lot here at Servillana Street,
U.E. Village, Cainta, Rizal, more particularly described as Lot 22 Block 5, covered by
TCT No. 501812, towards maintaining our friendly relation and avoiding a possible
litigation for our mutual benefit. For our part therefore, to assuage your feeling which
obviously is influenced by the present economic situation and for a higher price on said
property, notwithstanding the agreed contract price of P270,000.00, we are offering our
hand in friendship and propose to increase the price to a grand total of P312,000.00, no
matter our difficulties, I have to confess, to be paid as follows: (Rollo, p. 147)

The tone of the letter gives credence to the petitioners-spouses' contention that the Absolute
Deed of Sale was only simulated, its execution only to facilitate the release of the private
respondents' PAG-IBIG loan from Urban Bank. It also gives credence to the petitioners-spouses'
contention that they agreed to push thru with the sale provided the price would be raised to
P330,000.00. For, why then, did the respondents refer to ". . . our problem of finalizing our
purchase . . ." and offer P312,000.00 which was beyond the initial price of the subject property
of P270,000.00.
We rule that the findings of facts of the trial court which are at variance with those of the
appellate court are more in consonance with the evidence on record. The trial court stated:
The parties have common interests on the property. The defendants were interested to
sell it in order to settle their obligation with PCIB and to be able to buy another property.
The plaintiffs were interested to buy the property but were not ready to pay immediately
the agreed consideration. Plaintiffs were depending on the loan that they jointly applied
for with PAG-IBIG. In fact, if only to augment their resources for its purpose, plaintiff
Clemente Catabas who used to work with the Philippine Long Distance Telephone
Company had to prematurely retire in order to collect his retirement benefits.
Obviously, the defendants knew and took into consideration this financial handicap of the
plaintiffs in the execution of the Contract to Sell. Hence, the grace period to pay the
balance of P260,000.00 up to the first week of December 1983. By then, the plaintiffs
were expecting the release of the loan they applied for which was being followed up by
their acquaintance at Urban Bank. The deadline came and passed but no payment was
made. The contract provided that failure to pay the balance will "automatically cancel this
contract and the vendor shall immediately return the downpayment of P10,000.00, to the
Vendees" but the transaction was not called off nor the Pl0,000.00 returned. Evidently,
the parties wanted the sale to go through. Defendant Meynardo Policarpio testified, and
it was not denied, that the plaintiffs requested the defendants to wait a little longer as the
person supposed to help hasten the release of the loan was busy since it was Christmas
time then, and to that request, the defendants acceded. This is the logical explanation of
the plaintiffs moving into the premises on December 18, 1983. It is at this point that the
Court is impressed with the defendants' gesture of good faith and accommodation. For
although the Contract to Sell provided: "Vendees shall not take possession of the
property until aforesaid balance of P260,000.00 shall have been paid" (emphasis
supplied), the defendants, barely two (2) weeks after the contract should have been
automatically cancelled for the non-payment of the balance, allowed the plaintiffs to
move in even if they have to rent another place to stay.
Against this backdrop, there was no difficulty for the plaintiffs insuring the defendants'
cooperation to accelerate the release of the loan. Hence, when defendants were told it
was necessary for them to signify their conformity to the letter (Exhs. "G", "6") sent by
Urban Bank to PCIB, they readily obliged. The same alacrity was displayed regarding
the Deed of Absolute Sale without which Urban Bank would not release the loan. Again,

at this point, the defendants' good faith and implicit trust in the plaintiffs were generously
portrayed. Although the consideration of P230,000.00 stated in the Deed of Absolute
Sale was not fully paid (the plaintiffs had paid only P75,000.00, with the amounts of
P10,000.00 and P5,000.00, being paid after April 9, 1984) the defendants executed the
document. True, there was the motivation for the defendants to sign because of the
plaintiffs' verbal conformity that the selling price would be increased to P330,000.00; but
this was still a contingency wholly dependent on plaintiff s word of honor, while the
defendants' leverage had become a fait accompli upon affixing their signatures due to
the absolute nature of the sale and physical possession of the premises delivered to the
plaintiffs.
Up to this stage, the defendants have done everything within their capability to help the
plaintiffs effect the release of their loan.1wphi1 At this point, too, the only impediment to
Urban Bank's release of the loan was the non-delivery of the title. It was a hitch that was
later to spell the non-release of the loan which plaintiffs impute, was due to the fault of
the defendants.
In the institution of the Complaint, the plaintiffs were of the impression that the delivery of
the title to Urban Bank was the duty of the defendants which they failed to discharge and
for which, consequently, they should be held accountable. This frame of mind while
impressive at first blush, cannot be countenanced and finds no support from the
evidence adduced.
The plaintiffs fully knew from the inception of the transaction that the defendants' title
was mortgaged with PCIB (Romulo Catabas, TSN, March 10, 1984 p. 20). Much as they
would want to, the defendants could not just get the title from PCIB without the mortgage
balance being paid. Precisely, the letter (Exh. "G", also Exh. "6") itself of the Urban Bank
bearing defendants' signatures affixed thereon, at the behest of the plaintiffs themselves,
was directed to PCIB requesting the latter for the delivery of the title, among other
things, before the former pays off the mortgage balance thereat as a pre-condition for
the release of the loan. The plaintiffs are now in estoppel to assumejust because it is
expedient to do so a posture inconsistent with this clear narration of facts. To hold the
defendants responsible for an act that PCIB alone could do is decidedly illogical and
puerile (Rollo, pp. 85-87)
Moreover, under the contract to sell, it is provided therein that failure on the part of the vendees
(private respondents) to pay the balance of the price on the first week of December 1983 will
automatically cancel the contract. The private respondents' obligation to pay was a suspensive
condition to the obligation of the petitioners-spouses to sell and deliver the subject property.
Since, admittedly, the private respondents failed on their obligation to pay, this rendered the
contract to sell ineffective and without force and effect. (See Spouses Eduardo and Ann Agustin
v. Court of Appeals G.R. No. 84751, June 6, 1990)

The subsequent execution of the deed of sale did not in any manner transfer ownership of the
property to the private respondents. It is clear that the deed of sale was executed merely to
facilitate the release of the private respondents' PAG-IBIG loan from the Urban Bank and not for
the purpose of actually transferring ownership.
With these findings, we rule that the private respondents are not entitled to specific
performance. The obligation in a contract of sale is reciprocal. (Cortez v. Bibao and Borromeo
41 Phil. 298 [1920]). Since, the vendees admittedly had not paid the full price of the property
which was their obligation under the subject contract they cannot now compel performance of
the said contract.
Under the facts of the case, we agree with the trial court that the petitioners-spouses are entitled
to moral damages, to wit:
The defendants' claim of the trauma they suffered upon being sued by the plaintiffs
inspires belief. After doing everything in good faith within their capability to help
accelerate the release of plaintiffs' loan, their shock was understandable when the
plaintiffs, in brazen disregard of their failure to comply with their contractual obligation,
suddenly filed the instant complaint. Rather than being commended, as should have
been expected, for walking the Biblical second mile in generous accommodation of the
plaintiffs, the defendants were instead unceremoniously brought to Court. (Rollo, p. 90)
However, we find the award of P30,000.00 as moral damages excessive. In the case
of Prudenciado v. Alliance Transport System, Inc. (148 SCRA 440 [1987]) cited in Radio
Communications of the Philippines, Inc. (RCPI), et al. v. Rodriguez, G.R. No. 83768 February
28,1990 we held that ". . . moral damages are emphatically not intended to enrich a complainant
at the expense of a defendant. They are accorded only to enable the injured party to obtain
means, diversion or amusements that will serve to alleviate the moral suffering he has
undergone by reason of the defendants' culpable action. The award of moral damages must be
proportionate to the suffering inflicted." We rule that the amount of P15,000.00 as moral
damages in favor of the petitioners-spouses would be reasonable considering the facts and
circumstances of the case.
The award of P20,000.00 exemplary damages is not proper considering that there is no
showing that the private respondents acted in "a wanton, fraudulent, reckless, oppressive, or
malevolent manner." (Article 2232, Civil Code).

Finally, we find the award of attorney's fees in favor of the petitioners-spouses unwarranted. In
the case of Radio Communications of the Philippines, Inc. v. Rodriguez, supra, citing the case
of Stronghold Insurance Company, Inc. v. Court of Appeals, 173 SCRA 619 [1989] we ruled:
In Abrogar v. Intermediate Appellate Court (G.R. No. 67970, January 15, 1988, 157
SCRA 57) the Court had occasion to state that '[t]he reason for the award of attorney's

fees must be stated in the text of the court's decision, otherwise, if it is stated only in the
dispositive portion of the decision, the same shall be disallowed on appeal. (at p.
61, citing Mirasol v. dela Cruz, G.R. No. L-32552, July 31, 1978, 84 SCRA 337).
Nowhere does the text of the decision of the trial court mention the reason for the award of
attorney's fees. The trial court's decision failed to justify the award of P30,000.00 as attorney's
fees. The award of attorney's fees must, therefore, be deleted. (See also Spouses Eduardo and
Ann Agustin v. Court of Appeals, supra).
WHEREFORE, the questioned decision and Resolution of the Court of Appeals are REVERSED
and SET ASIDE. The decision of the Regional Trial Court Pasig, Metro Manila is hereby
REINSTATED except that the award for moral damages is reduced to P15,000.00 and the
awards for exemplary damages in the amount of P20,000.00 and attorney's fees in the amount
of P30,000.00 are deleted.
SO ORDERED.
G.R. No. 146918

May 2, 2006

CITIBANK, N.A., Petitioner,


vs.
SPS. LUIS and CARMELITA CABAMONGAN and their sons LUISCABAMONGAN, JR. and
LITO CABAMONGAN, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari of the Decision1 dated January 26, 2001
and the Resolution2dated July 30, 2001 of the Court of Appeals (CA) in CA-G.R. CV No. 59033.
The factual background of the case is as follows:
On August 16, 1993, spouses Luis and Carmelita Cabamongan opened a joint "and/or" foreign
currency time deposit in trust for their sons Luis, Jr. and Lito at the Citibank, N.A., Makati
branch, with Reference No. 60-22214372, in the amount of $55,216.69 for a term of 182 days or
until February 14, 1994, at 2.5625 per cent interest per annum.3 Prior to maturity, or on
November 10, 1993, a person claiming to be Carmelita went to the Makati branch and preterminated the said foreign currency time deposit by presenting a passport, a Bank of America
Versatele Card, an ATM card and a Mabuhay Credit Card.4 She filled up the necessary forms for
pre-termination of deposits with the assistance of Account Officer Yeye San Pedro. While the
transaction was being processed, she was casually interviewed by San Pedro about her
personal circumstances and investment plans.5Since the said person failed to surrender the
original Certificate of Deposit, she had to execute a notarized release and waiver document in
favor of Citibank, pursuant to Citibank's internal procedure, before the money was released to
her.6 The release and waiver document7 was not notarized on that same day but the money was
nonetheless given to the person withdrawing.8 The transaction lasted for about 40 minutes.9

After said person left, San Pedro realized that she left behind an identification card.10 Thus, San
Pedro called up Carmelita's listed address at No. 48 Ranger Street, Moonwalk Village, Las
Pinas, Metro Manila on the same day to have the card picked up.11 Marites, the wife of Lito,
received San Pedro's call and was stunned by the news that Carmelita preterminated her
foreign currency time deposit because Carmelita was in the United States at that time.12 The
Cabamongan spouses work and reside in California. Marites made an overseas call to
Carmelita to inform her about what happened.13 The Cabamongan spouses were shocked at the
news. It seems that sometime between June 10 and 16, 1993, an unidentified person broke in
at the couple's residence at No. 3268 Baldwin Park Boulevard, Baldwin Park, California. Initially,
they reported that only Carmelita's jewelry box was missing, but later on, they discovered that
other items, such as their passports, bank deposit certificates, including the subject foreign
currency deposit, and identification cards were also missing.14 It was only then that the
Cabamongan spouses realized that their passports and bank deposit certificates were lost.15
Through various overseas calls, the Cabamongan spouses informed Citibank, thru San Pedro,
that Carmelita was in the United States and did not preterminate their deposit and that the
person who did so was an impostor who could have also been involved in the break-in of their
California residence. San Pedro told the spouses to submit the necessary documents to support
their claim but Citibank concluded nonetheless that Carmelita indeed preterminated her deposit.
In a letter dated September 16, 1994, the Cabamongan spouses, through counsel, made a
formal demand upon Citibank for payment of their preterminated deposit in the amount of
$55,216.69 with legal interests.16 In a letter dated November 28, 1994, Citibank, through
counsel, refused the Cabamongan spouses' demand for payment, asserting that the subject
deposit was released to Carmelita upon proper identification and verification.17
On January 27, 1995, the Cabamongan spouses filed a complaint against Citibank before the
Regional Trial Court of Makati for Specific Performance with Damages, docketed as Civil Case
No 95-163 and raffled to Branch 150 (RTC).18
In its Answer dated April 20, 1995, Citibank insists that it was not negligent of its duties since the
subject deposit was released to Carmelita only upon proper identification and verification.19
At the pre-trial conference the parties failed to arrive at an amicable settlement.20 Thus, trial on
the merits ensued.
For the plaintiffs, the Cabamongan spouses themselves and Florenda G. Negre, Documents
Examiner II of the Philippine National Police (PNP) Crime Laboratory in Camp Crame, Quezon
City, testified. The Cabamongan spouses, in essence, testified that Carmelita could not have
preterminated the deposit account since she was in California at the time of the
incident.21 Negre testified that an examination of the questioned signature and the samples of
the standard signatures of Carmelita submitted in the RTC showed a significant divergence.
She concluded that they were not written by one and the same person.22
For the respondent, Citibank presented San Pedro and Cris Cabalatungan, Vice-President and
In-Charge of Security and Management Division. Both San Pedro and Cabalatungan testified
that proper bank procedure was followed and the deposit was released to Carmelita only upon
proper identification and verification.23
On July 1, 1997, the RTC rendered a decision in favor of the Cabamongan spouses and against
Citibank, the dispositive portion of which reads, thus:

WHEREFORE, premises considered, defendant Citibank, N.A., is hereby ordered to pay the
plaintiffs the following:
1) the principal amount of their Foreign Currency Deposit (Reference No. 6022214372)
amounting to $55,216.69 or its Phil. Currency equivalent plus interests from August 16,
1993 until fully paid;
2) Moral damages of P50,000.00;
3) Attorney's fees of P50,000.00; and
4) Cost of suit.
SO ORDERED.24
The RTC reasoned that:
xxx Citibank, N.A., committed negligence resulting to the undue suffering of the plaintiffs. The
forgery of the signatures of plaintiff Carmelita Cabamongan on the questioned documents has
been categorically established by the handwriting expert. xxx Defendant bank was clearly
remiss in its duty and obligations to treat plaintiff's account with the highest degree of care,
considering the nature of their relationship. Banks are under the obligation to treat the accounts
of their depositors with meticulous care. This is the reason for their established procedure of
requiring several specimen signatures and recent picture from potential depositors. For every
transaction, the depositor's signature is passed upon by personnel to check and countercheck
possible irregularities and therefore must bear the blame when they fail to detect the forgery or
discrepancy.25
Despite the favorable decision, the Cabamongan spouses filed on October 1, 1997 a motion to
partially reconsider the decision by praying for an increase of the amount of the damages
awarded.26 Citibank opposed the motion.27 On November 19, 1997, the RTC granted the motion
for partial reconsideration and amended the dispositive portion of the decision as follows:
From the foregoing, and considering all the evidence laid down by the parties, the dispositive
portion of the court's decision dated July 1, 1997 is hereby amended and/or modified to read as
follows:
WHEREFORE, defendant Citibank, N.A., is hereby ordered to pay the plaintiffs the following:
1) the principal amount of their foreign currency deposit (Reference No. 6022214372)
amounting to $55,216.69 or its Philippine currency equivalent (at the time of its actual
payment or execution) plus legal interest from Aug. 16, 1993 until fully paid.
2) moral damages in the amount of P200,000.00;
3) exemplary damages in the amount of P100,000.00;
4) attorney's fees of P100,000.00;

5) litigation expenses of P200,000.00;


6) cost of suit.
SO ORDERED.28
Dissatisfied, Citibank filed an appeal with the CA, docketed as CA-G.R. CV No. 59033.29 On
January 26, 2001, the CA rendered a decision sustaining the finding of the RTC that Citibank
was negligent, ratiocinating in this wise:
In the instant case, it is beyond dispute that the subject foreign currency deposit was preterminated on 10 November 1993. But Carmelita Cabamongan, who works as a nursing aid
(sic) at the Sierra View Care Center in Baldwin Park, California, had shown through her
Certificate of Employment and her Daily Time Record from the [sic] January to December 1993
that she was in the United States at the time of the incident.
Defendant Citibank, N.A., however, insists that Carmelita was the one who pre-terminated the
deposit despite claims to the contrary. Its basis for saying so is the fact that the person who
made the transaction on the incident mentioned presented a valid passport and three (3) other
identification cards. The attending account officer examined these documents and even
interviewed said person. She was satisfied that the person presenting the documents was
indeed Carmelita Cabamongan. However, such conclusion is belied by these following
circumstances.
First, the said person did not present the certificate of deposit issued to Carmelita Cabamongan.
This would not have been an insurmountable obstacle as the bank, in the absence of such
certificate, allows the termination of the deposit for as long as the depositor executes a
notarized release and waiver document in favor of the bank. However, this simple procedure
was not followed by the bank, as it terminated the deposit and actually delivered the money to
the impostor without having the said document notarized on the flimsy excuse that another
department of the bank was in charge of notarization. The said procedure was obviously for the
protection of the bank but it deliberately ignored such precaution. At the very least, the conduct
of the bank amounts to negligence.
Second, in the internal memorandum of Account Officer Yeye San Pedro regarding the incident,
she reported that upon comparing the authentic signatures of Carmelita Cabamongan on file
with the bank with the signatures made by the person claiming to be Cabamongan on the
documents required for the termination of the deposit, she noticed that one letter in the latter
[sic] signatures was different from that in the standard signatures. She requested said person to
sign again and scrutinized the identification cards presented. Presumably, San Pedro was
satisfied with the second set of signatures made as she eventually authorized the termination of
the deposit. However, upon examination of the signatures made during the incident by the
Philippine National Police (PNP) Crime Laboratory, the said signatures turned out to be
forgeries. As the qualifications of Document Examiner Florenda Negre were established and
she satisfactorily testified on her findings during the trial, we have no reason to doubt the validity
of her findings. Again, the bank's negligence is patent. San Pedro was able to detect
discrepancies in the signatures but she did not exercise additional precautions to ascertain the
identity of the person she was dealing with. In fact, the entire transaction took only 40 minutes to
complete despite the anomalous situation. Undoubtedly, the bank could have done a better job.

Third, as the bank had on file pictures of its depositors, it is inconceivable how bank employees
could have been duped by an impostor. San Pedro admitted in her testimony that the woman
she dealt with did not resemble the pictures appearing on the identification cards presented but
San Pedro still went on with the sensitive transaction. She did not mind such disturbing anomaly
because she was convinced of the validity of the passport. She also considered as decisive the
fact that the impostor had a mole on her face in the same way that the person in the pictures on
the identification cards had a mole. These explanations do not account for the disparity between
the pictures and the actual appearance of the impostor. That said person was allowed to
withdraw the money anyway is beyond belief.
The above circumstances point to the bank's clear negligence. Bank transactions pass through
a successive [sic] of bank personnel, whose duty is to check and countercheck transactions for
possible errors. While a bank is not expected to be infallible, it must bear the blame for failing to
discover mistakes of its employees despite established bank procedure involving a battery of
personnel designed to minimize if not eliminate errors. In the instant case, Yeye San Pedro, the
employee who primarily dealt with the impostor, did not follow bank procedure when she did not
have the waiver document notarized. She also openly courted disaster by ignoring
discrepancies between the actual appearance of the impostor and the pictures she presented,
as well as the disparities between the signatures made during the transaction and those on file
with the bank. But even if San Pedro was negligent, why must the other employees in the
hierarchy of the bank's work flow allow such thing to pass unnoticed and unrectified?30
The CA, however, disagreed with the damages awarded by the RTC. It held that, insofar as the
date from which legal interest of 12% is to run, it should be counted from September 16, 1994
when extrajudicial demand was made. As to moral damages, the CA reduced it to P100,000.00
and deleted the awards of exemplary damages and litigation expenses. Thus, the dispositive
portion of the CA decision reads:
WHEREFORE, the decision of the trial court dated 01 July 1997, and its order dated 19
November 1997, are hereby AFFIRMED with the MODIFICATION that the legal interest for
actual damages awarded in the amount of $55,216.69 shall run from 16 September 1994;
exemplary damages amounting to P100,000.00 and litigation expenses amounting
to P200,000.00 are deleted; and moral damages is reduced to P100,000.00.
Costs against defendant.
SO ORDERED.31
The Cabamongan spouses filed a motion for partial reconsideration on the matter of the award
of damages in the decision.32 On July 30, 2001, the
CA granted in part said motion and modified its decision as follows:
1. The actual damages in amount of $55,216.69, representing the amount of appellees'
foreign currency time deposit shall earn an interest of 2.5625% for the period 16 August
1993 to 14 February 1994, as stipulated in the contract;
2. From 16 September 1994 until full payment, the amount of $55,216.69 shall earn
interest at the legal rate of 12% per annum, and;

3. The award of moral damages is reduced to P50,000.00.33


Dissatisfied, both parties filed separate petitions for review on certiorari with this Court. The
Cabamongan spouses' petition, docketed as G.R. No. 149234, was denied by the Court per its
Resolution dated October 17, 2001.34 On the other hand, Citibank's petition was given due
course by the Court per Resolution dated December 10, 2001 and the parties were required to
submit their respective memoranda.35
Citibank poses the following errors for resolution:
1. THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND GRAVELY
ABUSED ITS DISCRETION IN UPHOLDING THE LOWER COURT'S DECISION
WHICH IS NOT BASED ON CLEAR EVIDENCE BUT ON GRAVE MISAPPREHENSION
OF FACTS.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE
DECISION OF THE TRIAL COURT AWARDING MORAL DAMAGES WHEN IN FACT
THERE IS NO BASIS IN LAW AND FACT FOR SAID AWARD.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE
PRINCIPAL AMOUNT OF US$55,216.69 SHOULD EARN INTEREST AT THE RATE OF
12% PER ANNUM FROM 16 SEPTEMBER 1994 UNTIL FULL PAYMENT.36
Anent the first ground, Citibank contends that the CA erred in affirming the RTC's finding that it
was negligent since the said courts failed to appreciate the extra diligence of a good father of a
family exercised by Citibank thru San Pedro.
As to the second ground, Citibank argues that the Cabamongan spouses are not entitled to
moral damages since moral damages can be awarded only in cases of breach of contract where
the bank has acted willfully, fraudulently or in bad faith. It submits that it has not been shown in
this case that Citibank acted willfully, fraudulently or in bad faith and mere negligence, even if
the Cabamongan spouses suffered mental anguish or serious anxiety on account thereof, is not
a ground for awarding moral damages.
On the third ground, Citibank avers that the interest rate should not be 12% but the stipulated
rate of 2.5625% per annum. It adds that there is no basis to pay the interest rate of 12% per
annum from September 16, 1994 until full payment because as of said date there was no legal
ground yet for the Cabamongan spouses to demand payment of the principal and it is only after
a final judgment is issued declaring that Citibank is obliged to return the principal amount of
US$55,216.69 when the right to demand payment starts and legal interest starts to run.
On the other hand, the Cabamongan spouses contend that Citibank's negligence has been
established by evidence. As to the interest rate, they submit that the stipulated interest of
2.5635% should apply for the 182-day contract period from August 16, 1993 to February 14,
1993; thereafter, 12% should apply. They further contend that the RTC's award of exemplary
damages of P100,000.00 should be maintained. They submit that the CA erred in treating the
award of litigation expenses as lawyer's fees since they have shown that they incurred actual
expenses in litigating their claim against Citibank. They also contend that the CA erred in
reducing the award of moral damages in view of the degree of mental anguish and emotional
fears, anxieties and nervousness suffered by them.37

Subsequently, Citibank, thru a new counsel, submitted a Supplemental Memorandum,38 wherein


it posits that, assuming that it was negligent, the Cabamongan spouses were guilty of
contributory negligence since they failed to notify Citibank that they had migrated to the United
States and were residents thereat and after having been victims of a burglary, they should have
immediately assessed their loss and informed Citibank of the disappearance of the bank
certificate, their passports and other identification cards, then the fraud would not have been
perpetuated and the losses avoided. It further argues that since the Cabamongan spouses are
guilty of contributory negligence, the doctrine of last clear chance is inapplicable.
Citibank's assertion that the Cabamongan spouses are guilty of contributory negligence and
non-application of the doctrine of last clear chance cannot pass muster since these contentions
were raised for the first time only in their Supplemental Memorandum. Indeed, the records show
that said contention were neither pleaded in the petition for review and the memorandum nor in
Citibank's Answer to the complaint or in its appellant's brief filed with the CA. To consider the
alleged facts and arguments raised belatedly in a supplemental pleading to herein petition for
review at this very late stage in the proceedings would amount to trampling on the basic
principles of fair play, justice and due process.391avvphil.net
The Court has repeatedly emphasized that, since the banking business is impressed with public
interest, of paramount importance thereto is the trust and confidence of the public in general.
Consequently, the highest degree of diligence40 is expected,41 and high standards of integrity
and performance are even required, of it.42By the nature of its functions, a bank is "under
obligation to treat the accounts of its depositors with meticulous care,43 always having in mind
the fiduciary nature of their relationship."44
In this case, it has been sufficiently shown that the signatures of Carmelita in the forms for
pretermination of deposits are forgeries. Citibank, with its signature verification procedure, failed
to detect the forgery. Its negligence consisted in the omission of that degree of diligence
required of banks. The Court has held that a bank is "bound to know the signatures of its
customers; and if it pays a forged check, it must be considered as making the payment out of its
own funds, and cannot ordinarily charge the amount so paid to the account of the depositor
whose name was forged."45 Such principle equally applies here.
Citibank cannot label its negligence as mere mistake or human error. Banks handle daily
transactions involving millions of pesos.46 By the very nature of their works the degree of
responsibility, care and trustworthiness expected of their employees and officials is far greater
than those of ordinary clerks and employees.47 Banks are expected to exercise the highest
degree of diligence in the selection and supervision of their employees.48
The Court agrees with the observation of the CA that Citibank, thru Account Officer San Pedro,
openly courted disaster when despite noticing discrepancies in the signature and photograph of
the person claiming to be Carmelita and the failure to surrender the original certificate of time
deposit, the pretermination of the account was allowed. Even the waiver document was not
notarized, a procedure meant to protect the bank. For not observing the degree of diligence
required of banking institutions, whose business is impressed with public interest, Citibank is
liable for damages.
As to the interest rate, Citibank avers that the claim of the Cabamongan spouses does not
constitute a loan or forbearance of money and therefore, the interest rate of 6%, not 12%,
applies.

The Court does not agree.


The time deposit subject matter of herein petition is a simple loan. The provisions of the New
Civil Code on simple loan govern the contract between a bank and its depositor. Specifically,
Article 1980 thereof categorically provides that ". . . savings . . . deposits of money in banks and
similar institutions shall be governed by the provisions concerning simple loan." Thus, the
relationship between a bank and its depositor is that of a debtor-creditor, the depositor being the
creditor as it lends the bank money, and the bank is the debtor which agrees to pay the
depositor on demand.
The applicable interest rate on the actual damages of $55,216.69, should be in accordance with
the guidelines set forth in Eastern Shipping Lines, Inc. v. Court of Appeals49 to wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The
provisions under Title XVIII on "Damages" of the Civil Code govern in determining the
measure of recoverable damages.
II. With regard particularly to an award of interest, in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed,
as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the
demand is made, the interest shall begin to run only from the date the judgment
of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be 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.50

Thus, in a loan or forbearance of money, the interest due should be that stipulated in writing,
and in the absence thereof, the rate shall be 12% per annum counted from the time of demand.
Accordingly, the stipulated interest rate of 2.562% per annum shall apply for the 182-day
contract period from August 16, 1993 to February 14, 1994. For the period from the date of
extra-judicial demand, September 16, 1994, until full payment, the rate of 12% shall apply. As
for the intervening period between February 15, 1994 to September 15, 1994, the rate of
interest then prevailing granted by Citibank shall apply since the time deposit provided for roll
over upon maturity of the principal and interest.51
As to moral damages, in culpa contractual or breach of contract, as in the case before the
Court, moral damages are recoverable only if the defendant has acted fraudulently or in bad
faith,52 or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of
his contractual obligations.53 The act of Citibank's employee in allowing the pretermination of
Cabamongan spouses' account despite the noted discrepancies in Carmelita's signature and
photograph, the absence of the original certificate of time deposit and the lack of notarized
waiver dormant, constitutes gross negligence amounting to bad faith under Article 2220 of the
Civil Code.
There is no hard-and-fast rule in the determination of what would be a fair amount of moral
damages since each case must be governed by its own peculiar facts. The yardstick should be
that it is not palpably and scandalously excessive.54 The amount of P50,000.00 awarded by the
CA is reasonable and just. Moreover, said award is deemed final and executory insofar as
respondents are concerned considering that their petition for review had been denied by the
Court in its final and executory Resolution dated October 17, 2001 in G.R. No. 149234.
Finally, Citibank contends that the award of attorney's fees should be deleted since such award
appears only in the dispositive portion of the decision of the RTC and the latter failed to
elaborate, explain and justify the same.
Article 2208 of the New Civil Code enumerates the instances where such may be awarded and,
in all cases, it must be reasonable, just and equitable if the same were to be granted. Attorney's
fees as part of damages are not meant to enrich the winning party at the expense of the losing
litigant. They are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate.55 The award of attorney's fees is the exception
rather than the general rule. As such, it is necessary for the court to make findings of facts and
law that would bring the case within the exception and justify the grant of such award. The
matter of attorney's fees cannot be mentioned only in the dispositive portion of the
decision.56 They must be clearly explained and justified by the trial court in the body of its
decision. Consequently, the award of attorney's fees should be deleted.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision and
Resolution areAFFIRMED with MODIFICATIONS, as follows:
1. The interest shall be computed as follows:
a. The actual damages in principal amount of $55,216.69, representing the
amount of foreign currency time deposit shall earn interest at the stipulated rate
of 2.5625% for the period August 16, 1993 to February 14, 1994;

b. From February 15, 1994 to September 15, 1994, the principal amount of
$55,216.69 and the interest earned as of February 14, 1994 shall earn interest at
the rate then prevailing granted by Citibank;
c. From September 16, 1994 until full payment, the principal amount of
$55,216.69 and the interest earned as of September 15, 1994, shall earn interest
at the legal rate of 12% per annum;
2. The award of attorney's fees is DELETED.
No pronouncement as to costs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice