HEIRS OF SIMEON BORLADO, namely, ADELAIDA BORLADO, LORETO BORLADO, REYNALDO

BORLADO, RICARDO BORLADO, FRANCISCO BORLADO and ALADINO DORADO, petitioners,

vs.
COURT OF APPEALS, and SALVACION VDA. DE BULAN, BIENVENIDO BULAN, JR., NORMA B.
CLARITO and THE PROVINCIAL SHERIFF OF CAPIZ, respondents.
PARDO, J.:
The case is an appeal via certiorari from a decision1 of the Court of Appeals affirming the decision of the
trial court, the dispositive portion of which reads:
"WHEREFORE, judgment is rendered dismissing plaintiffs' complaint for lack of cause of action
and ordering as vacated the restraining order and writ of preliminary injunction issued in this
case; and
"1. Plaintiffs to be jointly and solidarily liable to defendants the quantity of one hundred (100)
cavans of palay every year from 1972 until plaintiffs vacate the premises of the land in question;
"2. Declaring defendants as owner of the land and entitled to possession;
"3. Ordering plaintiffs to pay defendants the sum of P5,000.00 as attorney's fees and the sum of
P5,000.00 as litigation expenses; and
"4. To pay the costs of the suit.
"SO ORDERED.
"Roxas City, Philippines, March 18, 1988.

"(Sgd.) JONAS A. ABELLAR

"Judge"2

The Facts
The facts, as found by the Court of Appeals, are as follows:
"The records show that plaintiffs-appellants3 (petitioners) are the heirs of Simeon Borlado whose
parents were Serapio Borlado and Balbina Bulan. The original owner of the lot in question, Lot
No. 2097 of the Pontevedra Cadastre, Maayon, Capiz, was Serapio Borlado, grandfather of
petitioners.
"On 15 April 1942, Serapio sold the lot to Francisco Bacero (Exh. "C", p. 247, MTC Record) for
Three Hundred Pesos (P300.00). After the death of Francisco on 26 February 1948, his widow
Amparo Dionisio Vda. de Bacero, in her capacity as legal guardian of her minor children, namely:
Nicolas, Valentin and Luzviminda, all surnamed Bacero and forced heirs of Francisco Bacero sold
it (the lot) to the Spouses Bienvenido Bulan and Salvacion Borbon, through a Deed of Absolute
Sale dated 27 August 1954 (Exh. 65, pp. 243-245, id.).

"Upon the execution of the Deed of Sale and even prior thereto, actual possession of Lot No.
2057 was with the vendees-spouses Bulans in view of a loan obtained by Francisco Bacero from
them in December 1947 (Exh. "65", supra). Exercising their right of ownership under the Deed of
Sale, Salvacion Borbon Vda. de Bulan declared the lot in her name in 1900 for taxation purposes
under Tax Declaration No. 2232 (Exh. "F", p. 254, Record [MTC]). She paid the corresponding
taxes as evidenced by the Tax Receipts marked as Exhibits "K", "J", "I", "G", "F" and "H" (pp. 248253, Record, id.). Salvacion and her co-defendants-appellees' 4 possession of the lot was
continuous, peaceful, uninterrupted, adverse and exclusive until November 4, 1972, when
petitioners forcibly entered and wrested physical possession thereof from them.
"On 23 November 1972, respondents filed with the Municipal Court of Maayon, Capiz a complaint
for ejectment docketed as Civil Case No. A-1, against petitioners (p. 1, id.). The ejectment case
was decided in favor of the respondents whereby the petitioners, their agents, tenants, privies
and members of their families were ordered to vacate Lot No. 2079 and deliver possession to the
respondents together with all improvements and standing crops; to pay said respondents One
Hundred (100) cavans of palay annually from 1972 to the present or in the total amount of One
Thousand One Hundred (1,100) cavans of palay; and to pay the sum of Five Thousand
(P5,000.00) Pesos as reimbursement for the amount respondents had paid their lawyer to protect
their rights; and, the costs of suit (Exh. "57", pp. 256-261, id.). Instead of appealing the adverse
decision to the Court of First Instance (now RTC), on 8 November 1983, petitioners filed the
present case with the Regional Trial Court, Branch 18, Roxas City, docketed as Civil Case No. V4887. This case was dismissed for lack of cause of action in a decision, the decretal portion of
which was quoted earlier."5
On 24 November 1993, the Court of Appeals promulgated its decision affirming in toto the appealed
decision.6
Hence, this appeal.7
The Issue
The issue raised is whether the Court of Appeals erred in ruling that respondents were the owners of the
lot in question.
The Court's Ruling
We deny the petition. The issue is factual. In an appeal via certiorari, we may not review the findings of
fact of the Court of Appeals.8 When supported by substantial evidence, the findings of fact of the Court of
Appeals are conclusive and binding on the parties and are not reviewable by this Court, 9 unless the case
falls under any of the exceptions to the rule.10
Petitioner failed to prove that the case falls within the exceptions. 11 The Supreme Court is not a trier of
facts.12 It is not our function to review, examine and evaluate or weigh the probative value of the evidence
presented.13 A question of fact would arise in such event.14 Questions of fact cannot be raised in an
appeal via certiorari before the Supreme Court and are not proper for its consideration. 15
Nevertheless, as a matter of law, the trial court and the Court of Appeals erred in holding petitioners liable
to pay respondents one hundred (100) cavans of palay every year from 1972 until they vacate the
premises of the land in question.
The one hundred cavans of palay was awarded as a form of damages. We cannot sustain the award.
"Palay" is not legal tender currency in the Philippines.

El Fallo del Tribunal

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of Appeals in CAG.R. CV No. 18980 with modification that petitioners' liability to pay respondents one hundred (100)
cavans of palay every year from 1972 until petitioners vacate the land in question is deleted, for lack of
basis.
No costs.
SO ORDERED.
Davide, Jr., C .J ., Puno, Kapunan and Ynares-Santiago, JJ ., concur.

SPOUSES CRISTINO and BRIGIDA CUSTODIO and SPOUSES LITO and MARIA CRISTINA
SANTOS, petitioners, vs. COURT OF APPEALS, HEIRS OF PACIFICO C. MABASA and
REGIONAL TRIAL COURT OF PASIG, METRO MANILA, BRANCH 181, respondents.
DECISION
REGALADO, J.:
This petition for review on certiorari assails the decision of respondent Court of Appeals in CA-G.R.
CV No. 29115, promulgated on November 10, 1993, which affirmed with modification the decision of the
trial court, as well as its resolution dated July 8, 1994 denying petitioners motion for reconsideration.[1]
On August 26, 1982, Civil Case No. 47466 for the grant of an easement of right of way was filed by
Pacifico Mabasa against Cristino Custodio, Brigida R. Custodio, Rosalina R. Morato, Lito Santos and
Maria Cristina C. Santos before the Regional Trial Court of Pasig and assigned to Branch 22 thereof. [2]
The generative facts of the case, as synthesized by the trial court and adopted by the Court of
Appeals, are as follows:
Perusing the record, this Court finds that the original plaintiff Pacifico Mabasa died during the pendency of
this case and was substituted by Ofelia Mabasa, his surviving spouse [and children].
The plaintiff owns a parcel of land with a two-door apartment erected thereon situated at Interior P.
Burgos St., Palingon, Tipas, Taguig, Metro Manila. The plaintiff was able to acquire said property through
a contract of sale with spouses Mamerto Rayos and Teodora Quintero as vendors last September
1981. Said property may be described to be surrounded by other immovables pertaining to defendants
herein. Taking P. Burgos Street as the point of reference, on the left side, going to plaintiffs property, the
row of houses will be as follows: That of defendants Cristino and Brigido Custodio, then that of Lito and
Maria Cristina Santos and then that of Ofelia Mabasa. On the right side (is) that of defendant Rosalina
Morato and then a Septic Tank (Exhibit D). As an access toP. Burgos Street from plaintiffs property, there
are two possible passageways. The first passageway is approximately one meter wide and is about 20
meters distan(t) from Mabasas residence to P. Burgos Street. Such path is passing in between the
previously mentioned row of houses. The second passageway is about 3 meters in width and length from

plaintiff Mabasas residence to P. Burgos Street; it is about 26 meters. In passing thru said passageway, a
less than a meter wide path through the septic tank and with 5-6 meters in length has to be traversed.
When said property was purchased by Mabasa, there were tenants occupying the premises and who
were acknowledged by plaintiff Mabasa as tenants. However, sometime in February, 1982. one of said
tenants vacated the apartment and when plaintiff Mabasa went to see the premises, he saw that there
had been built an adobe fence in the first passageway making it narrower in width. Said adobe fence was
first constructed by defendants Santoses along their property which is also along the first passageway.
Defendant Morato constructed her adobe fence and even extended said fence in such a way that the
entire passageway was enclosed (Exhibit 1-Santoses and Custodios, Exh. D for plaintiff, Exhs. 1-C, 1-D
and I -E) And it was then that the remaining tenants of said apartment vacated the area. Defendant Ma.
Cristina Santos testified that she constructed said fence because there was an incident when her
daughter was dragged by a bicycle pedalled by a son of one of the tenants in said apartment along the
first passageway. She also mentioned some other inconveniences of having (at) the front of her house a
pathway such as when some of the tenants were drunk and would bang their doors and windows. Some
of their footwear were even lost. x x x[3] (Italics in original text; corrections in parentheses supplied)
On February 27, 1990, a decision was rendered by the trial court, with this dispositive part:
Accordingly, judgment is hereby rendered as follows:
1) Ordering defendants Custodios and Santoses to give plaintiff permanent access - ingress and egress,
to the public street;
2) Ordering the plaintiff to pay defendants Custodios and Santoses the sum of Eight Thousand Pesos
(P8,000) as indemnity for the permanent use of the passageway.
The parties to shoulder their respective litigation expenses. [4]
Not satisfied therewith, therein plaintiff represented by his heirs, herein private respondents, went to
the Court of Appeals raising the sole issue of whether or not the lower court erred in not awarding
damages in their favor. On November 10, 1993, as earlier stated, the Court of Appeals rendered its
decision affirming the judgment of the trial court with modification, the decretal portion of which disposes
as follows:
WHEREFORE, the appealed decision of the lower court is hereby AFFIRMED WITH MODIFICATION
only insofar as the herein grant of damages to plaintiffs-appellants. The Court hereby orders defendantsappellees to pay plaintiffs-appellants the sum of Sixty Five Thousand (P65,000) Pesos as Actual
Damages, Thirty Thousand (P30,000) Pesos as Moral Damages, and Ten Thousand (P10,000) Pesos as
Exemplary Damages. The rest of the appealed decision is affirmed to all respects. [5]
On July 8, 1994, the Court of Appeals denied petitioners motion for reconsideration. [6] Petitioners
then took the present recourse to us, raising two issues, namely, whether or not the grant of right of way
to herein private respondents is proper, and whether or not the award of damages is in order.
With respect to the first issue, herein petitioners are already barred from raising the same.
Petitioners did not appeal from the decision of the court a quo granting private respondents the right of
way, hence they are presumed to be satisfied with the adjudication therein. With the finality of the

judgment of the trial court as to petitioners, the issue of propriety of the grant of right of way has already
been laid to rest.
For failure to appeal the decision of the trial court to the Court of Appeals, petitioners cannot obtain
any affirmative relief other than those granted in the decision of the trial court. That decision of the court
below has become final as against them and can no longer be reviewed, much less reversed, by this
Court. The rule in this jurisdiction is that whenever an appeal is taken in a civil case, an appellee who has
not himself appealed may not obtain from the appellate court any affirmative relief other than what was
granted in the decision of the lower court. The appellee can only advance any argument that he may
deem necessary to defeat the appellants claim or to uphold the decision that is being disputed, and he
can assign errors in his brief if such is required to strengthen the views expressed by the court a
quo. These assigned errors, in turn, may be considered by the appellate court solely to maintain the
appealed decision on other grounds, but not for the purpose of reversing or modifying the judgment in the
appellees favor and giving him other affirmative reliefs.[7]
However, with respect to the second issue, we agree with petitioners that the Court of Appeals erred
in awarding damages in favor of private respondents. The award of damages has no substantial legal
basis. A reading of the decision of the Court of Appeals will show that the award of damages was based
solely on the fact that the original plaintiff, Pacifico Mabasa, incurred losses in the form of unrealized
rentals when the tenants vacated the leased premises by reason of the closure of the passageway.
However, the mere fact that the plaintiff suffered losses does not give rise to a right to recover
damages. To warrant the recovery of damages, there must be both a right of action for a legal wrong
inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or
damage without wrong, does not constitute a cause of action, since damages are merely part of the
remedy allowed for the injury caused by a breach or wrong. [8]
There is a material distinction between damages and injury. Injury is the illegal invasion of a legal
right; damage is the loss, hurt, or harm which results from the injury; and damages are the recompense or
compensation awarded for the damage suffered. Thus, there can be damage without injury in those
instances in which the loss or harm was not the result of a violation of a legal duty. These situations are
often called damnum absque injuria.[9] in order that a plaintiff may maintain an action for the injuries of
which he complains, he must establish that such injuries resulted from a breach of duty which the
defendant owed to the plaintiff - a concurrence of injury to the plaintiff and legal responsibility by the
person causing it.[10] The underlying basis for the award of tort damages is the premise that an individual
was injured in contemplation of law. Thus, there must first be the breach of some duty and the imposition
of liability for that breach before damages may be awarded; it is not sufficient to state that there should be
tort liability merely because the plaintiff suffered some pain and suffering) [11]
Many accidents occur and many injuries are inflicted by acts or omissions which cause damage or
loss to another but which violate no legal duty to such other person, and consequently create no cause of
action in his favor. In such cases, the consequences must be borne by the injured person alone. The law
affords no remedy for damages resulting from an act which does not amount to a legal injury or wrong. [12]
In other words, in order that the law will give redress for an act causing damage, that act must be not
only hurtful, but wrongful. There must be damnum et injuria.[13] If, as may happen in many cases, a person
sustains actual damage, that is, harm or loss to his person or property, without sustaining any legal injury,

that is, an act or omission which the law does not deem an injury, the damage is regarded as damnum
absque injuria.[14]
In the case at bar, although there was damage, there was no legal injury. Contrary to the claim of
private respondents, petitioners could not be said to have violated the principle of abuse of right. In order
that the principle of abuse of right provided in Article 21 of the Civil Code can be applied, it is essential
that the following requisites concur: (1) The defendant should have acted in a manner that is contrary to
morals, good customs or public policy; (2) The acts should be willful; and (3) There was damage or injury
to the plaintiff.[15]
The act of petitioners in constructing a fence within their lot is a valid exercise of their right as
owners, hence not contrary to morals, good customs or public policy. The law recognizes in the owner the
right to enjoy and dispose of a thing, without other limitations than those established by law. [16] It is within
the right of petitioners, as owners, to enclose and fence their property. Article 430 of the Civil Code
provides that (e)very owner may enclose or fence his land or tenements by means of walls, ditches, live
or dead hedges, or by any other means without detriment to servitudes constituted thereon.
At the time of the construction of the fence, the lot was not subject to any servitudes. There was no
easement of way existing in favor of private respondents, either by law or by contract. The fact that
private respondents had no existing right over the said passageway is confirmed by the very decision of
the trial court granting a compulsory right of way in their favor after payment of just compensation. It was
only that decision which gave private respondents the right to use the said passageway after payment of
the compensation and imposed a corresponding duty on petitioners not to interfere in the exercise of said
right.
Hence, prior to said decision, petitioners had an absolute right over their property and their act of
fencing and enclosing the same was an act which they may lawfully perform in the employment and
exercise of said right. To repeat, whatever injury or damage may have been sustained by private
respondents by reason of the rightful use of the said land by petitioners is damnum absque injuria.[17]
A person has a right to the natural use and enjoyment of his own property, according to his pleasure,
for all the purposes to which such property is usually applied. As a general rule, therefore, there is no
cause of action for acts done by one person upon his own property in a lawful and proper manner,
although such acts incidentally cause damage or an unavoidable loss to another, as such damage or loss
is damnum absque injuria.[18] When the owner of property makes use thereof in the general and ordinary
manner in which the property is used, such as fencing or enclosing the same as in this case, nobody can
complain of having been injured, because the inconvenience arising from said use can be considered as
a mere consequence of community life.[19]
The proper exercise of a lawful right cannot constitute a legal wrong for which an action will lie,
although the act may result in damage to another, for no legal right has been invaded [21] One may use
any lawful means to accomplish a lawful purpose and though the means adopted may cause damage to
another, no cause of action arises in the latters favor. Any injury or damage occasioned thereby
is damnum absque injuria. The courts can give no redress for hardship to an individual resulting from
action reasonably calculated to achieve a lawful end by lawful means. [22]
[20]

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

PNOC V. CA (1998)
G.R. No. 107518 October 8, 1998
FACTS:
September 21, 1977 early morning: M/V Maria Efigenia XV, owned by Maria Efigenia Fishing
Corporation on its way to Navotas, Metro Manila collided with the vessel Petroparcel owned by the
Luzon Stevedoring Corporation (LSC)

Board of Marine Inquiry, Philippine Coast Guard Commandant Simeon N. Alejandro found
Petroparcel to be at fault

Maria Efigenia sued the LSC and the Petroparcel captain, Edgardo Doruelo praying for an award
of P692,680.00 representing the value of the fishing nets, boat equipment and cargoes of M/V Maria
Efigenia XV with interest at the legal rate plus 25% as attorneys fees and later on amended to add
the lost value of the hull less the P200K insurance and unrealized profits and lost business
opportunities

During the pendency of the case, PNOC Shipping and Transport Corporation sought to be
substituted in place of LSC as it acquired Petroparcel

Lower Court: against PNOC ordering it to pay P6,438,048 value of the fishing boat with interest
plus P50K attorney's fees and cost of suit

CA: affirmed in toto

ISSUE: W/N the damage was adequately proven

HELD: YES. affirming with modification actual damages of P6,438,048.00 for lack of evidentiary bases
therefor. P2M nominal damages instead.

in connection with evidence which may appear to be of doubtful relevancy or incompetency or

admissibility, it is the safest policy to be liberal, not rejecting them on doubtful or technical grounds,
but admitting them unless plainly irrelevant, immaterial or incompetent, for the reason that their
rejection places them beyond the consideration of the court.
If they are thereafter found relevant or competent, can easily be remedied by completely
discarding or ignoring them
two kinds of actual or compensatory damages:
loss of what a person already possesses (dao emergente)
failure to receive as a benefit that which would have pertained to him

in the case of profit-earning chattels, what has to be assessed is the value of the chattel to its
owner as a going concern at the time and place of the loss, and this means, at least in the case of
ships, that regard must be had to existing and pending engagements
If the market value of the ship reflects the fact that it is in any case virtually certain of profitable
employment, then nothing can be added to that value in respect of charters actually lost, for to do so
would be pro tanto to compensate the plaintiff twice over.
if the ship is valued without reference to its actual future engagements and only in the light of its
profit-earning potentiality, then it may be necessary to add to the value thus assessed the anticipated
profit on a charter or other engagement which it was unable to fulfill.
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
proven through sole testimony of general manager without objection from LSC
Admissibility of evidence refers to the question of whether or not the circumstance (or evidence)
is to considered at all. On the other hand, the probative value of evidence refers to the question of
whether or not it proves an issue
Hearsay evidence whether objected to or not has no probative value.
In the absence of competent proof on the actual damage suffered, private respondent is `entitled
to nominal damages which, as the law says, is adjudicated in order that a right of the plaintiff, which
has been violated or invaded by defendant, may be vindicated and recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered
awarded in every obligation arising from law, contracts, quasi-contracts, acts or
omissions punished by law, and quasi-delicts, or in every case where property right has been invaded.
damages in name only and not in fact
amount to be awarded as nominal damages shall be equal or at least commensurate to
the injury sustained by private respondent considering the concept and purpose of such damages
Ordinarily, the receipt of insurance payments should diminish the total value of the vessel quoted
by private respondent in his complaint considering that such payment is causally related to the loss for
which it claimed compensation.
Its failure to pay the docket fee corresponding to its increased claim for damages under the
amended complaint should not be considered as having curtailed the lower courts jurisdiction since
the unpaid docket fee should be considered as a lien on the judgment

Philippine National Oil Company vs Court of Appeals G.R. 109976

April 26, 2005

-TirsoSavellano informed the BIR that PNB had failed to withhold the 15% finaltax on interest
earnings and yields from the money placements of PNOC, whichwas violative of P.D. 1931 (which
withdrew all tax exemptions of GOCCs)
-Acting on such information, the BIR requested PNOC to settle theaforementioned tax liability;
PNOC offered to compromise the same byproposing that it be set-off against a claim by
NAPOCOR for tax refund/credit (the amount of the tax refund was supposedly a receivable
account of PNOC fromNAPOCOR)
-The proposalwas found premature by the BIR as NAPOCORs claim was stillunder process, so
PNOC amended its offer and offered to pay an amount representing 30% of the basic tax in
accordance with E.O. 44;The same wasaccepted by BIR Commissioner Bienvenido Tan

-Meanwhile,Savellano was paid the informers reward (15% of the tax collectedfrom PNOC and
PNB); A month after receiving his last installment for the reward,Savellano wrote the BIR to
demand payment of the balance of his reward, towhich the BIR (through Comm. Tan) replied that
Savellano was no longer owedby them as he had already received an amount equal to 15% of
the compromiseagreement proposed by PNOC; Savellano sought a reconsideration
of thedecision, questioning the legality of the compromise agreement between the BIRand PNOC
-While his Motion for Reconsideration was yet pending with the BIR, Savellanofiled a Petition for
Review with the CTA claiming Comm. Tan acted with graveabuse of discretion in entering into a
compromise agreement with PNOC which immensely lessened his informers reward
-Ultimately, new BIR Commissioner Jose Ong, found meritorious Savellanos Motion for
Reconsideration and ordered the PNB to pay the deficiency withholding tax on the
interest earnings from PNOCs money placements
-The CTA later on likewise found the compromise agreement entered intobetween the BIR and
PNOC as without any force and effect; They likewiseordered that upon payment by PNOC,
Savellano was entitled to the balance of hisinformers reward
-The CA concurred with the CTA decision and affirmed the same, hence the caseat barIssue/s:
1.Was the CTA declaration finding the compromise agreement between theBIR and
PNOC valid?
2.Was the CTA finding that the deficiency withholding tax assessment against PNB
was already final and unappealable and unenforceable valid?
3.Was the CTA order directing payment of additional informers reward for Savellano
valid?

Held:
1. Compromise agreement between PNOC and BIR is void for being contraryto law and public policy
2. The withholding tax assessment vs. PNB had become final andunappealable
3.Savellano is entitled to be paid the remainder of his informers reward
Ratio:

1.PNOC could not apply for a compromise under E.O. 44 because its taxliability was not a
delinquent account or a disputed assessment. PNOCs tax liability could not be considered a
delinquent account because it was not self-assessed as the BIR conducted an investigation
afterreceiving information from Savellano. Nor is there a deficiencyassessment present. Neither
PNOC or PNB conducted self-assessment,and neither was there any tax assessment issued
by the BIR vs them.PNOC and PNB were both silent about their tax liabilities until they
wereassessed thereon.(Try to make it more specific or particular by infusing your own
understanding of E.O. 44. This is alien to me so I wont elaborate too much, foundation nalangito
to make your work easier. Anghaba din ngRatio, grabe. I think this might be the only or at least
the mainissue/premise where tax is heavily involved.)
2.The CTA and the CA declared as final and unappealable (and thusunenforceable) the
assessment vs PNB since PNB failed to protest it within the 30-day prescribed period.
3. Savellano is entitled to additional informers award since the BIR had already collected the full
amount of the tax assessment against PNB. (Sec.316(1) of the 1977 NIRC)

Gatchalian V. Delim (1991)

FACTS:

July 11,1973: Reynalda Gatchalian boarded Thames" mini bus at Aringay, La Union bound for
Bauang, of the same province. The bus bumped a cement flower pot on the side of the road, went off
the road, turned turtle and fell into a ditch.

Gatchalian got injured with physical injuries on the leg, arm and forehead

Mrs. Adela Delim visited the passenger and later paid for their hospitalization and medical
expenses. She also gave transportation expense of P12 in going home from the hospital and they
were made to sign a Joint Affidavit stating that they are no longer interested to file a complaint,
criminal or civil against the said driver and owner of the said Thames.

Gatchalian filed in the CFI an action extra contractu to recover compensatory and moral damages
stating that the mishap had left her with a conspicuous white scar measuring 1 by 1/2 inches on the
forehead, generating mental suffering and an inferiority complex on her part

as a result, she had to retire in seclusion and stay away from her friends

scar diminished her facial beauty and deprived her of opportunities for employment

Delim averred that it was a fortuitous event

CFI: dismissed because of the Joint Affidavit

CA: affirmed
ISSUE: W/N Gatchalian is entitled to damages

HELD: YES. CA, CFI REVERSED and SET ASIDE 1) P15,000 actual or compensatory damages to cover
the cost of plastic surgery for the removal of the scar on petitioner's forehead; 2) P30,000 moral
damages; and 3) P1,000 attorney's fees, the aggregate amount to bear interest at the legal rate of 6% per
annum counting from the promulgation of this decision until full payment thereof

A waiver, to be valid and effective, must in the first place be couched in clear and unequivocal
terms which leave no doubt as to the intention of a person to give up a right or benefit which legally
pertains to him.
while reading the same, she experienced dizziness but that, seeing the other passengers
who had also suffered injuries sign the document, she too signed without bothering to read the Joint
Affidavit in its entirety. Considering these circumstances there appears substantial doubt whether
petitioner understood fully the import of the Joint Affidavit
To uphold a supposed waiver of any right to claim damages by an injured passenger,
under circumstances like those exhibited in this case, would be to dilute and weaken the standard of
extraordinary diligence exacted by the law from common carriers and hence to render that standard
unenforceable.
To exempt a common carrier from liability for death or physical injuries to passengers
upon the ground of force majeure, the carrier must clearly show not only that the efficient cause of the
casualty was entirely independent of the human will, but also that it was impossible to avoid.
The driver did not stop to check if anything had gone wrong with the bus after the
snapping sound
Court of Appeals, however, found that at the time of the accident, she was no longer
employed in a public school since, being a casual employee and not a Civil Service eligible, she had
been laid off. Her employment as a substitute teacher was occasional and episodic, contingent upon
the availability of vacancies for substitute teachers.
A person is entitled to the physical integrity of his or her body; if that integrity is violated or
diminished, actual injury is suffered for which actual or compensatory damages are due and

assessable. Petitioner Gatchalian is entitled to be placed as nearly as possible in the condition that
she was before the mishap. A scar, especially one on the face of the woman, resulting from the
infliction of injury upon her, is a violation of bodily integrity, giving raise to a legitimate claim for
restoration to her conditio ante. If the scar is relatively small and does not grievously disfigure the
victim, the cost of surgery may be expected to be correspondingly modest.
In view of the testimony, and the fact that a considerable amount of time has lapsed since
the mishap in 1973 which may be expected to increase not only the cost but also very probably the
difficulty of removing the scar, we consider that the amount of P15,000.00 to cover the cost of such
plastic surgery is not unreasonable
moral damages may be awarded where gross negligence on the part of the common
carrier

Del Rosario V. CA (1997)

G.R. No. 118325 January 29, 1997

Lessons Applicable: Proof and Proximate Cause (Torts and Damages)
Laws Applicable: Article 2229 of the Civil Code, Article 2208 of the Civil Code

FACTS:

Metal Forming Corp. advertised there metal shingles as "STRUCTURALLY SAFE AND STRONG"
and that the "BANAWE METAL TILE structure acts as a single unit against wind and storm pressure
due to the strong hook action on its overlaps." The Spouses Del Rosario through their contractor
Engineer Puno purchased believing their representation.
The proper installation procedure expressly specified in the former's brochures and
advertisements for installation, i.e., the metal tile attached to the roof panels should be by 2 selfdrilling screws for 1 metal cleat but instead what was attached was metal cleats with only 1-inch
ordinary nail each and others were fastened with only 1 wood screw each so the roof was blown by
Typhoon Ruping 2 months later
MFC replaced the roof free of charge, in acknowledgment of its one-year warranty on the
materials and their installation. Esteban Adjusters and Valuers, Inc. hired by the Spouses Del Rosario
determined that only with a single wood screw or a combination of a single wood screw and a 1-inch
nail was used
DTI: charged MFC administrative fine of P10,000 otherwise its registration will be deemed
suspended and its establishment closed until the fine was fully paid
Office of the President: affirmed
MFC declining to concede to liability for the other damages to its electrical wiring, ceiling, furtures,
walls, wall paper, wood parquet flooring and furniture, the Spouses Del Rosario filed in the RTC for
total damage of P1,008,003 also praying for moral and exemplary damages

RTC: favored Spouses Del Rosario Actual damage P1,008,003, Moral

Damages P500,000, Exemplary Damages P300,000 and Attorney's fees and expenses of
litigation P150,000

CA: reversed holding there is no privity bet. the Spouses Del Rosario and MFC
ISSUE: W/N the Spouses Del Rosario should be awarded damages

HELD: YES. REINSTATED AND AFFIRMED, with the modification that the award of actual damages and
attorney's fees is deleted, and the moral and exemplary damages awarded are reduced from
P500,000.00 to P100,000.00, and from P300,000.00 to P50,000.00, respectively.

Since MFC, in bad faith and with gross negligence, infringed the express warranty made by it to
the general public in connection with the "Banawe" tiles brought to and set up in the house of the Del
Rosarios who had relied on the warranty, and thereby caused them considerable injury, the identity of
the individual who actually dealt with MFC and asked the latter to make such delivery and installation
is of little moment
Actual or compensatory damages cannot be presumed, but must be duly proved and proved with
reasonable degree of certainty.
relied only on the report of the Esteban Adjusters and Valuers, Inc. which contains no
statement whatever of the amount of the damage therefore no evidentiary foundation upon which to
lay an award of actual damages
law explicitly authorizes the award of moral damages "in breaches of contract where the
defendant acted fraudulently or in bad faith."
There being, moreover, satisfactory evidence of the psychological and mental trauma actually
suffered by the Del Rosarios, the grant to them of moral damages is warranted
Article 2229 of the Civil Code
damages may be imposed by way of example or correction for the public good, While
exemplary damages cannot be recovered as a matter of right, they need not be proved, although
plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court
may consider the question of whether or not exemplary damages should be awarded.
Exemplary damages are imposed not to enrich one party or impoverish another but to
serve as a deterrent against or as a negative incentive to curb socially deleterious actions
moral damages awarded must be commensurate with the loss or injury suffered
Since the judgment does not say why attorney's fees are awarded, there is no basis for such
award, which should consequently be removed
It is settled that the award of attorney's fees is the exception rather than the rule and counsel's
fees are not to be awarded every time a party wins. The power of the court to award attorney's fees
under Article 2208 of the Civil Code demands factual, legal, and equitable justification; its basis cannot
be left to speculation or conjecture. Where granted. the court must explicitly state in the body of the
decision, and not only in the dispositive portion thereof, the legal reason for the award of attorney's
fees.

DEL ROSARIO V CA (METAL FORMING CORP.)

267 SCRA 158 NARVASA; January 29, 1997
NATURE: An appeal of a Decision of the Court of Appeals.
FACTS

- The Del Rosarios' complaint, filed on November 21, 1990, charged Metal Forming Corp. (MFC) with
violation of Section 3 of Act No. 3740, "An Act to Penalize Fraudulent Advertising, Mislabeling or
Misbranding of Any Product, Stocks, Bonds, etc. The complaint alleged that:
1) "in selling to the public roofing materials known 'Banawe' shingles,** (MFC) made representations on
the durability of the product and sturdiness of its installation through massive advertisements in print
media and television (and) brochures ;"
2) the representations -- particularly those characterizing the shingles as "STRUCTURALLY SAFE AND
STRONG" and that the "BANAWE METAL TILE structure acts as a single unit against wind and storm
pressure due to the strong hook action on its overlaps"-- "prompted the Del Rosarios to buy the 'Banawe'
shingles and have them installed at their residence;"
3) "(b)arely two (2) months after completion of the installation, portions of the roof of the Del Rosarios
were blown away by strong wind brought about by typhoon "Ruping."
- The Office of the President found that:
one cannot efface the fundamental fact that MFC acted in bad faith and/or with gross negligence in
falling to deliver the necessary accessories for the proper installation of the structure and actually installed
inferior roofing materials at Del Rosarios residence, in violation of the proper installation procedure
expressly specified in the former's brochures and advertisements for installation, i.e., the metal tile
attached to the roof panels should be two (2) self-drilling screws for one (1) metal cleat. However, instead
of conforming with this procedure, MFC attached some of the metal cleats with this one (1)-inch ordinary
nail each and others were fastened with only one (10) wood screw each.
- MFC however declined to concede liability for the other damages claimed by the Del Rosario Spouses
to have been caused to the interior of their home. This prompted the latter to commence a civil action
against MFC. The spouses sought to recover from MFC damages resulting from the events just narrated,
contending that aside from the destruction of the roof of their house, injury was also caused to its
electrical wiring, ceiling, fixtures, walls, wall paper, wood parquet flooring and furniture. The Del Rosarios
reckoned their actual damages at P1,008,003. They also prayed for an award to them of moral damages
in the sum of P3,000,000; exemplary damages in the amount of P1,000,000; attorney's fees in the sum of
P1,000,000.
- Trial Court awarded P500K as moral damages and P300K as exemplary damages.
- CA reversed decision of the trial court, holding that there was no privity of contract.
ISSUES
1. WON there is a privity of contract between the parties
2. WON upon the facts established by the evidence, MFC is answerable to the Del Rosarios for the
damage caused to the latter's residence when its roof, made of shingles purchased from and installed by
the former, was blown away by a typhoon (this case is under EXEMPLARY DAMAGES in the outline)
HELD
1. YES, there is privity of contract bet the Del Rosarios and MFC.
Reasoning
- At all times and with regard to the acquisition and installation of the metal tiles or shingles, Puno was in
truth acting as contractor of the Del Rosarios and on their instructions. Ascertainment of the definite
identity of the person who actually ordered the shingles from MFC is utterly inconsequential -- it might just
as well have been a construction foreman, a trusted domestic, or any friend or acquaintance of the Del
Rosarios.
- The tiles were delivered to the Del Rosarios and used in fabricating the roof of their home; it was the
employees and workers of MFC who (a) delivered the shingles or metal tiles to the construction site of the
Del Rosarios' home, and (b) undertook and completed the installation thereof.
2. YES , the Del Rosarios are entitled to moral and exemplary damages.
Re: Actual damages
- Actual or compensatory damages cannot be presumed, but must be duly proved and proved with
reasonable degree of certainty. A court cannot rely on speculations, conjectures or guesswork as to the
fact and amount of damages, but must depend upon competent proof that they have (been) suffered and
on evidence of the actual amount thereof.
- The report of Esteban Adjusters and Valuers, Inc. contains no statement whatever of the amount of the
damage. Indeed, the testimony of Engr Abril, the representative of the Esteban Adjsters and Valuers, Inc.,
is that his firm had been retained only to determine the cause of the damage, not to estimate and assess
it.

Moral damages
- Moral damages are awarded for indemnity or reparation not punishment or correction, that is, an award
to entitle the injured party to obtain means (of) diversions and amusement that will serve to alleviate the
moral suffering he has undergone by reason of defendant's culpable action.
- That MFC did in truth act with bad faith, in flagrant breach of its express warranties made to the general
public and in wanton disregard of the rights of the Del Rosarios who relied on those warranties, is
adequately demonstrated by the recorded proofs. The law explicitly authorizes the award of moral
damages "in breaches of contract where the defendant acted fraudulently or in bad faith.
- Award of trial court of moral damages is reduced from P500K to P100K.
Exemplary damages
- Article 2229 of the Civil Code provides that such damages may be imposed by way of example or
correction for the public good. While exemplary damages cannot be recovered as a matter of right, they
need not be proved, although plaintiff must show that he is entitled to moral, temperate or compensatory
damages before the court may consider the question of whether or not exemplary damages should be
awarded Exemplary damages are imposed not to enrich one party or impoverish another but to serve as
a deterrent against or as a negative incentive to curb socially deleterious actions.
- Award of trial court of exemplary damages is reduced from P300K to P50K.
Disposition Decision of the Regional Trial Court of November 18, 1991 is REINSTATED AND
AFFIRMED, with the modification that the award of actual damages and attorney's fees is deleted, and
the moral and exemplary damages awarded are reduced from P500,000.00 to P100,000.00, and from
P300,000.00 to P50,000.00, respectively.

Francisco vs GSIS (1963)

February 14, 2013 markerwins Corporation Law, Mercantile Lawcorpo, merc
Facts: The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the defendant,
Government Service Insurance System a parcel of land known as Vic-Mari Compound, located at Baesa,
Quezon City. The System extrajudicially foreclosed the mortgage on the ground that up to that date the
plaintiff-mortgagor was in arrears on her monthly instalments. The System itself was the buyer of the
property in the foreclosure sale. The plaintiffs father, Atty. Vicente J. Francisco, sent a letter to the general
manager of the defendant corporation, Mr. Rodolfo P. Andal. And latter the System approved the request
of Francisco to redeem the land through a telegram. Defendant received the payment and it did not,
however, take over the administration of the compound. The System then sent a letter to Francisco
informing of his indebtedness and the 1 year period of redemption has been expired. And the System
argued that the telegram sent to Francisco saying that the System has approved the request in
redeeming the property is incorrect due to clerical problems.
Issue: WON the System is liable for the acts of its employees regarding the telegram?
Held: Yes. There was nothing in the telegram that hinted at any anomaly, or gave ground to suspect its
veracity, and the plaintiff, therefore, can not be blamed for relying upon it. There is no denying that the
telegram was within Andals apparent authority. Hence, even if it were the board secretary who sent the
telegram, the corporation could not evade the binding effect produced by the telegram. Knowledge of
facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and
in relation to matters within the scope of his authority, is notice to the corporation, whether he
communicates such knowledge or not. Yet, notwithstanding this notice, the defendant System pocketed
the amount, and kept silent about the telegram not being in accordance with the true facts, as it now
alleges. This silence, taken together with the unconditional acceptance of three other subsequent
remittances from plaintiff, constitutes in itself a binding ratification of the original agreement.
About these ads
ARMOVIT V CA (NORTHWEST AIRLINES)
184 SCRA 476 GANGAYCO; April 20, 1990

FACTS
- In October 1981, Dr. Herman Armovit and his family decided to spend their Christmas holidays with
relatives and friends in the Philippines so they purchased from Northwest Airlines 3 round trip airline
tickets from the US to Manila and back, plus 3 tickets for the rest of the children, though not involved in
the suit. Each ticket of the petitioners which was in the handwriting of Northwests tickets sales agent
contains the following entry on the Manila to Tokyo portion of the return flight:
"from Manila to Tokyo, NW flight 002, date 17 January, time 10:30 AM Status, OK"
- On their return trip from Manila to the US scheduled on January 17, 1982, they arrived at the check-in
counter of the airline at the Manila International Airport at 9:15 in the morning, which is a good one hour
and fifteen minutes ahead of the 10:30 AM scheduled flight time recited in their tickets. They were rudely
informed that they cannot be accommodated inasmuch as Flight 002 scheduled at 9:15 am was already
taking off and the 10:30 AM flight time entered in their plane tickets was erroneous.
- Previous to the date of departure Armovit re-confirmed their reservations through their representative
Ernesto Madriaga who personally presented the 3 tickets at the airlines Roxas Boulevard office. The
departure time in the 3 tickets was not changed when re-confimed. Their names appeared in the
passenger manifest and confirmed as Passenger Nos. 306, 307, and 308, Flight 002.
- Dr. Armovit protested in extreme agitation that because of the bump-off he will not be able to keep his
appointments with his patients in the US. They suffered anguish, wounded feelings, and serious anxiety
day and night of January 17th until the morning of January 18th when they were finally informed that
seats will be available for them on the flight that day.
- The RTC ruled in favor of the Armovits and ordered Northwest to pay actual (P1,300), exemplary
(P1,100,000) and moral (P1,100,000) damages as well as attorneys fees. The CA affirmed but
eliminated the moral damages on the ground that petitioners did not take the witness stand to testify on
their social humiliation, wounded feelings and anxiety, and that the breach of contract was not malicious
or fraudulent. It also reduced the exemplary damages to P170,000. Armovits motion for reconsideration
was denied.
ISSUE
WON the CA erred in deleting the award of moral damages
HELD
1. NO.
Ratio A contract to transport passengers is quite different in kind and degree from any other contractual
relation. And this is because of the relation which an air carrier sustains with the public. Its business is
mainly with the traveling public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public duty, Neglect or
malfeasance of the carrier's employees, naturally, could give ground for an action for damages
Passengers do not contract merely for transportation. They have the right to be treated by the carrier's
employees with kindness, respect, courtesy and due consideration. They are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such employees. So it is
that any rude or discourteous conduct on the part of employees towards a passenger gives the latter an
action for damages against the carrier. [Citing Air France v Carrascoso]
Reasoning
- The gross negligence committed by Northwest in the issuance of the tickets with entries as to the time of
the flight, the failure to correct such erroneous entries and the manner by which petitioners were rudely
informed that they were bumped off are clear indicia of such malice and bad faith and establish that
Northwest committed a breach of contract which entitles petitioners to moral damages.
- The CA observed that the Armovits failed to take the witness stand and testify on the matter. It
overlooked however, that their failure to appear in court to testify was explained by them. The
assassination of Senator Benigno Aquino, Jr. on August 21, 1983 following the year they were bumped off
caused turmoil in the country. This turmoil spilled over to the year 1984 when they were scheduled to

testify. However, the violent demonstrations in the country were sensationalized in the U.S. media so they
were advised to refrain from returning to the Philippines at the time.
- Nevertheless, Atty. Raymund Armovit, brother of Dr. Armovit, took the witness stand as he was with the
petitioners from the time they checked in up to the time of their ultimate departure. He was a witness
when the check-in officer rudely informed the Armovits that their flight had already taken off, while Dr.
Armovit remonstrated that their tickets reflected their flight time to be 10:30 AM; that in anger and
frustration, Dr. Armovit told the said check-in-officer that he had to be accommodated that morning so that
he could attend to all his appointments in the US; that Jacqueline Armovit also complained about not
being able to report for work at the expiration of her leave of absence; that while the Armovits had to
accept Northwest's offer for hotel accommodations at the Philippine Village Hotel so that they could follow
up and wait for their flight out of Manila the following day, they did not use their meal coupons because of
the limitations thereon so they had to spend for lunch, dinner, and breakfast in the sum of P1,300 while
waiting to be flown out of Manila; that Dr. Armovit had to forego the professional fees for the medical
appointments he missed due to his inability to take the January 17 flight; that the petitioners were finally
able to fly out of Manila on January 18, 1982, but were assured of this flight only on the very morning of
that day, so that they experienced anxiety until they were assured seats for that flight.
- No doubt Atty. Raymund Armovit's testimony adequately and sufficiently established the serious anxiety,
wounded feelings and social humiliation that petitioners suffered upon having been bumped off. However,
considering that Northwest took care of their accommodations while waiting and boarding them in the
flight back to the US, the following day, the Court finds that the petitioners are entitled to moral damages
in the amount of P100,000 each.
- To provide an example for the public good, an award of exemplary damages is also proper. The award of
the CA is adequate. Nevertheless, the deletion of the nominal damages by the CA is well-taken since
there is an award of actual damages. Nominal damages cannot co-exist with actual or compensatory
damages.
Disposition Petition is granted. The judgment of the CA is hereby modified such that Northwest shall pay
the following:
(a) actual damages in favor of Dr. Armovit in the sum of P1,300 with interest at the legal rate from January
17, 1982;
(b) moral damages at P100,000 and exemplary damages and P100,000 in favor of Dr. Armovit;
(c) moral damages of P100,000 and exemplary damages of P50,000 in favor of Mrs. Dora Armovit;
(d) moral damages of P100,000 and exemplary damages in the amount of P20,000 in favor of Miss
Jacqueline Armovit; and
(e) attorney's fees at 5% of the total awards, plus the cost of suit.
1. TEMPERATE

Article 2224, CC.

Temperate or moderate damages, which are more than nominal but less than compensatory damages,
may be recovered when the court finds that some pecuniary loss has been suffered but its amount can
not, from the nature of the case, be provided with certainty.

Article 2225, CC.

Temperate damages must be reasonable under the circumstances.

PEOPLE V SINGH
360 SCRA 404 BUENA; June 29, 2001
NATURE
Appellants Balwinder, Malkit, Mohinder and Dalvir, all surnamed Singh, were convicted of the crime of
Murder in Criminal Case No. 8683 for killing Surinder Singh, and Frustrated Murder in Criminal Cases No.
8682 for stabbing Dilbag Singh. Each of them were sentenced to suffer the penalty of reclusion perpetua
for murder, and the indeterminate penalty of 8 years and one (1) day of prision mayor as minimum, to
twelve (12) years and one (1) day of reclusion temporal as maximum for frustrated murder.
FACTS
- Dilbag Singh, private complainant for frustrated murder in Criminal Case No. 8682, recounts that on
November 26, 1993, at around 7:30 in the morning while he was cleaning his motorbike in front of the
Mendiola Apartment in Barangay Canlalay, Bian, Laguna, Dalvir, Balwinder, Gurmok, Jarnail, Amarjit,
Mohinder, Dial, Kuldip- all surnamed Singh-Johander Singh Dhillon, and Malkit Singh Dhillon arrived,
shouting foul remarks in their native language and demanding Surinder Singh to come out of the
apartment. When Surinder Singh came out of his apartment, Dalvir Singh tried to stab him but Surinder
Singh was able to move away. Dalvir Singh told his companions to hold Surinder Singh as he will kill him.
Thereafter, Dial Singh and Johinder Singh each held the right and left arms of Surinder Singh, with Kuldip
Singh pushing Surinder Singh on his back. Dalvir Singh then stabbed Surinder Singh, hitting him on the
right side of his stomach, and causing him to fall on the ground. Dial Singh remarked that Surinder Singh
failed to give money and if others will likewise refuse, the same fate will befall them. As Surinder Singh
tried to get up, Malkit Singh Dhillon and Jarnail Singh started hitting him with lead pipes all over his body,
while Johinder Singh and Dial Singh punched and kicked Surinder. Amarjit Singh, who was holding a gun,
warned everyone not to help Surinder Singh or else he will shoot. Thereat, when all these things were
going on, private complainant Dilbag Singh tried to stop them but Balwinder Singh stabbed him on the left
side of his back. Gurmok Singh likewise stabbed him with a bolo, but he was not hit as he was able to
move to one side. After that, the ten (10) accused Indians left.
Dilbag Singh and Surinder Singh, both injured, were brought to the Perpetual Help Hospital, Bian,
Laguna, by Jaswinder Singh, Johinder Singh Gill, Balwinder Singh Gill and Alwan Singh, for treatment.
There, Surinder Singh was pronounced dead on arrival.
- The events, according to appellants, happened in this wise. Appellant Dalvir Singh testified that on
November 26, 1993, at around 7:30 in the morning, he was conducting his buy and sell business along
Brgy. Canlalay, Bian, Laguna. While collecting from his customers, he was accosted by Jaswinder,
Dilbag and Surinder Singh to stop at the corner of the street. When he stopped, he alighted from his
motorcycle. Jaswinder, Dilbag and Surinder Singh accused him of squealing their status to the
immigration authorities. Then, Jaswinder Singh punched him. Appellant Dalvir Singh retaliated by
slapping Jaswinder Singh afterwhich, Jaswinder Singh, went inside his apartment to get a pipe. When
Surinder Singh was about to stab him, he wrestled the knife from him and, in the process, private
complainant Dilbag Singh was stabbed on his back with the same knife. As Dalvir Singh grappled for the
possession of the knife from Surinder Singh, both of them fell down, with him landing on top of Surinder
Singh and that was the time when Surinder Singh was stabbed on the right portion of his stomach. Then,
Surinder Singh lost his grip and appellant Dalvir Singh was able to get hold of the knife. Appellant Dalvir
Singh was so nervous that he left the place on his motorcycle while holding the knife. He threw the knife
along the highway of Bian, Laguna.
- After trial, appellants were convicted of the crime charged, thus
"WHEREFORE, the guilt of accused Balwinder Singh, Malkit Singh Dhillon, Mohinder Singh, Dalvir
Singh and Dial Singh having been established beyond reasonable doubt of the crimes of frustrated
murder in Criminal Case No. 8282 and murder in Criminal Case 8683 defined and penalized in Articles
248 and 250 of the Revised Penal Code, this Court hereby sentences them (except Dial Singh who died
during the presentation of defense evidence on the main case) as follows:
"Criminal Case No. 8682:
"1. each to suffer an indeterminate penalty of imprisonment of from eight (8) years and one (1) day of
prision mayor as minimum, to twelve (12) years and one (1) day of reclusion temporal maximum;

"2. jointly and severally, to pay private complainant Dilbag Singh the amounts of P16,000 representing
his hospitalization and medical expenses, and P30,000 for and as attorneys fees; and
"3. jointly and severally, to pay the costs of suit.
"Criminal Case No. 8683:
"1. each to suffer the penalty of reclusion perpetua;
"2. jointly and severally, to pay the heirs of Surinder Singh the following sums:
a) P50,000.00 as civil indemnity;
b) P41,500.00 representing funeral, wake and transportation expenses;
c) P5,760,000.00 for lost earnings/income;
d) P400.00 for hospitalization expenses;
e) P50,000.00 for moral damages; and
f) P500,000.00 for and as attorneys fees; and
"3. jointly and severally, to pay the costs of suit.
"Since accused Jarnail Singh, Gurmok Singh, Amarjit Singh, Johinder Singh and Kuldip Singh have
remained at-large to date, in order not to clog the docket of this court, let the records of these two cases
be sent to the files and warrant be issued for their immediate arrest.
ISSUE
WON the court a quo erred in awarding excessive damages against accused-appellants
HELD : YES
Reasoning
- In Criminal Case No. 8682 for frustrated murder, the trial court awarded private complainant Dilbag
Singh the amount of P16,000.00 representing his hospitalization and medical expenses, and P 30,000.00
as attorneys fees. For his hospitalization and medical expenses, the receipts submitted to support said
claim amounted only to P370.50. Hence, private complainant Dilbag Singh is entitled only to the said
amount. The award of attorneys fees is hereby deleted. Nonetheless, private complaint is entitled to
moral damages in the amount of P50,000.00 for the suffering he endured from appellants felonious acts.
- In Criminal Case No. 8683 for murder, the following amount of actual damages were duly proven
P16,500.00 funeral expenses and air ticket/freight of the cadaver $600.27. The amount of P400.00 for
hospitalization expenses should be deleted for not being supported by evidence. The trial courts award of
P50,000.00 as civil indemnity, and P50,000.00 moral damages are affirmed. The award of P500,000.00
as attorneys fees and P5,760,000 as compensation for loss of earning capacity, are likewise deleted for
lack of basis. Awards for loss of earning capacity partake of damages which must be proven not only by
credible and satisfactory evidence, but also by unbiased proof. The testimony of Balwinder Singh Gill, first
cousin of the deceased, on the alleged income of the deceased while in the Philippines, is not enough.
The best evidence to substantiate income earned by foreigners while in the Philippines is the payment of
taxes with the Bureau of Internal Revenue. Absent such proof, bare allegation is insufficient.
Nevertheless, considering that the definite proof of pecuniary loss cannot be offered, and the fact of loss
has been established, appellants shall pay the heirs of Surinder Singh temperate damages in the amount
of P200,000.00.
Obiter
- In lieu of actual damages which was not proven or documented, temperate damages may be awarded
in a murder case. (People vs. dela Tongga)
Disposition in accordance with the foregoing disquisition, the decision appealed from is hereby affirmed
subject to the following modifications1. In Criminal Case No. 8682 for frustrated murder, appellants shall only be liable to pay
a. P370.50 for hospitalization expenses;
b. P50,000.00, as moral damages, plus costs; and,
2. In Criminal Case No. 8683 for murder, in addition to the civil indemnity, moral damages and attorneys
fees awarded by the trial court, appellants shall paya. P16,500.00, as funeral expenses;
b. $600.27, as air ticket/freight of the cadaver, to be computed at the prevailing rate of exchange at the
time of the promulgation of this decision; and,
c. P200,000.00, as temperate damages, plus costs.

PNB V CA
G.R. No. 108630 ROMERO April 2, 1996
FACTS:
Tan owned a parcel of land which was expropriated by the government. He filed a motion w/ the TC
requesting that it issue an order for the payment of P32K as expropriation price. PNB was ordered to pay
Tan the amount. PNB issued and delivered a managers check to Sonia Gonzaga who had a Special
Power of Attorny supposedly executed by Tan in her favor. Gonzaga took the money for herself. Tan
demanded payment which was refused by PNB, having already paid the amount to Tans agent. Tan file
a motion with the court requiring PNB to pay. TC: ruled in favor of Tan and ordered PNB to pay the
amount and exemplary damages. CA: affirmed, but deleted the award of exemplary damages.
ISSUE:
WON exemplary damages should be awarded to Tan.
HELD:
No. Exemplary damages may be awarded if a party acted in a wanton, fraudulent, reckless, oppressive,
or malevolent manner. It cannot be recovered as a matter of right, but left to the discretion of the court.
Although there was a breach of PNBs obligation to Tan, there is no basis for the award of exemplary
damages
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO GUECO and THE PHILIPPINE
AMERICAN GENERAL INSURANCE COMPANY, INC., respondents.
Medina, Locsin, Corua, & Sumbillo for petitioner.
Manuel Lim & Associates for private respondents.
ANTONIO, J.:
Certiorari to review the decision of the Court of Appeals which affirmed the judgment of the Court of First
Instance of Manila in Civil Case No. 34185, ordering petitioner, as third-party defendant, to pay
respondent Rita Gueco Tapnio, as third-party plaintiff, the sum of P2,379.71, plus 12% interest per annum
from September 19, 1957 until the same is fully paid, P200.00 attorney's fees and costs, the same
amounts which Rita Gueco Tapnio was ordered to pay the Philippine American General Insurance Co.,
Inc., to be paid directly to the Philippine American General Insurance Co., Inc. in full satisfaction of the
judgment rendered against Rita Gueco Tapnio in favor of the former; plus P500.00 attorney's fees for Rita
Gueco Tapnio and costs. The basic action is the complaint filed by Philamgen (Philippine American
General Insurance Co., Inc.) as surety against Rita Gueco Tapnio and Cecilio Gueco, for the recovery of
the sum of P2,379.71 paid by Philamgen to the Philippine National Bank on behalf of respondents Tapnio
and Gueco, pursuant to an indemnity agreement. Petitioner Bank was made third-party defendant by
Tapnio and Gueco on the theory that their failure to pay the debt was due to the fault or negligence of
petitioner.
The facts as found by the respondent Court of Appeals, in affirming the decision of the Court of First
Instance of Manila, are quoted hereunder:
Plaintiff executed its Bond, Exh. A, with defendant Rita Gueco Tapnio as principal, in
favor of the Philippine National Bank Branch at San Fernando, Pampanga, to guarantee

the payment of defendant Rita Gueco Tapnio's account with said Bank. In turn, to
guarantee the payment of whatever amount the bonding company would pay to the
Philippine National Bank, both defendants executed the indemnity agreement, Exh. B.
Under the terms and conditions of this indemnity agreement, whatever amount the
plaintiff would pay would earn interest at the rate of 12% per annum, plus attorney's fees
in the amount of 15 % of the whole amount due in case of court litigation.
The original amount of the bond was for P4,000.00; but the amount was later reduced to
P2,000.00.
It is not disputed that defendant Rita Gueco Tapnio was indebted to the bank in the sum
of P2,000.00, plus accumulated interests unpaid, which she failed to pay despite
demands. The Bank wrote a letter of demand to plaintiff, as per Exh. C; whereupon,
plaintiff paid the bank on September 18, 1957, the full amount due and owing in the sum
of P2,379.91, for and on account of defendant Rita Gueco's obligation (Exhs. D and D-1).
Plaintiff, in turn, made several demands, both verbal and written, upon defendants (Exhs.
E and F), but to no avail.
Defendant Rita Gueco Tapnio admitted all the foregoing facts. She claims, however,
when demand was made upon her by plaintiff for her to pay her debt to the Bank, that
she told the Plaintiff that she did not consider herself to be indebted to the Bank at all
because she had an agreement with one Jacobo-Nazon whereby she had leased to the
latter her unused export sugar quota for the 1956-1957 agricultural year, consisting of
1,000 piculs at the rate of P2.80 per picul, or for a total of P2,800.00, which was already
in excess of her obligation guaranteed by plaintiff's bond, Exh. A. This lease agreement,
according to her, was with the knowledge of the bank. But the Bank has placed obstacles
to the consummation of the lease, and the delay caused by said obstacles forced 'Nazon
to rescind the lease contract. Thus, Rita Gueco Tapnio filed her third-party complaint
against the Bank to recover from the latter any and all sums of money which may be
adjudged against her and in favor of the plaitiff plus moral damages, attorney's fees and
costs.
Insofar as the contentions of the parties herein are concerned, we quote with approval
the following findings of the lower court based on the evidence presented at the trial of
the case:
It has been established during the trial that Mrs. Tapnio had an export
sugar quota of 1,000 piculs for the agricultural year 1956-1957 which she
did not need. She agreed to allow Mr. Jacobo C. Tuazon to use said
quota for the consideration of P2,500.00 (Exh. "4"-Gueco). This
agreement was called a contract of lease of sugar allotment.
At the time of the agreement, Mrs. Tapnio was indebted to the Philippine
National Bank at San Fernando, Pampanga. Her indebtedness was
known as a crop loan and was secured by a mortgage on her standing
crop including her sugar quota allocation for the agricultural year
corresponding to said standing crop. This arrangement was necessary in

order that when Mrs. Tapnio harvests, the P.N.B., having a lien on the
crop, may effectively enforce collection against her. Her sugar cannot be
exported without sugar quota allotment Sometimes, however, a planter
harvest less sugar than her quota, so her excess quota is utilized by
another who pays her for its use. This is the arrangement entered into
between Mrs. Tapnio and Mr. Tuazon regarding the former's excess
quota for 1956-1957 (Exh. "4"-Gueco).
Since the quota was mortgaged to the P.N.B., the contract of lease had
to be approved by said Bank, The same was submitted to the branch
manager at San Fernando, Pampanga. The latter required the parties to
raise the consideration of P2.80 per picul or a total of P2,800.00 (Exh. "2Gueco") informing them that "the minimum lease rental acceptable to the
Bank, is P2.80 per picul." In a letter addressed to the branch manager on
August 10, 1956, Mr. Tuazon informed the manager that he was
agreeable to raising the consideration to P2.80 per picul. He further
informed the manager that he was ready to pay said amount as the funds
were in his folder which was kept in the bank.
Explaining the meaning of Tuazon's statement as to the funds, it was
stated by him that he had an approved loan from the bank but he had not
yet utilized it as he was intending to use it to pay for the quota. Hence,
when he said the amount needed to pay Mrs. Tapnio was in his folder
which was in the bank, he meant and the manager understood and knew
he had an approved loan available to be used in payment of the quota. In
said Exh. "6-Gueco", Tuazon also informed the manager that he would
want for a notice from the manager as to the time when the bank needed
the money so that Tuazon could sign the corresponding promissory note.
Further Consideration of the evidence discloses that when the branch manager of the
Philippine National Bank at San Fernando recommended the approval of the contract of
lease at the price of P2.80 per picul (Exh. 1 1-Bank), whose recommendation was
concurred in by the Vice-president of said Bank, J. V. Buenaventura, the board of
directors required that the amount be raised to 13.00 per picul. This act of the board of
directors was communicated to Tuazon, who in turn asked for a reconsideration thereof.
On November 19, 1956, the branch manager submitted Tuazon's request for
reconsideration to the board of directors with another recommendation for the approval of
the lease at P2.80 per picul, but the board returned the recommendation unacted upon,
considering that the current price prevailing at the time was P3.00 per picul (Exh. 9Bank).
The parties were notified of the refusal on the part of the board of directors of the Bank to
grant the motion for reconsideration. The matter stood as it was until February 22, 1957,
when Tuazon wrote a letter (Exh. 10-Bank informing the Bank that he was no longer
interested to continue the deal, referring to the lease of sugar quota allotment in favor of
defendant Rita Gueco Tapnio. The result is that the latter lost the sum of P2,800.00 which
she should have received from Tuazon and which she could have paid the Bank to
cancel off her indebtedness,

The court below held, and in this holding we concur that failure of the negotiation for the
lease of the sugar quota allocation of Rita Gueco Tapnio to Tuazon was due to the fault of
the directors of the Philippine National Bank, The refusal on the part of the bank to
approve the lease at the rate of P2.80 per picul which, as stated above, would have
enabled Rita Gueco Tapnio to realize the amount of P2,800.00 which was more than
sufficient to pay off her indebtedness to the Bank, and its insistence on the rental price of
P3.00 per picul thus unnecessarily increasing the value by only a difference of P200.00.
inevitably brought about the rescission of the lease contract to the damage and prejudice
of Rita Gueco Tapnio in the aforesaid sum of P2,800.00. The unreasonableness of the
position adopted by the board of directors of the Philippine National Bank in refusing to
approve the lease at the rate of P2.80 per picul and insisting on the rate of P3.00 per
picul, if only to increase the retail value by only P200.00 is shown by the fact that all the
accounts of Rita Gueco Tapnio with the Bank were secured by chattel mortgage on
standing crops, assignment of leasehold rights and interests on her properties, and
surety bonds, aside from the fact that from Exh. 8-Bank, it appears that she was offering
to execute a real estate mortgage in favor of the Bank to replace the surety bond This
statement is further bolstered by the fact that Rita Gueco Tapnio apparently had the
means to pay her obligation fact that she has been granted several value of almost
P80,000.00 for the agricultural years from 1952 to 56. 1
Its motion for the reconsideration of the decision of the Court of Appeals having been denied, petitioner
filed the present petition.
The petitioner contends that the Court of Appeals erred:
(1) In finding that the rescission of the lease contract of the 1,000 piculs of sugar quota allocation of
respondent Rita Gueco Tapnio by Jacobo C. Tuazon was due to the unjustified refusal of petitioner to
approve said lease contract, and its unreasonable insistence on the rental price of P3.00 instead of P2.80
per picul; and
(2) In not holding that based on the statistics of sugar price and prices of sugar quota in the possession of
the petitioner, the latter's Board of Directors correctly fixed the rental of price per picul of 1,000 piculs of
sugar quota leased by respondent Rita Gueco Tapnio to Jacobo C. Tuazon at P3.00 per picul.
Petitioner argued that as an assignee of the sugar quota of Tapnio, it has the right, both under its own
Charter and under the Corporation Law, to safeguard and protect its rights and interests under the deed
of assignment, which include the right to approve or disapprove the said lease of sugar quota and in the
exercise of that authority, its
Board of Directors necessarily had authority to determine and fix the rental price per picul of the sugar
quota subject of the lease between private respondents and Jacobo C. Tuazon. It argued further that both
under its Charter and the Corporation Law, petitioner, acting thru its Board of Directors, has the perfect
right to adopt a policy with respect to fixing of rental prices of export sugar quota allocations, and in fixing
the rentals at P3.00 per picul, it did not act arbitrarily since the said Board was guided by statistics of
sugar price and prices of sugar quotas prevailing at the time. Since the fixing of the rental of the sugar
quota is a function lodged with petitioner's Board of Directors and is a matter of policy, the respondent
Court of Appeals could not substitute its own judgment for that of said Board of Directors, which acted in

good faith, making as its basis therefore the prevailing market price as shown by statistics which were
then in their possession.
Finally, petitioner emphasized that under the appealed judgment, it shall suffer a great injustice because
as a creditor, it shall be deprived of a just claim against its debtor (respondent Rita Gueco Tapnio) as it
would be required to return to respondent Philamgen the sum of P2,379.71, plus interest, which amount
had been previously paid to petitioner by said insurance company in behalf of the principal debtor, herein
respondent Rita Gueco Tapnio, and without recourse against respondent Rita Gueco Tapnio.
We must advert to the rule that this Court's appellate jurisdiction in proceedings of this nature is limited to
reviewing only errors of law, accepting as conclusive the factual fin dings of the Court of Appeals upon its
own assessment of the evidence. 2
The contract of lease of sugar quota allotment at P2.50 per picul between Rita Gueco Tapnio and Jacobo
C. Tuazon was executed on April 17, 1956. This contract was submitted to the Branch Manager of the
Philippine National Bank at San Fernando, Pampanga. This arrangement was necessary because
Tapnio's indebtedness to petitioner was secured by a mortgage on her standing crop including her sugar
quota allocation for the agricultural year corresponding to said standing crop. The latter required the
parties to raise the consideration to P2.80 per picul, the minimum lease rental acceptable to the Bank, or
a total of P2,800.00. Tuazon informed the Branch Manager, thru a letter dated August 10, 1956, that he
was agreeable to raising the consideration to P2.80 per picul. He further informed the manager that he
was ready to pay the said sum of P2,800.00 as the funds were in his folder which was kept in the said
Bank. This referred to the approved loan of Tuazon from the Bank which he intended to use in paying for
the use of the sugar quota. The Branch Manager submitted the contract of lease of sugar quota allocation
to the Head Office on September 7, 1956, with a recommendation for approval, which recommendation
was concurred in by the Vice-President of the Bank, Mr. J. V. Buenaventura. This notwithstanding, the
Board of Directors of petitioner required that the consideration be raised to P3.00 per picul.
Tuazon, after being informed of the action of the Board of Directors, asked for a reconsideration thereof.
On November 19, 1956, the Branch Manager submitted the request for reconsideration and again
recommended the approval of the lease at P2.80 per picul, but the Board returned the recommendation
unacted, stating that the current price prevailing at that time was P3.00 per picul.
On February 22, 1957, Tuazon wrote a letter, informing the Bank that he was no longer interested in
continuing the lease of sugar quota allotment. The crop year 1956-1957 ended and Mrs. Tapnio failed to
utilize her sugar quota, resulting in her loss in the sum of P2,800.00 which she should have received had
the lease in favor of Tuazon been implemented.
It has been clearly shown that when the Branch Manager of petitioner required the parties to raise the
consideration of the lease from P2.50 to P2.80 per picul, or a total of P2,800-00, they readily agreed.
Hence, in his letter to the Branch Manager of the Bank on August 10, 1956, Tuazon informed him that the
minimum lease rental of P2.80 per picul was acceptable to him and that he even offered to use the loan
secured by him from petitioner to pay in full the sum of P2,800.00 which was the total consideration of the
lease. This arrangement was not only satisfactory to the Branch Manager but it was also approves by
Vice-President J. V. Buenaventura of the PNB. Under that arrangement, Rita Gueco Tapnio could have
realized the amount of P2,800.00, which was more than enough to pay the balance of her indebtedness
to the Bank which was secured by the bond of Philamgen.

There is no question that Tapnio's failure to utilize her sugar quota for the crop year 1956-1957 was due
to the disapproval of the lease by the Board of Directors of petitioner. The issue, therefore, is whether or
not petitioner is liable for the damage caused.
As observed by the trial court, time is of the essence in the approval of the lease of sugar quota
allotments, since the same must be utilized during the milling season, because any allotment which is not
filled during such milling season may be reallocated by the Sugar Quota Administration to other holders of
allotments. 3 There was no proof that there was any other person at that time willing to lease the sugar
quota allotment of private respondents for a price higher than P2.80 per picul. "The fact that there were
isolated transactions wherein the consideration for the lease was P3.00 a picul", according to the trial
court, "does not necessarily mean that there are always ready takers of said price. " The
unreasonableness of the position adopted by the petitioner's Board of Directors is shown by the fact that
the difference between the amount of P2.80 per picul offered by Tuazon and the P3.00 per picul
demanded by the Board amounted only to a total sum of P200.00. Considering that all the accounts of
Rita Gueco Tapnio with the Bank were secured by chattel mortgage on standing crops, assignment of
leasehold rights and interests on her properties, and surety bonds and that she had apparently "the
means to pay her obligation to the Bank, as shown by the fact that she has been granted several sugar
crop loans of the total value of almost P80,000.00 for the agricultural years from 1952 to 1956", there was
no reasonable basis for the Board of Directors of petitioner to have rejected the lease agreement because
of a measly sum of P200.00.
While petitioner had the ultimate authority of approving or disapproving the proposed lease since the
quota was mortgaged to the Bank, the latter certainly cannot escape its responsibility of observing, for the
protection of the interest of private respondents, that degree of care, precaution and vigilance which the
circumstances justly demand in approving or disapproving the lease of said sugar quota. The law makes
it imperative that every person "must in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith, 4 This petitioner failed to do.
Certainly, it knew that the agricultural year was about to expire, that by its disapproval of the lease private
respondents would be unable to utilize the sugar quota in question. In failing to observe the reasonable
degree of care and vigilance which the surrounding circumstances reasonably impose, petitioner is
consequently liable for the damages caused on private respondents. Under Article 21 of the New Civil
Code, "any person who wilfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage." The afore-cited provisions on
human relations were intended to expand the concept of torts in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is impossible for human foresight to
specifically provide in the statutes. 5
A corporation is civilly liable in the same manner as natural persons for torts, because "generally
speaking, the rules governing the liability of a principal or master for a tort committed by an agent or
servant are the same whether the principal or master be a natural person or a corporation, and whether
the servant or agent be a natural or artificial person. All of the authorities agree that a principal or master
is liable for every tort which he expressly directs or authorizes, and this is just as true of a corporation as
of a natural person, A corporation is liable, therefore, whenever a tortious act is committed by an officer or
agent under express direction or authority from the stockholders or members acting as a body, or,
generally, from the directors as the governing body." 6
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby AFFIRMED.

Fernando, Aquino, Concepcion, Jr., and Santos, JJ., concur.

Separate Opinions
BARREDO, J., concurring:
concurs on the basis of Article 19 of the Civil Code, or at least, of equity. He reserves his opinion on the
matter of torts relied upon in the main opinion.
Board of Liquidators v Kalaw (Torts)

BOARD OF LIQUIDATORS V KALAW G.R. No. L-18805 August 14, 1967 THE BOARD OF
LIQUIDATORS representing THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, plaintiffappellant, vs. HEIRS OF MAXIMO M. KALAW, JUAN BOCAR, ESTATE OF THE DECEASED
CASIMIRO GARCIA, and LEONOR MOLL, defendants-appellees.
FACTS:
The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit governmental
organization on avowedly for the protection, preservation and development of the coconut industry in the
Philippines. On August 1, 1946, NACOCO's charter was amended [Republic Act 5] to grant that
corporation the express power to buy and sell copra. The charter amendment was enacted to stabilize
copra prices, to serve coconut producers by securing advantageous prices for them, to cut down to a
minimum, if not altogether eliminate, the margin of middlemen, mostly aliens. General manager and board
chairman was Maximo M. Kalaw; defendants Juan Bocar and Casimiro Garcia were members of the
Board; defendant Leonor Moll became director only on December 22, 1947. NACOCO, after the passage
of Republic Act 5, embarked on copra trading activities.
An unhappy chain of events conspired to deter NACOCO from fulfilling the contracts it entered into.
Nature supervened. Four devastating typhoons visited the Philippines in 1947. When it became clear that
the contracts would be unprofitable, Kalaw submitted them to the board for approval. It was not until
December 22, 1947 when the membership was completed. Defendant Moll took her oath on that date. A
meeting was then held. Kalaw made a full disclosure of the situation, apprised the board of the impending
heavy losses. No action was first taken on the contracts but not long thereafter, that is, on January 30,
1948, the board met again with Kalaw, Bocar, Garcia and Moll in attendance. They unanimously approved
the contracts hereinbefore enumerated.
As was to be expected, NACOCO but partially performed the contracts. The buyers threatened damage
suits, some of which were settled. But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue
before the Court of First Instance of Manila. The cases culminated in an out-of- court amicable settlement
when the Kalaw management was already out.
With particular reference to the Dreyfus claims, NACOCO put up the defenses that:
(1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did not have license to do
business here; and
(2) failure to deliver was due to force majeure, the typhoons. All the settlements sum up to P1,343,274.52.
In this suit started in February, 1949, NACOCO seeks to recover the above sum of P1,343,274.52 from
general manager and board chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro Garcia and

Leonor Moll. It charges Kalaw with negligence under Article 1902 of the old Civil Code (now Article 2176,
new Civil Code); and defendant board members, including Kalaw, with bad faith and/or breach of trust for
having approved the contracts. By Executive Order 372, dated November 24, 1950, NACOCO, together
with other government-owned corporations, was abolished, and the Board of Liquidators was entrusted
with the function of settling and closing its affairs.
DECISION OF LOWER COURTS:
1. CFI-Manila: dismissed the complaint. Plaintiff was ordered to pay the heirs of Maximo Kalaw the sum of
P2,601.94 for unpaid salaries and cash deposit due the deceased Kalaw from NACOCO.
ISSUE:
1. Whether plaintiff Board of Liquidators has lost its legal personality to continue with this suit since the
three year period has elapsed, the Board of Liquidators may not now continue with, and prosecute, the
present case to its conclusion
2. Whether the action is unenforceable against Kalaw
3. whether the case at bar is to be taken out of the general concept of the powers of a general manager,
given the cited provision of the NACOCO by-laws requiring prior directorate approval of NACOCO
contracts.
4. Whether damages should be awarded
RULING:
1. No, the provision should be read not as an isolated provision but in conjunction with the whole. So
reading, it will be readily observed that no time limit has been tacked to the existence of the Board of
Liquidators and its function of closing the affairs of the various government owned corporations, including
NACOCO.
The President thought it best to do away with the boards of directors of the defunct corporations; at the
same time, however, the President had chosen to see to it that the Board of Liquidators step into the
vacuum. And nowhere in the executive order was there any mention of the lifespan of the Board of
Liquidators.
3 methods by which corporation may wind up it its affairs:
1. Voluntary dissolution, "such disposition of its assets as justice requires, and may appoint a receiver to
collect such assets and pay the debts of the corporation;
2. Corporate existence is terminated - "shall nevertheless be continued as a body corporate for
three years after the time when it would have been so dissolved, for the purpose of prosecuting
and defending suits by or against it and of enabling it gradually to settle and close its affairs, to
dispose of and convey its property and to divide its capital stock, but not for the purpose of
continuing the business for which it was established;"
3. corporation, within the three year period just mentioned, "is authorized and empowered to convey all of
its property to trustees for the benefit of members, stockholders, creditors, and others interested
Corpus Juris Secundum likewise is authority for the statement that "[t]he dissolution of a
corporation ends its existence so that there must be statutory authority for prolongation of its
life even for purposes of pending litigation
Board of Liquidators escapes from the operation thereof for the reason that "[o]bviously, the complete
loss of plaintiff's corporate existence after the expiration of the period of three (3) years for the settlement
of its affairs is what impelled the President to create a Board of Liquidators, to continue the management
of such matters as may then be pending."
The Board of Liquidators thus became the trustee on behalf of the government. It was an express trust.
The legal interest became vested in the trustee the Board of Liquidators. The beneficial
interest remained with the sole stockholder the government. At no time had the government withdrawn

the property, or the authority to continue the present suit, from the Board of Liquidators. If for this reason
alone, we cannot stay the hand of the Board of Liquidators from prosecuting this case to its final
conclusion. The provisions of Section 78 of the Corporation Law the third method of winding up
corporate affairs find application.
2. Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro Garcia survives.

claims that are barred if not filed in the estate settlement proceedings(Rule 87, sec. 5)
> actions that are abated by death are:
(1) claims for funeral expenses and those for the last sickness of the decedent;
(2) judgments for money; and
(3) "all claims for money against the decedent, arising from contract express or implied."
it is not enough that the claim against the deceased party be for money, but it must arise from "contract
express or implied"
actions that survive and may be prosecuted against the executor or administrator (Rule 88, sec. 1)
> 1. actions for damages caused by tortious conduct of a defendant (as in the case at bar) survive the
death of the latter.
actions that survive against a decedent's executors or administrators, and they are:
(1) actions to recover real and personal property from the estate; (2) actions to enforce a lien thereon; and
(3) actions to recover damages for an injury to person or property.

3. The movement of the market requires that sales agreements be entered into, even though the goods
are not yet in the hands of the seller. Known in business parlance as forward sales, it is concededly the
practice of the trade. Above all, NACOCO's limited funds necessitated a quick turnover. Copra contracts
then had to be executed on short notice at times within twenty-four hours. To be appreciated then is
the difficulty of calling a formal meeting of the board
So pleased was NACOCO's board of directors that, on December 5, 1946, in Kalaw's absence, it voted to
grant him aspecial bonus "in recognition of the signal achievement rendered by him in putting the
Corporation's business on a self-sufficient basis within a few months after assuming office, despite
numerous handicaps and difficulties."
These previous contract it should be stressed, were signed by Kalaw without prior authority from the
board. Existence of such authority is established, by proof of the course of business, the usage and
practices of the company and by theknowledge which the board of directors has, or must be presumed to
have, of acts and doings of its subordinates in and about the affairs of the corporation.
If the by-laws were to be literally followed, the board should give its stamp of prior approval on all
corporate contracts. But that board itself, by its acts and through acquiescence, practically laid aside the
by-law requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid corporate acts. Bad faith does not simply
connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and
conscious doing of wrong; it means breach of a known duty thru some motive or interest or ill
will; it partakes of the nature of fraud. Applying this precept to the given facts herein, we find that
there was no "dishonest purpose," or "some moral obliquity," or "conscious doing of wrong," or
"breach of a known duty," or "Some motive or interest or ill will" that "partakes of the nature of

fraud."
4. No. This is a case of damnum absque injuria. Conjunction of damage and wrong is here absent. There
cannot be an actionable wrong if either one or the other is wanting. Of course, Kalaw could not have been
an insurer of profits. He could not be expected to predict the coming of unpredictable typhoons. And even
as typhoons supervened Kalaw was not remissed in his duty. He exerted efforts to stave off losses. That
Kalaw cannot be tagged with crassa negligentia or as much as simple negligence, would seem to be
supported by the fact that even as the contracts were being questioned in Congress and in the NACOCO
board itself, President Roxas defended the actuations of Kalaw.
It is a well known rule of law that questions of policy of management are left solely to the honest decision
of officers and directors of a corporation, and the court is without authority to substitute its judgment for
the judgment of the board of directors; the board is the business manager of the corporation, and so long
as it acts in good faith its orders are not reviewable by the courts."