G.R. No. 170141 April 22, 2008 issued a U.S. visa.
issued a U.S. visa. Just to allow him to board the plane, he pleaded with JAL to closely monitor his movements
JAPAN AIRLINES, petitioner,
vs.
JESUS SIMANGAN, respondent.
DECISION
REYES R.T., J.:
WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a contract of
carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he
does not, then the carrier opens itself to a suit for breach of contract of carriage. 1
The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by
Japan Airlines (JAL).2
In this petition for review on certiorari,3 petitioner JAL appeals the: (1) Decision 4 dated May 31, 2005 of the
Court of Appeals (CA) ordering it to pay respondent Jesus Simangan moral and exemplary damages; and (2)
Resolution5 of the same court dated September 28, 2005 denying JAL's motion for reconsideration.
The Facts
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in UCLA
School of Medicine in Los Angeles, California, U.S.A. Upon request of UCLA, respondent undertook a series of
laboratory tests at the National Kidney Institute in Quezon City to verify whether his blood and tissue type are
compatible with Loreto's. 6 Fortunately, said tests proved that respondent's blood and tissue type were well-
matched with Loreto's. 7
Respondent needed to go to the United States to complete his preliminary work-up and donation surgery. Hence,
to facilitate respondent's travel to the United States, UCLA wrote a letter to the American Consulate in Manila to
arrange for his visa. In due time, respondent was issued an emergency U.S. visa by the American Embassy in
Manila.8
Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from petitioner JAL for
US$1,485.00 and was issued the corresponding boarding pass. 9 He was scheduled to a particular flight bound for
Los Angeles, California, U.S.A. via Narita, Japan. 10
On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the company of
several relatives and friends.11 He was allowed to check-in at JAL's counter.12 His plane ticket, boarding pass,
travel authority and personal articles were subjected to rigid immigration and security routines. 13 After passing
through said immigration and security procedures, respondent was allowed by JAL to enter its airplane. 14
While inside the airplane, JAL's airline crew suspected respondent of carrying a falsified travel document and
imputed that he would only use the trip to the United States as a pretext to stay and work in Japan. 15 The
stewardess asked respondent to show his travel documents. Shortly after, the stewardess along with a Japanese and
a Filipino haughtily ordered him to stand up and leave the plane. 16 Respondent protested, explaining that he was
when the aircraft stops over in Narita. 17 His pleas were ignored. He was then constrained to go out of the plane. 18
In a nutshell, respondent was bumped off the flight.
Respondent went to JAL's ground office and waited there for three hours. Meanwhile, the plane took off and he
was left behind.19 Afterwards, he was informed that his travel documents were, indeed, in order. 20 Respondent was
refunded the cost of his plane ticket less the sum of US$500.00 which was deducted by JAL. 21 Subsequently,
respondent's U.S. visa was cancelled.22
Displeased by the turn of events, respondent filed an action for damages against JAL with the Regional Trial Court
(RTC) in Valenzuela City, docketed as Civil Case No. 4195-V-93. He claimed he was not able to donate his kidney
to Loreto; and that he suffered terrible embarrassment and mental anguish. 23 He prayed that he be awarded P3
million as moral damages, P1.5 million as exemplary damages and P500,000.00 as attorney's fees.24
JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow respondent
to fly on his scheduled departure was due to "a need for his travel documents to be authenticated by the United
States Embassy"25 because no one from JAL's airport staff had encountered a parole visa before. 26 It posited that
the authentication required additional time; that respondent was advised to take the flight the following day, July
30, 1992. JAL alleged that respondent agreed to be rebooked on July 30, 1992. 27
JAL also lodged a counterclaim anchored on respondent's alleged wrongful institution of the complaint. It prayed
for litigation expenses, exemplary damages and attorney's fees. 28
On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of respondent
(plaintiff), disposing as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the amount of
P1,000,000.00 as moral damages, the amount of P500,000.00 as exemplary damages and the amount of
P250,000.00 as attorney's fees, plus the cost of suit.29
The RTC explained:
In summarily and insolently ordering the plaintiff to disembark while the latter was already settled in his
assigned seat, the defendant violated the contract of carriage; that when the plaintiff was ordered out of
the plane under the pretext that the genuineness of his travel documents would be verified it had caused
him embarrassment and besmirched reputation; and that when the plaintiff was finally not allowed to
take the flight, he suffered more wounded feelings and social humiliation for which the plaintiff was
asking to be awarded moral and exemplary damages as well as attorney's fees.
The reason given by the defendant that what prompted them to investigate the genuineness of the travel
documents of the plaintiff was that the plaintiff was not then carrying a regular visa but just a letter does
not appear satisfactory. The defendant is engaged in transporting passengers by plane from country to
country and is therefore conversant with the travel documents. The defendant should not be allowed to
pretend, to the prejudice of the plaintiff not to know that the travel documents of the plaintiff are valid
documents to allow him entry in the United States.
The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in his
assigned seat clearly demonstrated that the defendant breached its contract of carriage with the plaintiff
 as passenger in bad faith and as such the plaintiff is
entitled to moral and exemplary damages as well as to
an award of attorney's fees.30
Disagreeing with the RTC judgment, JAL appealed to the CA
contending that it is not guilty of breach of contract of carriage,
hence, not liable for damages. 31 It posited that it is the one
entitled to recover on its counterclaim. 32
CA Ruling
In a Decision33 dated May 31, 2005, the CA affirmed the
decision of the RTC with modification in that it lowered the
amount of moral and exemplary damages and deleted the award
of attorney's fees. The fallo of the CA decision reads:
WHEREFORE, the appealed Decision is AFFIRMED
with MODIFICATION. Appellant JAPAN AIR
LINES is ordered to pay appellee JESUS
SIMANGAN the reduced sums, as follows: Five
Hundred Thousand Pesos (P500,000.00) as moral
damages, and Two Hundred Fifty Thousand Pesos
(P250,000.00) as exemplary damages. The award of
attorney's fees is hereby DELETED.34
The CA elucidated that since JAL issued to respondent a round
trip plane ticket for a lawful consideration, "there arose a
perfected contract between them."35 It found that respondent
was "haughtily ejected"36 by JAL and that "he was certainly
embarrassed and humiliated"37 when, in the presence of other
passengers, JAL's airline staff "shouted at him to stand up and
arrogantly asked him to produce his travel papers, without the
least courtesy every human being is entitled to"; 38 and that "he
was compelled to deplane on the grounds that his papers were
fake."39
The CA ratiocinated:
While the protection of passengers must take precedence over
convenience, the implementation of security measures must be
attended by basic courtesies.
In fact, breach of the contract of carriage creates
against the carrier a presumption of liability, by a
simple proof of injury, relieving the injured passenger
of the duty to establish the fault of the carrier or of his
employees; and placing on the carrier the burden to
prove that it was due to an unforeseen event or to
force majeure.
That appellee possessed bogus travel documents and
that he might stay illegally in Japan are allegations
without substantiation. Also, appellant's attempt to
rebook appellee the following day was too late and
did not relieve it from liability. The damage had been
done. Besides, its belated theory of novation, i.e., that
appellant's original obligation to carry appellee to
Narita and Los Angeles on July 29, 1992 was
extinguished by novation when appellant and
appellant agreed that appellee will instead take
appellant's flight to Narita on the following day, July
30, 1992, deserves little attention. It is inappropriate
at bar. Questions not taken up during the trial cannot
be raised for the first time on appeal. 40 (Underscoring
ours and citations were omitted)
Citing Ortigas, Jr. v. Lufthansa German Airlines,41 the CA
declared that "(i)n contracts of common carriage, inattention
and lack of care on the part of the carrier resulting in the failure
of the passenger to be accommodated in the class contracted for
amounts to bad faith or fraud which entitles the passengers to
the award of moral damages in accordance with Article 2220 of
the Civil Code."42
Nevertheless, the CA modified the damages awarded by the
RTC. It explained:
Fundamental in the law on damages is that one
injured by a breach of a contract, or by a wrongful or
negligent act or omission shall have a fair and just
compensation commensurate to the loss sustained as
consequence of the defendant's act. Being
discretionary on the court, the amount, however,
should not be palpably and scandalously excessive.
Here, the trial court's award of P1,000,000.00 as
moral damages appears to be overblown. No other
proof of appellee's social standing, profession,
financial capabilities was presented except that he
was single and a businessman. To Us, the sum of
500,000.00 is just and fair. For, moral damages are
emphatically not intended to enrich a complainant at
the expense of the defendant. They are awarded only
to enable the injured party to obtain means, diversion
or amusements that will serve to alleviate the moral
suffering he has undergone, by reason of the
defendant's culpable action.
Moreover, the grant of P500,000.00 as exemplary
damages needs to be reduced to a reasonable level.
The award of exemplary damages is designed to
permit the courts to mould behavior that has socially
deleterious consequences and its imposition is
required by public policy to suppress the wanton acts
of the offender. Hence, the sum of P250,000.00 is
adequate under the circumstances.
The award of P250,000.00 as attorney's fees lacks
factual basis. Appellee was definitely compelled to
litigate in protecting his rights and in seeking relief
from appellant's misdeeds. Yet, the record is devoid
of evidence to show the cost of the services of his
counsel and/or the actual expenses incurred in
prosecuting his action.43 (Citations were omitted)
When JAL's motion for reconsideration was denied, it resorted
to the petition at bar.
Issues
JAL poses the following issues -
I.
WHETHER OR NOT THE COURT OF APPEALS Basically, there are three (3) issues to resolve here: (1) whether
ERRED IN RULING THAT RESPONDENT WAS or not JAL is guilty of contract of carriage; (2) whether or not
ENTITLED TO MORAL DAMAGES, respondent is entitled to moral and exemplary damages; and (3)
CONSIDERING THAT: whether or not JAL is entitled to its counterclaim for damages.

A. JAL WAS NOT GUILTY OF BREACH Our Ruling

OF CONTRACT.
This Court is not a trier of facts.
B. MORAL DAMAGES MAY BE
AWARDED IN BREACH OF CONTRACT Chiefly, the issues are factual. The RTC findings of facts were
CASES ONLY WHEN THE BREACH IS affirmed by the CA. The CA also gave its nod to the reasoning
ATTENDED BY FRAUD OR BAD of the RTC except as to the awards of damages, which were
FAITH. ASSUMING ARGUENDO THAT reduced, and that of attorney's fees, which was deleted.
JAL WAS GUILTY OF BREACH, JAL
DID NOT ACT FRAUDULENTLY OR IN
BAD FAITH AS TO ENTITLE We are not a trier of facts. We generally rely upon, and are
RESPONDENT TO MORAL DAMAGES. bound by, the conclusions on this matter of the lower courts,
which are better equipped and have better opportunity to assess
the evidence first-hand, including the testimony of the
C. THE LAW DISTINGUISHES A witnesses.45
CONTRACTUAL BREACH EFFECTED
IN GOOD FAITH FROM ONE
ATTENDED BY BAD FAITH. We have repeatedly held that the findings of fact of the CA are
final and conclusive and cannot be reviewed on appeal to the
Supreme Court provided they are based on substantial
II. evidence.46 We have no jurisdiction, as a rule, to reverse their
findings.47 Among the exceptions to this rule are: (a) when the
WHETHER OR NOT THE COURT OF APPEALS conclusion is a finding grounded entirely on speculations,
ERRED IN RULING THAT RESPONDENT WAS surmises or conjectures; (b) when the inference made is
ENTITLED TO EXEMPLARY DAMAGES manifestly mistaken, absurd or impossible; (c) where there is
CONSIDERING THAT: grave abuse of discretion; (d) when the judgment is based on a
misapprehension of facts; (e) when the findings of facts are
A. EXEMPLARY DAMAGES ARE NOT conflicting; (f) when the CA, in making its findings, went
RECOVERABLE IN BREACH OF beyond the issues of the case and the same is contrary to the
CONTRACT OF CARRIAGE UNLESS admissions of both appellant and appellee.48
THE CARRIER IS GUILTY OF
WANTON, FRAUDULENT, RECKLESS, The said exceptions, which are being invoked by JAL, are not
OPPRESSIVE OR MALEVOLENT found here. There is no indication that the findings of the CA
CONDUCT. are contrary to the evidence on record or that vital testimonies
of JAL's witnesses were disregarded. Neither did the CA
B. ASSUMING ARGUENDO THAT JAL commit misapprehension of facts nor did it fail to consider
WAS GUILTY OF BREACH, JAL DID relevant facts. Likewise, there was no grave abuse of discretion
NOT ACT IN A WANTON in the appreciation of facts or mistaken and absurd inferences.
FRAUDULENT, RECKLESS,
OPPRESSIVE OR MALEVOLENT We thus sustain the coherent facts as established by the courts
MANNER AS TO ENTITLE below, there being no sufficient showing that the said courts
RESPONDENT TO EXEMPLARY committed reversible error in reaching their conclusions.
DAMAGES.
JAL is guilty of breach of
III. contract of carriage.

ASSUMING ARGUENDO THAT RESPONDENT
WAS ENTITLED TO AN AWARD OF DAMAGES,
WHETHER OR NOT THE COURT OF APPEALS
AWARD OF P750,000 IN DAMAGES WAS
EXCESSIVE AND UNPRECEDENTED.
IV.
WHETHER OR NOT THE COURT OF APPEALS
ERRED IN NOT FINDING FOR JAL ON ITS
COUNTERCLAIM.44 (Underscoring Ours)
That respondent purchased a round trip plane ticket from JAL
and was issued the corresponding boarding pass is
uncontroverted.49 His plane ticket, boarding pass, travel
authority and personal articles were subjected to rigid
immigration and security procedure. 50 After passing through
said immigration and security procedure, he was allowed by
JAL to enter its airplane to fly to Los Angeles, California,
U.S.A. via Narita, Japan.51 Concisely, there was a contract of
carriage between JAL and respondent.
Nevertheless, JAL made respondent get off the plane on his
scheduled departure on July 29, 1992. He was not allowed by
JAL to fly. JAL thus failed to comply with its obligation under
the contract of carriage.
JAL justifies its action by arguing that there was "a need to
verify the authenticity of respondent's travel document." 52 It
alleged that no one from its airport staff had encountered a
parole visa before.53 It further contended that respondent agreed
to fly the next day so that it could first verify his travel
document, hence, there was novation. 54 It maintained that it was
not guilty of breach of contract of carriage as respondent was
not able to travel to the United States due to his own voluntary
desistance.55
We cannot agree. JAL did not allow respondent to fly. It
informed respondent that there was a need to first check the
authenticity of his travel documents with the U.S. Embassy. 56
As admitted by JAL, "the flight could not wait for Mr.
Simangan because it was ready to depart."57
Since JAL definitely declared that the flight could not wait for
respondent, it gave respondent no choice but to be left behind.
The latter was unceremoniously bumped off despite his
protestations and valid travel documents and notwithstanding
his contract of carriage with JAL. Damage had already been
done when respondent was offered to fly the next day on July
30, 1992. Said offer did not cure JAL's default.
Considering that respondent was forced to get out of the plane
and left behind against his will, he could not have freely
consented to be rebooked the next day. In short, he did not
agree to the alleged novation. Since novation implies a waiver
of the right the creditor had before the novation, such waiver
must be express.58 It cannot be supposed, without clear proof,
that respondent had willingly done away with his right to fly on
July 29, 1992.
Moreover, the reason behind the bumping off incident, as found
by the RTC and CA, was that JAL personnel imputed that
respondent would only use the trip to the United States as a
pretext to stay and work in Japan.59
Apart from the fact that respondent's plane ticket, boarding
pass, travel authority and personal articles already passed the
rigid immigration and security routines, 60 JAL, as a common
carrier, ought to know the kind of valid travel documents
respondent carried. As provided in Article 1755 of the New
Civil Code: "A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for
all the circumstances."61 Thus, We find untenable JAL's defense
of "verification of respondent's documents" in its breach of
contract of carriage.
It bears repeating that the power to admit or not an alien into
the country is a sovereign act which cannot be interfered with
even by JAL.62
In an action for breach of contract of carriage, all that is
required of plaintiff is to prove the existence of such contract
and its non-performance by the carrier through the latter's
failure to carry the passenger safely to his destination. 63
Respondent has complied with these twin requisites.
Respondent is entitled to moral and exemplary damages and
attorney's fees plus legal interest.
With reference to moral damages, JAL alleged that they are not
recoverable in actions ex contractu except only when the breach
is attended by fraud or bad faith. It is contended that it did not
act fraudulently or in bad faith towards respondent, hence, it
may not be held liable for moral damages.
As a general rule, moral damages are not recoverable in actions
for damages predicated on a breach of contract for it is not one
of the items enumerated under Article 2219 of the Civil Code. 64
As an exception, such damages are recoverable: (1) in cases in
which the mishap results in the death of a passenger, as
provided in Article 1764, in relation to Article 2206(3) of the
Civil Code; and (2) in the cases in which the carrier is guilty of
fraud or bad faith, as provided in Article 2220.65
The acts committed by JAL against respondent amounts to bad
faith. As found by the RTC, JAL breached its contract of
carriage with respondent in bad faith. JAL personnel summarily
and insolently ordered respondent to disembark while the latter
was already settled in his assigned seat. He was ordered out of
the plane under the alleged reason that the genuineness of his
travel documents should be verified.
These findings of facts were upheld by the CA, to wit:
x x x he was haughtily ejected by appellant. He was
certainly embarrassed and humiliated when, in the
presence of other passengers, the appellant's airline
staff shouted at him to stand up and arrogantly asked
him to produce his travel papers, without the least
courtesy every human being is entitled to. Then, he
was compelled to deplane on the grounds that his
papers were fake. His protestation of having been
issued a U.S. visa coupled with his plea to appellant
to closely monitor his movements when the aircraft
stops over in Narita, were ignored. Worse, he was
made to wait for many hours at the office of appellant
only to be told later that he has valid travel
documents.66 (Underscoring ours)
Clearly, JAL is liable for moral damages. It is firmly settled that
moral damages are recoverable in suits predicated on breach of
a contract of carriage where it is proved that the carrier was
guilty of fraud or bad faith, as in this case. Inattention to and
lack of care for the interests of its passengers who are entitled
to its utmost consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to an award of
moral damages. What the law considers as bad faith which may
furnish the ground for an award of moral damages would be
bad faith in securing the contract and in the execution thereof,
as well as in the enforcement of its terms, or any other kind of
deceit.67
JAL is also liable for exemplary damages as its above-
mentioned acts constitute wanton, oppressive and malevolent
acts against respondent. Exemplary damages, which are
awarded by way of example or correction for the public good,
may be recovered in contractual obligations, as in this case, if
defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.68
Exemplary damages are designed by our civil law to permit the
courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents
against such behaviour. In requiring compliance with the
standard of extraordinary diligence, a standard which is, in fact,
that of the highest possible degree of diligence, from common
carriers and in creating a presumption of negligence against
them, the law seeks to compel them to control their employees,
to tame their reckless instincts and to force them to take
adequate care of human beings and their property.69
Neglect or malfeasance of the carrier's employees could give
ground for an action for damages. Passengers have a right to be
treated by the carrier's employees with kindness, respect,
courtesy and due consideration and are entitled to be protected
against personal misconduct, injurious language, indignities and
abuses from such employees.70
The assessment of P500,000.00 as moral damages and
P100,000.00 as exemplary damages in respondent's favor is, in
Our view, reasonable and realistic. This award is reasonably
sufficient to indemnify him for the humiliation and
embarrassment he suffered. This also serves as an example to
discourage the repetition of similar oppressive acts.
With respect to attorney's fees, they may be awarded when
defendant's act or omission has compelled plaintiff to litigate
with third persons or to incur expenses to protect his interest. 71
The Court, in Construction Development Corporation of the
Philippines v. Estrella,72 citing Traders Royal Bank Employees
Union-Independent v. National Labor Relations Commission,73
elucidated thus:
There are two commonly accepted concepts of
attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's
fee is the reasonable compensation paid to a lawyer
by his client for the legal services he has rendered to
the latter. The basis of this compensation is the fact of
his employment by and his agreement with the client.
In its extraordinary concept, an attorney's fee is
an indemnity for damages ordered by the court to
be paid by the losing party in a litigation. The basis
of this is any of the cases provided by law where such
award can be made, such as those authorized in
Article 2208, Civil Code, and is payable not to the
lawyer but to the client, unless they have agreed
that the award shall pertain to the lawyer as
additional compensation or as part thereof.74
It was therefore erroneous for the CA to delete the award of
attorney's fees on the ground that the record is devoid of
evidence to show the cost of the services of respondent's
counsel. The amount is actually discretionary upon the Court so
long as it passes the test of reasonableness. They may be
recovered as actual or compensatory damages when exemplary
damages are awarded and whenever the court deems it just and
equitable,75 as in this case.
Considering the factual backdrop of this case, attorney's fees in
the amount of P200,000.00 is reasonably modest.
The above liabilities of JAL in the total amount of P800,000.00
earn legal interest pursuant to the Court's ruling in Construction
Development Corporation of the Philippines v. Estrella,76 citing
Eastern Shipping Lines, Inc. v. Court of Appeals,77 to wit:
Regarding the imposition of legal interest at the rate
of 6% from the time of the filing of the complaint, we
held in Eastern Shipping Lines, Inc. v. Court of
Appeals, that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual
and compensatory damages, subject to the following
rules, to wit -
1. When the obligation is breached, and it
consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the
interest due should be that which may have
been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest
from the time it is judicially demanded. In
the absence of stipulation, the rate of
interest shall be 12% per annum to be
computed from default, i.e., from judicial or
extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a
loan or forbearance of money, is breached,
an interest on the amount of damages
awarded may be imposed at the discretion
of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on
unliquidated claims or damages except
when or until the demand can be
established with reasonable certainty.
Accordingly, where the demand is
established with reasonable certainty, the
interest shall begin to run from the time the
claim is made judicially or extrajudicially
(Art. 1169, Civil Code) but when such
certainty cannot be so reasonably
established at the time the demand is made,
the interest shall begin to run only from
the date the judgment of the court is
made (at which time the quantification of
damages may be deemed to have been
reasonably ascertained). The actual base
for the computation of legal interest shall,
in any case, be on the amount finally
adjudged.
3. When the judgment of the court
awarding a sum of money becomes final
and executory, the rate of legal interest,
 whether the case falls under paragraph 1
or paragraph 2, above, shall be 12% per
annum from such finality until its
satisfaction, this interim period being
deemed to be by then an equivalent to a
forbearance of credit.78 (Emphasis
supplied and citations omitted)
Accordingly, in addition to the said total amount of
P800,000.00, JAL is liable to pay respondent legal interest.
Pursuant to the above ruling of the Court, the legal interest is
6% and it shall be reckoned from September 21, 2000 when the
RTC rendered its judgment. From the time this Decision
becomes final and executory, the interest rate shall be 12% until
its satisfaction.
JAL is not entitled to its counterclaim for damages.
The counterclaim of JAL in its Answer 79 is a compulsory
counterclaim for damages and attorney's fees arising from the
filing of the complaint. There is no mention of any other
counter claims.
This compulsory counterclaim of JAL arising from the filing of
the complaint may not be granted inasmuch as the complaint
against it is obviously not malicious or unfounded. It was filed
by respondent precisely to claim his right to damages against
JAL. Well-settled is the rule that the commencement of an
action does not per se make the action wrongful and subject the
action to damages, for the law could not have meant to impose
a penalty on the right to litigate.80
We reiterate case law that if damages result from a party's
exercise of a right, it is damnum absque injuria.81 Lawful acts
give rise to no injury. Walang perhuwisyong maaring idulot
ang paggamit sa sariling karapatan.
During the trial, however, JAL presented a witness who
testified that JAL suffered further damages. Allegedly,
respondent caused the publications of his subject complaint
against JAL in the newspaper for which JAL suffered
damages.82
Although these additional damages allegedly suffered by JAL
were not incorporated in its Answer as they arose subsequent to
its filing, JAL's witness was able to testify on the same before
the RTC.83 Hence, although these issues were not raised by the
pleadings, they shall be treated in all respects as if they had
been raised in the pleadings.
As provided in Section 5, Rule 10 of the Rules of Court,
"(w)hen issues not raised by the pleadings are tried with the
express or implied consent of the parties, they shall be treated
in all respects as if they had been raised in the pleadings."
Nevertheless, JAL's counterclaim cannot be granted.
JAL is a common carrier. JAL's business is mainly with the
traveling public. It invites people to avail themselves of the
comforts and advantages it offers.84 Since JAL deals with the
public, its bumping off of respondent without a valid reason
naturally drew public attention and generated a public issue.
The publications involved matters about which the public has
the right to be informed because they relate to a public issue.
This public issue or concern is a legitimate topic of a public
comment that may be validly published.
Assuming that respondent, indeed, caused the publication of his
complaint, he may not be held liable for damages for it. The
constitutional guarantee of freedom of the speech and of the
press includes fair commentaries on matters of public interest.
This is explained by the Court in Borjal v. Court of Appeals,85 to
wit:
To reiterate, fair commentaries on matters of public
interest are privileged and constitute a valid defense
in an action for libel or slander. The doctrine of fair
comment means that while in general every
discreditable imputation publicly made is deemed
false, because every man is presumed innocent until
his guilt is judicially proved, and every false
imputation is deemed malicious, nevertheless, when
the discreditable imputation is directed against a
public person in his public capacity, it is not
necessarily actionable. In order that such discreditable
imputation to a public official may be actionable, it
must either be a false allegation of fact or a comment
based on a false supposition. If the comment is an
expression of opinion, based on established facts,
then it is immaterial that the opinion happens to be
mistaken, as long as it might reasonably be inferred
from the facts.86 (Citations omitted and underscoring
ours)
Even though JAL is not a public official, the rule on privileged
commentaries on matters of public interest applies to it. The
privilege applies not only to public officials but extends to a
great variety of subjects, and includes matters of public
concern, public men, and candidates for office. 87
Hence, pursuant to the Borjal case, there must be an actual
malice in order that a discreditable imputation to a public
person in his public capacity or to a public official may be
actionable. To be considered malicious, the libelous statements
must be shown to have been written or published with the
knowledge that they are false or in reckless disregard of
whether they are false or not.88
Considering that the published articles involve matters of public
interest and that its expressed opinion is not malicious but
based on established facts, the imputations against JAL are not
actionable. Therefore, JAL may not claim damages for them.
WHEREFORE, the petition is DENIED. The appealed
Decision of the Court of Appeals is AFFIRMED WITH
MODIFICATION. As modified, petitioner Japan Airlines is
ordered to pay respondent Jesus Simangan the following: (1)
P500,000.00 as moral damages; (2) P100,000.00 as exemplary
damages; and (3) P200,000.00 as attorney's fees.
The total amount adjudged shall earn legal interest at the rate of
6% per annum from the date of judgment of the Regional Trial
Court on September 21, 2000 until the finality of this Decision.
From the time this Decision becomes final and executory, the
unpaid amount, if any, shall earn legal interest at the rate of
12% per annum until its satisfaction.
SO ORDERED.
TITAN-IKEDA CONSTRUCTION G.R. No. 158768
& DEVELOPMENT
CORPORATION,
Petitioner,
Present:
PUNO, C.J., Chairperson,
Upon the completion of MPT's structural works, respondent
awarded the P130,000,000 contract for the tower's architectural
works8[8] (project) to petitioner. Thus, on January 31, 1994, the
parties executed a supplemental agreement. 9[9] The salient
portions thereof were:
1. the [project] shall cover the scope of work of the
detailed construction bid plans and specifications and bid
documents dated 28 September 1993, attached and forming an
integral part hereof as Annex A.
2. the contract price for the said works shall be P130
million.
3. the payment terms shall be full swapping or full
payment in condominium units. The condominium units
earmarked for the [petitioner] are shown in the attached Annex
B.

SANDOVAL-GUTIERREZ, 4. the [respondent] shall transfer and surrender to

-v e r s u s- [petitioner] the condominium units abovestated in accordance
CORONA, with the following schedule:

AZCUNA and (a) 80% of units upon posting and acceptance by

LEONARDO-DE CASTRO, JJ. [respondent] of the performance bond [and]

(b) 20% or remaining balance upon completion of the

PRIMETOWN PROPERTY project as provided in the construction contract and
GROUP, INC., simultaneous with the posting by [petitioner] of the
Respondent. reglementary guarantee bond.
Promulgated:
5. the contract period shall be fifteen (15) months
reckoned from the release of the condominium certificates of
February 12, 2008 title (CCTs) covering eighty percent (80%) of the units
transferable to [petitioner] as aforesaid[.]

x------------------------------------------- Significantly, the supplemental agreement adopted those

-------x provisions of the construction contract which it did not
specifically discuss or provide for.10[10] Among those carried
DECISION over was the designation of GEMM Construction Corporation
(GEMM) as the project's construction manager.11[11]
CORONA, J.:
Petitioner started working on the project in February 1994.

This petition for review on certiorari 1[1] seeks to set
aside the decision of the Court of Appeals (CA) in CA-G.R. CV
No. 613532[2] and its resolution3[3] denying reconsideration.
In 1992, respondent Primetown Property Group, Inc. awarded
the contract for the structural works 4[4] of its 32-storey Makati
Prime Tower (MPT) to petitioner Titan-Ikeda Construction and
Development Corporation.5[5] The parties formalized their
agreement in a construction contract6[6] dated February 4,
1993.7[7]
On June 30, 1994, respondent executed a deed of
sale12[12] (covering 114 condominium units and 20 parking
slots of the MPT collectively valued by the parties at
P112,416,716.88)13[13] in favor of petitioner pursuant to the
full-swapping payment provision of the supplemental
agreement.
Shortly thereafter, petitioner sold some of its units to third
persons.14[14]
In September 1995, respondent engaged the services of
Integratech, Inc. (ITI), an engineering consultancy firm, to

1 8
2 9
3 10
4 11
5 12
6 13
7 14
evaluate the progress of the project. 15[15] In its September 7,
1995 report,16[16] ITI informed respondent that petitioner, at
that point, had only accomplished 31.89% of the project (or was
11 months and six days behind schedule).17[17]
Meanwhile, petitioner and respondent were discussing the
possibility of the latters take over of the projects supervision.
Despite ongoing negotiations, respondent did not obtain
petitioners consent in hiring ITI as the projects construction
manager. Neither did it inform petitioner of ITIs September 7,
1995 report.
On October 12, 1995, petitioner sought to confirm
respondent's plan to take over the project.18[18] Its letter stated:
The mutual agreement arrived at sometime in the last
week of August 1995 for [respondent] to take over the
construction supervision of the balance of the [project] from
[petitioner's] [e]ngineering staff and complete [the] same by
December 31, 1995 as promised by [petitioner's] engineer.
The [petitioner's] accomplished works as of this date
of [t]ake over is of acceptable quality in materials and
workmanship.
This mutual agreement on the take over should
not be misconstrued in any other way except that the take
over is part of the long range plan of [respondent] that
[petitioner], in the spirit of cooperation, agreed to hand over the
construction supervision to [respondent] as requested.
(emphasis supplied)19[19]
Engineers Antonio Co, general construction manager of
respondent, and Luzon Y. Tablante, project manager of
petitioner, signed the letter.
Integratechs (ITIs) Report
In its September 7, 1995 report, ITI estimated that petitioner
should have accomplished 48.71% of the project as of the
October 12, 1995 takeover date.20[20] Petitioner repudiated this
figure21[21] but qualifiedly admitted that it did not finish the
project.22[22] Records showed that respondent did not merely
take over the supervision of the project but took full control
thereof.23[23]
Petitioner consequently conducted an inventory.24[24] On the
basis thereof, petitioner demanded from respondent the
payment of its balance amounting to P1,779,744.85.25[25]
15
16
17
18
19
20
21
22
23
24
25
On February 19, 1996, petitioner sent a second letter to
respondent demanding P2,023,876.25. This new figure included
the cost of materials (P244,331.40) petitioner advanced from
December 5, 1995 to January 26, 1996.26[26]
On November 22, 1996, petitioner demanded from respondent
the delivery of MPT's management certificate 27[27] and the
keys to the condominium units and the payment of its
(respondent's) balance.28[28]
Because respondent ignored petitioner's demand, petitioner, on
December 9, 1996, filed a complaint for specific
performance29[29] in the Housing and Land Use Regulatory
Board (HLURB).
While the complaint for specific performance was pending in
the HLURB, respondent sent a demand letter to petitioner
asking it to reimburse the actual costs incurred in finishing the
project (or P69,785,923.47).30[30] In view of the pendency of
the HLURB case, petitioner did not heed respondent's demands.
On April 29, 1997, the HLURB rendered a decision in favor of
petitioner.31[31] It ruled that the instrument executed on June
30, 1994 was a deed of absolute sale because the conveyance of
the condominium units and parking slots was not subject to any
condition.32[32] Thus, it ordered respondent to issue MPTs
management certificate and to deliver the keys to the
condominium units to petitioner.33[33] Respondent did not
appeal this decision. Consequently, a writ of execution was
issued upon its finality.34[34]
Undaunted by the finality of the HLURB decision, respondent
filed a complaint for collection of sum of money 35[35] against
petitioner in the Regional Trial Court (RTC) of Makati City,
Branch 58 on July 2, 1997. It prayed for the reimbursement of
the value of the projects unfinished portion amounting to
P66,677,000.36[36]
During trial, the RTC found that because respondent modified
the MPT's architectural design, petitioner had to adjust the
scope of work.37[37] Moreover, respondent belatedly informed
petitioner of those modifications. It also failed to deliver the
concrete mix and rebars according to schedule. For this reason,
petitioner was not responsible for the project's delay. 38[38] The
trial court thus allowed petitioner to set-off respondent's other
outstanding liabilities with respondents excess payment in the
project.39[39] It concluded that respondent owed petitioner
26
27
28
29
30
31
32
33
34
35
36
37
38
39
P2,023,876.25.40[40] In addition, because respondent refused to
deliver the keys to the condominium units and the management
certificate to petitioner, the RTC found that petitioner lost rental
income amounting to US$1,665,260.41[41] The dispositive
portion of the RTC decision stated:
WHEREFORE, PREMISES CONSIDERED, judgment is
hereby rendered dismissing [respondent's] [c]omplaint for lack
of merit. On the other hand, finding preponderance of evidence
to sustain [petitioner's] counterclaim, judgment is hereby
rendered in favor of [petitioner] ordering [respondent] to pay
the former:
1. The unpaid balance of the consideration for
[petitioner's] services in [the project] in the amount of
P2,023,867.25 with legal interest from the date of demand until
fully paid;
2. Compensatory damages in the amount of
US$1,665,260 or its peso equivalent at the current foreign
exchange rate representing lost rental income due only as of
July 1997 and the accrued lost earnings from then on until the
date of actual payment, with legal interest from the date of
demand until fully paid; and
3. Attorney's fees in the amount of P100,000 as
acceptance fee, P1,000 appearance fee per hearing and 25% of
the total amount awarded to [petitioner].
With costs against the [respondent].
SO ORDERED.42[42]
Respondent appealed the RTC decision to the CA. 43[43] The
appellate court found that respondent fully performed its
obligation when it executed the June 30, 1994 deed of absolute
sale in favor of petitioner.44[44] Moreover, ITI's report clearly
established that petitioner had completed only 48.71% of the
project as of October 12, 1995, the takeover date. Not only did
it incur delay in the performance of its obligation but petitioner
also failed to finish the project. The CA ruled that respondent
was entitled to recover the value of the unfinished portion of the
project under the principle of unjust enrichment. 45[45] Thus:
WHEREFORE, the appealed decision is
REVERSED and a new one entered dismissing [petitioner's]
counterclaims of P2,023,867.25 representing unpaid balance for
[its] services in [the project]; US$1,665,260 as accrued lost
earnings, and attorney's fees. [Petitioner] is hereby ordered to
return to [respondent] the amount of P66,677,000 representing
the value of unfinished [portion of the project], plus legal
interest thereon until fully paid. Upon payment by [petitioner]
of the aforementioned amount, [respondent] is hereby ordered
to deliver the keys and [m]anagement [c]ertificate of the
[Makati Prime Tower] paid to [petitioner] as consideration for
the [project].46[46]
40
41
42
43
44
45
Petitioner moved for reconsideration but it was denied. Hence,
this petition.
Petitioner contends that the CA erred in giving weight
to ITI's report because the project evaluation was commissioned
only by respondent,47[47] in disregard of industry practice.
Project evaluations are agreed upon by the parties and
conducted by a disinterested third party.48[48]
We grant the petition.
Review of Conflicting Factual Findings
As a general rule, only questions of law may be raised
in a petition for review on certiorari. Factual issues are
entertained only in exceptional cases such as where the findings
of fact of the CA and the trial court are conflicting. 49[49]
Here, a glaring contradiction exists between the factual findings
of the RTC and the CA. The trial court found that respondent
contributed to the project's delay because it belatedly
communicated the modifications and failed to deliver the
necessary materials on time. The CA, however, found that
petitioner incurred delay in the performance of its obligation. It
relied on ITI's report which stated that petitioner had
accomplished only 48.71% of the project as of October 12,
1995.
January 31, 1994 Supplemental Agreement Was
Extinguished
A contract is a meeting of the minds between two
persons whereby one binds himself, with respect to the other, to
give something or to render some service. 50[50] This case
involved two contracts entered into by the parties with regard to
the project.
The parties first entered into a contract for a piece of work 51[51]
when they executed the supplemental agreement. Petitioner as
contractor bound itself to execute the project for respondent, the
owner/developer, in consideration of a price certain
(P130,000,000). The supplemental agreement was reciprocal in
nature because the obligation of respondent to pay the entire
contract price depended on the obligation of petitioner to
complete the project (and vice versa).
Thereafter, the parties entered into a second contract. They
agreed to extinguish the supplemental agreement as evidenced
by the October 12, 1995 letter-agreement which was duly
acknowledged by their respective representatives. 52[52]
46
47
48
49
50
51
52

While the October 12, 1995 letter-agreement stated that
respondent was to take over merely the supervision of the
project, it actually took over the whole project itself. In fact,
respondent subsequently hired two contractors in petitioner's
stead.53[53] Moreover, petitioner's project engineer at site only
monitored the progress of architectural works undertaken in its
condominium units.54[54] Petitioner never objected to this
arrangement; hence, it voluntarily surrendered its participation
in the project. Moreover, it judicially admitted in its answer that
respondent took over the entire project, not merely its
supervision, pursuant to its (respondents) long-range plans. 55
[55]
Because the parties agreed to extinguish the supplemental
agreement, they were no longer required to fully perform their
respective obligations. Petitioner was relieved of its obligation
to complete the project while respondent was freed of its
obligation to pay the entire contract price. However,
respondent, by executing the June 30, 1994 deed of absolute
sale, was deemed to have paid P112,416,716.88. Nevertheless,
because petitioner applied part of what it received to
respondents outstanding liabilities, 56[56] it admitted
overpayment.
Because petitioner acknowledged that it had been overpaid, it
was obliged to return the excess to respondent. Embodying the
principle of solutio indebiti, Article 2154 of the Civil Code
provides:
Article 2154. If something is received when there is no right to
demand it and it was unduly delivered through mistake, the
obligation to return it arises.
For the extra-contractual obligation of solutio indebiti to arise,
the following requisites must be proven:
1. the absence of a right to collect the excess sums and
2. the payment was made by mistake.57[57]
With regard to the first requisite, because the supplemental
agreement had been extinguished by the mutual agreement of
the parties, petitioner became entitled only to the cost of
services it actually rendered (i.e., that fraction of the project
cost in proportion to the percentage of its actual
accomplishment in the project). It was not entitled to the excess
(or extent of overpayment).
On the second requisite, Article 2163 of the Civil
Code provides:
Article 2163. It is presumed that there was a mistake in the
payment if something which had never been due or had
already been paid was delivered; but, he from whom the return
is claimed may prove that the delivery was made out of
liberality or for any other just cause. (emphasis supplied)
53
54
55
56
57
In this instance, respondent paid part of the contract price under
the assumption that petitioner would complete the project
within the stipulated period. However, after the supplemental
agreement was extinguished, petitioner ceased working on the
project. Therefore, the compensation petitioner received in
excess of the cost of its actual accomplishment as of October
12, 1995 was never due. The condominium units and parking
slots corresponding to the said excess were mistakenly
delivered by respondent and were therefore not due to
petitioner.
Stated simply, respondent erroneously delivered
excess units to petitioner and the latter, pursuant to Article
2154, was obliged to the return them to respondent. 58[58]
Article 2160 of the Civil Code provides:
Article 2160. He who in good faith accepts an undue payment
of a thing certain and determinate shall only be responsible for
the impairment or loss of the same or its accessories and
accessions insofar as he has thereby been benefited. If he has
alienated it, he shall return the price or assign the action to
collect the sum.
One who receives payment by mistake in good faith is, as a
general rule, only liable to return the thing delivered. 59[59] If he
benefited therefrom, he is also liable for the impairment or loss
of the thing delivered and its accessories and accessions. 60[60]
If he sold the thing delivered, he should either deliver the
proceeds of the sale or assign the action to collect to the other
party.61[61]
The situation is, however, complicated by the following facts:
a) the basis of the valuation (P112,416,716.99) of the
condominium units and parking slots covered by the June 30,
1994 deed of sale is unknown;
b) the percentage of petitioner's actual accomplishment in the
project has not been determined and
c) the records of this case do not show the actual number of
condominium units and parking slots sold by petitioners.
Because this Court is not a trier of facts, the determination of
these matters should be remanded to the RTC for reception of
further evidence.
The RTC must first determine the percentage of the
project petitioner actually completed and its proportionate
cost.62[62] This will be the amount due to petitioner. Thereafter,
based on the stipulated valuation in the June 30, 1994 deed of
sale, the RTC shall determine how many condominium units
and parking slots correspond to the amount due to petitioner. It
will only be the management certificate and the keys to these
units that petitioner will be entitled to. The remaining units,
having been mistakenly delivered by respondent, will therefore
be the subject of solutio indebiti.
58
59
60
61
62
What exactly must petitioner give back to respondent? Under
Article 2160 in relation to Article 2154, it should return to
respondent the condominium units and parking slots in excess
of the value of its actual accomplishment (i.e., the amount due
to it) as of October 12, 1995. If these properties include units
and/or slots already sold to third persons, petitioner shall
deliver the proceeds of the sale thereof or assign the actions for
collection to respondent as required by Article 2160.
Delay In The Completion Of The Project
Mora or delay is the failure to perform the obligation
in due time because of dolo (malice) or culpa (negligence).63
[63] A debtor is deemed to have violated his obligation to the
creditor from the time the latter makes a demand. Once the
creditor makes a demand, the debtor incurs mora or delay.64[64]
The construction contract65[65] provided a procedure for
protesting delay:
Article XIV
DELAYS AND ABANDONMENT
15.1. If at any time during the effectivity of this contract,
[PETITIONER] shall incur unreasonable delay or slippages
of more than fifteen percent (15%) of the scheduled work
program, [RESPONDENT] should notify [PETITIONER]
in writing to accelerate the work and reduce, if not erase,
slippage. If after the lapse of sixty (60) days from receipt of
such notice, [PETITIONER] fails to rectify the delay or
slippage, [RESPONDENT] shall have the right to terminate this
contract except in cases where the same was caused by force
majeure. FORCE MAJEURE as contemplated herein, and in
determination of delay includes, but is not limited to, typhoon,
flood, earthquake, coup d'etat, rebellion, sedition, transport
strike, stoppage of work, mass public action that prevents
workers from reporting for work, and such other causes beyond
[PETITIONER'S] control.66[66] (emphasis supplied)
xxx xxx xxx
Respondent never sent petitioner a written demand
asking it to accelerate work on the project and reduce, if not
eliminate, slippage. If delay had truly been the reason why
respondent took over the project, it would have sent a written
demand as required by the construction contract. Moreover,
according to the October 12, 1995 letter-agreement, respondent
took over the project for the sole reason that such move was
part of its (respondent's) long-term plan.
Respondent, on the other hand, relied on ITI's
September 7, 1995 report. The construction contract named
GEMM, not ITI, as construction manager.67[67] Because
petitioner did not consent to the change of the designated
construction manager, ITI's September 7, 1995 report could not
bind it.
In view of the foregoing, we hold that petitioner did not incur
delay in the performance of its obligation.
63
64
65
66
67
Recovery Of Additional Costs Resulting From Changes
The supplemental agreement was a contract for a
stipulated price.68[68] In such contracts, the recovery of
additional costs (incurred due to changes in plans or
specifications) is governed by Article 1724 of the Civil Code.
Article 1724. The contractor who undertakes to build a structure
or any other work for a stipulated price, in conformity with
plans and specifications agreed upon with the landowner, can
neither withdraw from the contract nor demand an increase in
the price on account of higher cost of labor or materials, save
when there has been a change in plans and specifications,
provided:
1. such change has been authorized by the proprietor in
writing; and
2. the additional price to be paid to the contractor has been
determined in writing by both parties.
In Powton Conglomerate, Inc. v. Agcolicol, 69[69] we
reiterated that a claim for the cost of additional work arising
from changes in the scope of work can only be allowed upon
the:
1. written authority from the developer/owner
ordering/allowing the changes in work; and
2. written agreement of parties with regard to the increase in
cost (or price) due to the change in work or design
modification. 70[70]
Furthermore:
Compliance with the two requisites of Article 1724, a
specific provision governing additional works, is a condition
precedent of the recovery. The absence of one or the other
bars the recovery of additional costs. Neither the authority for
the changes made nor the additional price to be paid therefor
may be proved by any other evidence for purposes of
recovery.71[71] (emphasis supplied)
Petitioner submitted neither one. In addition, petitioners project
coordinator Estellita Garcia testified that respondent never
approved any change order.72[72] Thus, under Article 1724 and
pursuant to our ruling in Powton Conglomerate, Inc., petitioner
cannot recover the cost it incurred in effecting the design
modifications. A contractor who fails to secure the owner or
developer's written authority to changes in the work or written
assent to the additional cost to be incurred cannot invoke the
principle of unjust enrichment.73[73]
Recovery Of Compensatory Damages
68
69
70
71
72
73
Indemnification for damages comprehends not only the loss
suffered (actual damages or damnum emergens) but also the
claimant's lost profits (compensatory damages or lucrum
cessans). For compensatory damages to be awarded, it is
necessary to prove the actual amount of the alleged loss by
preponderance of evidence.74[74]
The RTC awarded compensatory damages based on the rental
pool rates submitted by petitioner 75[75] and on the premise that
all those units would have been leased had respondent only
finished the project by December 31, 1995. 76[76] However,
other than bare assertions, petitioner submitted no proof that the
rental pool was in fact able to lease out the units. We thus hold
that the losses sustained by petitioner were merely speculative
and there was no basis for the award.
Remand Of Other Claims
Since respondent did not repudiate petitioner's other claims
stated in the inventory77[77] in the RTC and CA, it is estopped
from questioning the validity thereof. 78[78] However, because
some of petitioner's claims have been disallowed, we remand
the records of this case to the RTC for the computation of
respondent's liability.79[79]
WHEREFORE, the petition is hereby GRANTED.
The March 15, 2002 decision and May 29, 2003
resolution of the Court of Appeals in CA-G.R. CV No. 61353
and the August 5, 1998 decision of the Regional Trial Court,
Branch 58, Makati City in Civil Case No. 97-1501 are hereby
SET ASIDE. New judgment is entered:
1. ordering petitioner Titan-Ikeda Construction and
Development Corporation to return to respondent Primetown
Property Group, Inc. the condominium units and parking slots
corresponding to the payment made in excess of the
proportionate (project) cost of its actual accomplishment as of
October 12, 1995, subject to its (petitioners) allowable claims
as stated in the inventory and
2. dismissing petitioner Titan-Ikeda Construction and
Development Corporations claims for the cost of additional
work (or change order) and damages.
The records of this case are remanded to the Regional
Trial Court of Makati City, Branch 58 for:
1. the reception of additional evidence to determine
(a) the percentage of the architectural work actually
completed by petitioner Titan-Ikeda Construction and
Development Corporation as of October 12, 1995 on the Makati
Prime Tower and
(b) the number of condominium units and parking slots
sold by petitioner Titan-Ikeda Construction and Development
Corporation to third persons;
74
75
76
77
78
79
2. the computation of petitioner Titan-Ikeda
Construction and Development Corporation's actual liability to
respondent Primetown Property Group, Inc. or vice-versa, and
the determination of imposable interests and/or penalties, if any.
G.R. No. 73867 February 29, 1988
TELEFAST COMMUNICATIONS/PHILIPPINE
WIRELESS, INC., petitioner,
vs.
IGNACIO CASTRO, SR., SOFIA C. CROUCH, IGNACIO
CASTRO JR., AURORA CASTRO, SALVADOR CASTRO,
MARIO CASTRO, CONRADO CASTRO, ESMERALDA
C. FLORO, AGERICO CASTRO, ROLANDO CASTRO,
VIRGILIO CASTRO AND GLORIA CASTRO, and
HONORABLE INTERMEDIATE APPELLATE COURT,
respondents.
PADILLA, J.:
Petition for review on certiorari of the decision * of the
Intermediate Appellate Court, dated 11 February 1986, in AC-
G.R. No. CV-70245, entitled "Ignacio Castro, Sr., et al.,
Plaintiffs-Appellees, versus Telefast Communication/Philippine
Wireless, Inc., Defendant-Appellant."
The facts of the case are as follows:
On 2 November 1956, Consolacion Bravo-Castro wife of
plaintiff Ignacio Castro, Sr. and mother of the other plaintiffs,
passed away in Lingayen, Pangasinan. On the same day, her
daughter Sofia C. Crouch, who was then vacationing in the
Philippines, addressed a telegram to plaintiff Ignacio Castro, Sr.
at 685 Wanda, Scottsburg, Indiana, U.S.A., 47170 announcing
Consolacion's death. The telegram was accepted by the
defendant in its Dagupan office, for transmission, after payment
of the required fees or charges.
The telegram never reached its addressee. Consolacion was
interred with only her daughter Sofia in attendance. Neither the
husband nor any of the other children of the deceased, then all
residing in the United States, returned for the burial.
When Sofia returned to the United States, she discovered that
the wire she had caused the defendant to send, had not been
received. She and the other plaintiffs thereupon brought action
for damages arising from defendant's breach of contract. The
case was filed in the Court of First Instance of Pangasinan and
docketed therein as Civil Case No. 15356. The only defense of
the defendant was that it was unable to transmit the telegram
because of "technical and atmospheric factors beyond its
control." 1 No evidence appears on record that defendant ever
made any attempt to advise the plaintiff Sofia C. Crouch as to
why it could not transmit the telegram.
The Court of First Instance of Pangasinan, after trial, ordered
the defendant (now petitioner) to pay the plaintiffs (now private
respondents) damages, as follows, with interest at 6% per
annum:
 1. Sofia C. Crouch, P31.92 and P16,000.00
as compensatory damages and P20,000.00
as moral damages.
2. Ignacio Castro Sr., P20,000.00 as moral
damages.
3. Ignacio Castro Jr., P20,000.00 as moral
damages.
4. Aurora Castro, P10,000.00 moral
damages.
5. Salvador Castro, P10,000.00 moral
damages.
6. Mario Castro, P10,000.00 moral
damages.
7. Conrado Castro, P10,000 moral damages.
8. Esmeralda C. Floro, P20,000.00 moral
damages.
9. Agerico Castro, P10,000.00 moral
damages.
10. Rolando Castro, P10,000.00 moral
damages.
11. Virgilio Castro, P10,000.00 moral
damages.
12. Gloria Castro, P10,000.00 moral
damages.
Defendant is also ordered to pay P5,000.00 attorney's fees,
exemplary damages in the amount of P1,000.00 to each of the
plaintiffs and costs. 2
On appeal by petitioner, the Intermediate Appellate Court
affirmed the trial court's decision but eliminated the award of
P16,000.00 as compensatory damages to Sofia C. Crouch and
the award of P1,000.00 to each of the private respondents as
exemplary damages. The award of P20,000.00 as moral
damages to each of Sofia C. Crouch, Ignacio Castro, Jr. and
Esmeralda C. Floro was also reduced to P120,000. 00 for each.
3 damages. 4
Petitioner appeals from the judgment of the appellate court,
contending that the award of moral damages should be
eliminated as defendant's negligent act was not motivated by
"fraud, malice or recklessness."
In other words, under petitioner's theory, it can only be held
liable for P 31.92, the fee or charges paid by Sofia C. Crouch
for the telegram that was never sent to the addressee thereof.
Petitioner's contention is without merit.
Art. 1170 of the Civil Code provides that "those who in the
performance of their obligations are guilty of fraud, negligence
or delay, and those who in any manner contravene the tenor
thereof, are liable for damages." Art. 2176 also provides that
"whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage
done."
In the case at bar, petitioner and private respondent Sofia C.
Crouch entered into a contract whereby, for a fee, petitioner
undertook to send said private respondent's message overseas
by telegram. This, petitioner did not do, despite performance by
said private respondent of her obligation by paying the required
charges. Petitioner was therefore guilty of contravening its
obligation to said private respondent and is thus liable for
damages.
This liability is not limited to actual or quantified damages. To
sustain petitioner's contrary position in this regard would result
in an inequitous situation where petitioner will only be held
liable for the actual cost of a telegram fixed thirty (30) years
ago.
We find Art. 2217 of the Civil Code applicable to the case at
bar. It states: "Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate results of
the defendant's wrongful act or omission." (Emphasis supplied).
Here, petitioner's act or omission, which amounted to gross
negligence, was precisely the cause of the suffering private
respondents had to undergo.
As the appellate court properly observed:
[Who] can seriously dispute the shock, the
mental anguish and the sorrow that the
overseas children must have suffered upon
learning of the death of their mother after
she had already been interred, without
being given the opportunity to even make a
choice on whether they wanted to pay her
their last respects? There is no doubt that
these emotional sufferings were
proximately caused by appellant's omission
and substantive law provides for the
justification for the award of moral
We also sustain the trial court's award of P16,000.00 as
compensatory damages to Sofia C. Crouch representing the
expenses she incurred when she came to the Philippines from
the United States to testify before the trial court. Had petitioner
not been remiss in performing its obligation, there would have
been no need for this suit or for Mrs. Crouch's testimony.
The award of exemplary damages by the trial court is likewise
justified and, therefore, sustained in the amount of P1,000.00
for each of the private respondents, as a warning to all telegram
companies to observe due diligence in transmitting the
messages of their customers.
WHEREFORE, the petition is DENIED. The decision appealed
from is modified so that petitioner is held liable to private
respondents in the following amounts:
(1) P10,000.00 as moral damages, to each
of private respondents;
(2) P1,000.00 as exemplary damages, to
each of private respondents;
(3) P16,000.00 as compensatory damages,
to private respondent Sofia C. Crouch;
(4) P5,000.00 as attorney's fees; and
(5) Costs of suit.
SO ORDERED.
TITAN-IKEDA CONST. vs. PRIMETOWN
544 SCRA 466 (Art. 1169)
Facts:
The parties entered into a contract for a piece of work when
they executed the supplemental agreement. Respondent
Primetown Property Group, Inc. awarded the contract for the
structural works of its 32-storey Makati Prime Tower (MPT) to
petitioner Titan-Ikeda Construction and Development
Corporation. Titan-Ikeda as contractor bound itself to execute
the project for respondent, the owner/developer, in
consideration of a price certain P130M. (The supplemental
agreement was reciprocal in nature because the obligation of
respondent to pay the entire contract price depended on the
obligation of petitioner to complete the project.)
ITI estimated that petitioner should have accomplished 48.71%
of the project as of the October 12, 1995 takeover date.
Petitioner repudiated this figure but qualifiedly admitted that it
did not finish the project. Records showed that respondent did
not merely take over the supervision of the project but took full
control thereof.
Because the parties agreed to extinguish the supplemental
agreement, they were no longer required to fully perform their
respective obligations. Petitioner was relieved of its obligation
to complete the project while respondent was freed of its
obligation to pay the entire contract price.
Issue:
WON there was delay on the part of petitioner Titan-Ikeda? NO
Held:
Mora or delay is the failure to perform the obligation in due
time because of dolo (malice) or culpa (negligence). A debtor is
deemed to have violated his obligation to the creditor from the
time the latter makes a demand. Once the creditor makes a
demand, the debtor incurs mora or delay.
Construction Contact:
If at any time during the effectivity of this contract,
[PETITIONER] shall incur unreasonable delay or slippages of
more (15%) of the scheduled work program, [RESPONDENT]
should notify in writing to accelerate the work and reduce, if
not erase, slippage. If after the lapse of sixty (60) days from
receipt of such notice, [PETITIONER] fails to rectify the delay
or slippage, [RESPONDENT] shall have the right to terminate
this contract except in cases where the same was caused by
force majeure.
Respondent never sent petitioner a written demand asking it to
accelerate work on the project and reduce, if not eliminate,
slippage. If delay had truly been the reason why respondent
took over the project, it would have sent a written demand as
required by the construction contract. Moreover, according to
the October 12, 1995 letter-agreement, respondent took over the
project for the sole reason that such move was part of its
(respondents) long-term plan.
Because petitioner did not consent to the change of the
designated construction manager, ITIs September 7, 1995
report could not bind it.
G.R. No. 157318 August 9, 2006
GENEROSO V. VILLANUEVA and RAUL C.
VILLANUEVA, JR., Petitioners,
vs.
ESTATE OF GERARDO L. GONZAGA/MA. VILLA
GONZAGA, in her capacity as Administratrix, Respondents.
DECISION
PUNO, J.:
Before us is a petition for review on certiorari assailing the
Decision dated January 16, 2003 1 of the Court of Appeals in
CA-G.R. CV No. 46865 which affirmed with modification the
Decision dated December 29, 1993 2 of the Regional Trial Court
(RTC) of Bacolod City in Civil Case No. 6552. The RTC-
Bacolod City declared the Memorandum of Agreement (MOA)
between petitioners and respondents as rescinded, and ordered
petitioners to pay moral damages and attorneys fees to
respondents. The Court of Appeals deleted the award for moral
damages.
The antecedent facts are as follows:
On January 15, 1990, petitioners Generoso Villanueva and Raul
Villanueva, Jr., business entrepreneurs engaged in the operation
of transloading stations and sugar trading, and respondent
Estate of Gerardo L. Gonzaga, represented by its Judicial
Administratrix, respondent Ma. Villa J. Gonzaga, executed a
MOA 3 which reads:
KNOW ALL MEN BY THESE PRESENTS:
This Memorandum made and entered into by and between:
THE ESTATE OF GERARDO L. GONZAGA represented in
the act by its Administratrix, MA. VILLA J. GONZAGA,
Filipino, of legal age, widow and resident of Bacolod City,
hereinafter referred to as the FIRST PARTY,
-and-
RAUL VILLANUEVA, JR. and GENEROSO V.
VILLANUEVA, Filipinos, of legal age, married and residents
of Bacolod City, hereinafter jointly referred to as the SECOND
PARTY.
W I T N E S S E T H:
1. WHEREAS, the FIRST PARTY is the true and lawful owner
of a parcel of land, Lot No. 1362, covered by TCT No. T-
131872 situated at Brgy. Granada, Bacolod City and known as
Hda. San Dionisio Norte;
2. WHEREAS, the aforesaid property is presently mortgaged
with the Philippine National Bank (PNB) as collateral for a
loan;
3. WHEREAS, the aforesaid property is already subdivided into
sub-lots although separate titles for each lot is not yet issued;
4. WHEREAS, the herein SECOND PARTY agrees to purchase
portions of the aforesaid property equivalent to 3,240 sq. meters
which portions are designated as Lots Nos. 28, 29, 30, 31, 32,
33, 34, 35, 36, 37, 38 & 39 in phase 11 of the subdivision plan;
5. WHEREAS, the SECOND PARTY agrees to purchase the
aforesaid lots at the price of ONE HUNDRED FIFTY
(P150.00) PESOS per sq. meter or for a total price of FOUR
HUNDRED EIGHTY SIX THOUSAND (P486,000.00) PESOS
subject to the following conditions:
A.) That the FIRST PARTY shall cause the release of the
aforementioned lots from the Philippine National Bank (PNB)
at the earliest possible time.
B.) That the SECOND PARTY agrees to pay the amount of
P486,000.00 as follows:
P100,000.00 - upon the signing of this
agreement.
P191,600.00 - on or before January 10,
1990.
P194,400.00 - upon the approval by the
PNB of the release of the
lots.
C.) That it is hereby agreed that the ONE HUNDRED
THOUSAND (P100,000.00) PESOS down payment shall at the
same time be considered as earnest money which shall be
forfeited in the event the SECOND PARTY withdraws from
this agreement.
D.) That upon payment of 60% of the purchase price, the
SECOND PARTY may start to introduce improvements in the
area if they so desire.
E.) That upon the release by the Philippine National Bank
(PNB) of the lots subject of this agreement, the FIRST PARTY
shall immediately execute a Deed of Sale in favor of the
SECOND PARTY. All expenses for documentation and capital
gains shall be borne by the FIRST PARTY, while expenses for
transfer of title to the SECOND PARTY shall be borne by the
latter.
IN WITNESS WHEREOF, the parties have hereunto set their
hands this 15th day of January, 1990 in this City of Bacolod,
Philippines. [emphases added]
As stipulated in the agreement, petitioners introduced
improvements after paying P291,600.00 constituting sixty
(60%) percent of the total purchase price of the lots. Petitioners
then requested permission from respondent Administratrix to
use the premises for the next milling season. Respondent
refused on the ground that petitioners cannot use the premises
until full payment of the purchase price. Petitioners informed
respondent that their immediate use of the premises was
absolutely necessary and that any delay will cause them
substantial damages. Respondent remained firm in her refusal,
and demanded that petitioners stop using the lots as a
transloading station to service the Victorias Milling Company
unless they pay the full purchase price. In a letter-reply dated
April 5, 1991, petitioners assured respondent of their readiness
to pay the balance but reminded respondent of her obligation to
redeem the lots from mortgage with the Philippine National
Bank (PNB). [4]Petitioners gave respondent ten (10) days
within which to do so. [5]
On April 10, 1991, respondent Administratrix wrote petitioners
informing them that the PNB had agreed to release the lots from
mortgage. She demanded payment of the balance of the
purchase price. Enclosed with the demand letter was the PNBs
letter of approval dated April 8, 1991, 6 marked as Exhibit "3-
B," which reads -
Mrs. Ma. Villa J. Gonzaga
Judicial Administratrix
Int. Est. of Gerardo L. Gonzaga
La Salle Subdivision
Bacolod City
Dear Mrs. Gonzaga:
We are pleased to inform you that your request for the partial
release of securities, particularly the 3,240 sq. m. agricultural
land x x x covered by TCT No. T-31113 has been approved by
our Senior Management Credit Committee I on April 1, 1991
subject to the following conditions:
1. The sale be approved by the Court insofar as the interest of
the estate is concerned;
2. Payment of two (2) annual amortizations of the restructured
accounts in addition to P50,000.00 to be derived from sale of
lot sought to be released;
3. Such terms and conditions that our Legal Dept. may impose
to protect the interest of the Bank.
Please see us for the preparation of the covering documents.
[emphases added]
Very truly yours,
(signed)
CECILIA S. GAYENALO
Asst. Manager
In their letter-reply dated April 18, 1991, 7 petitioners demanded
that respondent show the clean titles to the lots first before they
pay the balance of the purchase price. Respondent merely
reiterated the demand for payment. Petitioners stood pat on
their demand.
On May 28, 1991, respondent Administratrix executed a Deed
of Rescission rescinding the MOA on two grounds: (1)
petitioners failed to pay the balance of the purchase price
despite notice of the lots release from mortgage, and (2)
petitioners violated the MOA by using the lots as a transloading
station without permission from the respondents.
In their Letter dated June 13, 1991, petitioners, through counsel,
formally demanded the production of the titles to the lots before
they pay the balance of the purchase price. The demand was
ignored. Consequently, on June 19, 1991, petitioners filed a
complaint against respondents for breach of contract, specific
performance and damages before the RTC-Bacolod City,
docketed as Civil Case No. 6552. Petitioners alleged that
respondents delayed performance of their obligation by
unreasonably failing to secure the release of the lots from
mortgage with the PNB within the earliest possible time, as
stipulated in the MOA. Petitioners prayed that respondents be
ordered to produce the clean titles to the lots before they pay
the balance of the purchase price.
The trial court decided the case in favor of respondents. The
dispositive portion of the decision reads-
(1) Declaring the Memorandum of Agreement, Exh. "C"
rescinded; consequently ownership and possession of Lots 28 to
39, inclusive, of Phase II of the subdivision plan covered by
TCT No. T-31113 are hereby restored to defendants, and
defendants (sic) are thereby ordered to vacate the premises of
said lots;
(2) Ordering plaintiffs to jointly and severally pay defendants:
P20,000.00 as moral damages; and P15,000.00 as attorneys
fees;
(3) Ordering defendants to solidarily pay or refund plaintiffs:
the sum of P100,000.00 paid by the latter as down payment on
the aforesaid Memorandum of Agreement on December 18,
1989, with legal interest at 6% per annum from said date up to
and until the amount is fully paid or refunded; and another sum
of P191,600.00 paid by the latter to the former in connection
with the said Memorandum of Agreement on January 10, 1990,
with the same rate of interest at 6% per annum from said date
up to and until the amount is fully paid or refunded; and
(4) Condemning plaintiffs to pay the cost of suit. [8]
Petitioners filed a petition for review before the Court of
Appeals. On January 16, 2003, the Court of Appeals affirmed
the trial courts decision but deleted the award for moral
damages on the ground that petitioners were not guilty of bad
faith in refusing to pay the balance of the purchase price. 9
Hence, this petition.
Petitioners raise the following issues:
1. Whether x x x respondents failed to comply with their
reciprocal obligation of securing the release of the subject lots
from mortgage indebtedness with the Philippine National Bank.
2. Whether x x x the delivery of the titles corresponding to the
twelve (12) lots subject of the Memorandum of Agreement is a
precondition to the payment by the petitioners of the balance of
the consideration.
3. Whether x x x petitioners did incur (sic) delay in the
performance of their reciprocal obligation under the
Memorandum of Agreement.
4. Whether x x x there is legal, or even a factual, ground for the
rescission of the Memorandum of Agreement. 10
We will resolve first the procedural objections raised by the
respondents.
Respondents contend that the petition should be dismissed for
late filing, and irregular execution of the affidavit of service
attached to the petition. Respondents allege that the petition
was filed late as there was no evidence to show that petitioners
motion for extension of time to file the petition has been
granted by the Court. Petitioners allegedly received a copy of
the assailed Court of Appeals decision on January 28, 2003 but
filed the petition for review on March 12, 2003 only, contrary to
Section 2, Rule 45 of the 1997 Rules of Civil Procedure. 11 In
addition, the Affidavit of Service attached to the petition was
irregularly executed on March 13, 2003, a day after the petition
has been filed in Court.
Respondents contentions are not meritorious. The records show
that petitioners motion for 30 days extension of time to file the
petition for review has been granted in our Resolution dated
March 26, 2003. Petitioners were given thirty (30) days from
the expiration of the original period, or until March 13, 2003,
within which to file the petition for review. Although our
resolution is dated after the extension prayed for has already
expired, we specifically conditioned the grant of extension upon
the timeliness of the filing of the petition and payment by
petitioners of the correct docket and other filing fees.
Petitioners did so. The petition for review was posted by
registered mail on March 13, 2003, as shown by the date
appearing on the first page of the original copy of the petition
filed with the Court. [12]The Affidavit of Service was thus
regularly executed on March 13, 2003, the same day that the
petition was posted by registered mail. No reason exists
therefore for the dismissal of the petition on technical grounds,
as respondents erroneously contend.
On the merits of the case, we agree with the petitioners that the
Court of Appeals erred in ruling that respondents had already
fulfilled their obligation to cause the release of the lots from
mortgage with the PNB at the time they demanded payment of
the balance of the purchase price. The finding of the appellate
court is refuted by Exh. "3-B" and by the testimonial evidence
on record.
A reading of Exhibit "3-B," 13 which is the PNBs letter of
approval dated April 8, 1991, clearly shows that the approval
was conditional. Three (3) conditions were laid down by the
bank before the lots could be finally released from mortgage.
The three conditions were: (1) that respondents secure approval
of the sale from the intestate court insofar as the interest of the
estate is concerned; (2) that respondents pay two annual
amortizations of their restructured accounts with the PNB plus
P50,000.00 to be derived from the sale of the lots sought to be
released; and (3) that respondents comply with such other terms
and conditions as the PNBs Legal Department may impose.
Cecilia S. Gayenalo, the Assistant Manager of PNB Bacolod
City Branch, herself testified that it was in July 1991 that the
final release papers were prepared by the bank because it was
only at that time that respondents complied with the three
conditions. 14 It was therefore premature for respondents to
demand payment of the balance of the purchase price from the
petitioners in April 1991 and, failing in that, to "rescind" the
MOA in May 1991.
Moreover, there is no legal basis for the rescission. The remedy
of rescission under Art. 1191 of the Civil Code 15 is predicated
on a breach of faith by the other party that violates the
reciprocity between them. 16 We have held in numerous cases
that the remedy does not apply to contracts to sell. 17 We
explained the reason in Santos v. Court of Appeals, 18 viz -
x x x [I]n a contract to sell, title remains with the vendor and
does not pass on to the vendee until the purchase price is paid in
full. Thus, in a contract to sell, the payment of the purchase
price is a positive suspensive condition. Failure to pay the price
agreed upon is not a mere breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey
title from acquiring an obligatory force. This is entirely
different from the situation in a contract of sale, where non-
payment of the price is a negative resolutory condition. The
effects in law are not identical. In a contract of sale, the vendor
has lost ownership of the thing sold and cannot recover it,
unless the contract of sale is rescinded and set aside. In a
contract to sell, however, the vendor remains the owner for as
long as the vendee has not complied fully with the condition of
paying the purchase price. If the vendor should eject the vendee
for failure to meet the condition precedent, he is enforcing the
contract and not rescinding it. x x x x Article 1592 speaks of
non-payment of the purchase price as a resolutory condition. It
does not apply to a contract to sell. As to Article 1191, it is
subordinated to the provisions of Article 1592 when applied to
sales of immovable property. Neither provision is applicable [to
a contract to sell]. (emphasis added)
The MOA between petitioners and respondents is a conditional
contract to sell. Ownership over the lots is not to pass to the
petitioners until full payment of the purchase price. Petitioners
obligation to pay, in turn, is conditioned upon the release of the
lots from mortgage with the PNB to be secured by the
respondents. Although there was no express provision regarding
reserved ownership until full payment of the purchase price, the
intent of the parties in this regard is evident from the provision
that a deed of absolute sale shall be executed only when the lots
have been released from mortgage and the balance paid by
petitioners. Since ownership has not been transferred, no further
legal action need have been taken by the respondents, except an
action to recover possession in case petitioners refuse to
voluntarily surrender the lots. 19
The records show that the lots were finally released from
mortgage in July 1991. Petitioners have always expressed
readiness to pay the balance of the purchase price once that is
achieved. Hence, petitioners should be allowed to pay the
balance now, if they so desire, since it is established that
respondents demand for them to pay in April 1991 was
premature. However, petitioners may not demand production by
the respondents of the titles to the lots as a condition for their
payment. It was not required under the MOA. The MOA merely
states that petitioners shall pay the balance "upon approval by
the PNB of the release of the lots" from mortgage. Petitioners
may not add further conditions now. Obligations arising from
contracts have the force of law between the contracting parties
and should be complied with in good faith. 20
IN VIEW WHEREOF, the petition is GRANTED. The assailed
Decision dated January 16, 2003 of the Court of Appeals in
CA-G.R. CV No. 46865 is REVERSED and SET ASIDE.
Petitioners and respondents are restored to