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CASE #1: BALIWAG VS CA

FACTS: Juanito Fidel drove Baliwag Transit Bus No. 117 to its terminal for repair of its brake system.
He told the mechanic Mario Dionisio to inform the headman about the matter so proper order to the
mechanics could be made. He alighted from the bus and told the gasman to fill up the gas tank. Shortly
after, Juanito returned to the bus and sat on the drivers seat. Suddenly the bus moved and he felt
something was hit. He then saw Mario Dionisio ling on the ground bleeding and convulsive,
sandwiched between Bus 117 and another Baliwag Transit Bus. He was rushed to the hospital but he
died.
His wife and children lodged a complaint for damages against Baliwag Transit, Inc. and Juanito Fidel.
The RTC of Q.C. ruled in favor of the private respondents, ordering the petitioner and Juanito to pay
damages. The private respondents appealed to the Court of Appeals who modified the indemnity
(adding loss of earning capacity, funeral expenses and increasing the moral damages)

ISSUE: Whether or not Baliwag Transit is liable for the death of its employee.

RULING: YES.
Art. 2180 which states that, The obligation imposed by article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible x x x x Employers
shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks, even though the former are not engaged in any business or industry x x x x The
responsibility treated of in this article shall cease when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to prevent damage.
Article 2180, in relation to Art. 2176, of the Civil Code provides that the employer of a negligent
employee is liable for the damages caused by the latter. When an injury is caused by the negligence of
an employee there instantly arises a presumption of the law that there was negligence on the part of the
employer either in the selection of his employee or in the supervision over him after such selection. The
presumption however may be rebutted by a clear showing on the part of the employer that it had
exercised the care and diligence of a good father of a family in the selection and supervision of his
employee. Hence, to escape solidary liability for quasi-delict committed by an employee, the employer
must adduce sufficient proof that it exercised such degree of care. Petitioner's failure to prove that it
exercised the due diligence of a good father of a family in the selection and supervision of its driver
Juanito Fidel will make it solidarily liable with the latter for damages caused by him.

CASE #2: PRODUCERS BANK VS CA

Laws Applicable: ART. 2208, Article 2232 of the Civil Code

FACTS:

April, 1982: Salvador Chua was offered by Mr. Jimmy Rojas, manager of Producers Bank of the
Philippines to transfer his account from Pacific Banking Corporation to Producers Bank.
Chua did and was able to obtain a loan for P2,000,000 which was secured by a real estate mortgage
and payable within a period of 3 years or from 1982 to 1985
January 20, 1984: Chua deposited with Producers Bank P960,000 which was entered into
their savings account passbook but failed to credit it because Sixto Castillo, absconded with the
money.
Producers Bank dishonored the checks drawn by Chua in favor of various creditors. Although his
balance was P1,051,051.19.
Despite their request for copies of the bank's ledgers, it refused so Chua filed an action for
damages.
October 15, 1984: Producer's Bank filed a petition for extrajudicial foreclosure of the real estate
mortgage
RTC: favored Chua ordering Producers to pay P2,000,000 moral damages, with legal rate of
interest; P90,000/month and P18,000/month unrealized profits from his cement and gasoline station
business, to commence from October 16, 1984, with legal rate of interest until fully paid; P250,000
exemplary damages. Offset the P960,000 with his agricultural loan of P1,300,000 with 14%
interest, to commence from January 4, 1984, covered by a real estate mortgage, both of which shall
have a cut-off time frame on the date of this decision. Loan of P175,000 and the clean loan of
P400,000 without interest shall be off-settled by the moral, actual and compensatory damages. 15%
of moral, actual and compensatory damages as attorney's fees. Cost of suit.
CA: modified moral damages to P500,000. P100,000.00 attorney's fees

ISSUE: W/N the award for damages is reasonable.

HELD: YES. affirmed with MODIFICATION. P300,000 moral damages. P150,000 exemplary
damages. P100,000 attorney's fees and litigation expenses.

Obviously, petitioner bank's wrongful act caused serious anxiety, embarrassment, and humiliation
to private respondents for which they are entitled to recover moral damages in the amount of
P300,000.00 which we deem to be reasonable
Producer's bank failure to credit the deposit constituted gross negligence in the performance of its
contractual obligation which amounts to evident bad faith
Verily, all these acts of petitioner were accompanied by bad faith and done in wanton, fraudulent
and malevolent manner warranting the award of exemplary damages in favor of private
respondents, in accordance with Article 2232 of the Civil Code
Need not prove the actual extent of exemplary damages, for its determination is addressed to the
sound discretion of the court upon proof of the plaintiff's entitlement to moral, temperate, or
compensatory damages (Article 2234, Civil Code)
There are two kinds of actual or compensatory damages:
loss of what a person already possesses
failure to receive as a benefit that which would have pertained to him
damages consisting of unrealized profits, frequently referred as "ganacias frustradas" or "lucrum
cessans," are not to be granted on the basis of mere speculation, conjecture, or surmise, but rather
by reference to some reasonably definite standard such as market value, established experienced, or
direct inference from known circumstances
When the existence of a loss is established, absolute certainty as to its amount is not required. The
benefit to be derived from a contract which one of the parties has absolutely failed to perform is of
necessity to some extent, a matter of speculation, but the injured party is not to be denied for that
reason alone. He must produce the best evidence of which his case is susceptible and if that
evidence warrants the inference that he has been damaged by the loss of profits which he might
with reasonable certainty have anticipated but for the defendant's wrongful act, he is entitled to
recover.
evidence of private respondents insufficient to be considered within the purview of "best evidence."
The bare assertion of private respondent Salvador Chua that he lost an average of P18,000/month is
inadequate if not speculative and should be admitted with extreme caution especially because it is
not supported by independent evidence.
Could have presented such evidence as reports on the average actual profits earned by their
gasoline business, their financial statements, and other evidence of profitability which could aid the
court in arriving with reasonable certainty at the amount of profits which private respondents failed
to earn. Did not even present any instrument or deed evidencing their claim that they have
transferred their right to operate their gasoline station to their relatives.
Extrajudicial foreclosure is clearly unfounded, this does not necessarily mean, in the absence of
specific facts proving damages, that actual damage has been sustained. It must depend on actual
proof of the damages alleged to have been suffered.
Attorney's fees may be awarded when a party is compelled to litigate or to incur expenses to protect
his interest by reason of an unjustified act of the other party
act of not crediting private respondents' deposit of P960,000.00, as well as the premature filing of
the extrajudicial foreclosure, have compelled private respondents to institute an action for
injunction and damages primarily in order to protect their rights and interests

CASE #3: MARIKINA AUTO VS PPL

FACTS:
1. Erlinda V. Valdellon is the owner of a two-door commercial apartment located at No. 31 Kamias
Road, Quezon City. The Marikina Auto Line Transport Corporation (MALTC) is the owner-
operator of a passenger bus, its employee, was assigned as the regular driver of the bus.
2. At around 2:00 p.m. on October 3, 1992, Suelto was driving the passenger bus along Kamias
Road, Kamuning, Quezon City, going towards EDSA. The bus suddenly swerved to the right
and struck the terrace of the commercial apartment owned by Valdellon. Upon Valdellons
request, the court ordered Sergio Pontiveros, the Senior Building Inspection Officer of the City
Engineers Office, to inspect the damaged terrace.
3. He recommended that since the structural members made of concrete had been displaced, the
terrace would have to be demolished "to keep its monolithicness, and to insure the safety and
stability of the building."
4. In a letter addressed to the bus company and Suelto, Valdellon demanded payment of
P148,440.00, within 10 days from receipt thereof, to cover the cost of the damage to the terrace.
he bus company and Suelto offered a P30,000.00 settlement which Valdellon refused.
5. Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property
against Suelto. After the requisite preliminary investigation, an Information was filed with the
RTC of Quezon City.
6. Valdellon also filed a separate civil complaint against Suelto and the bus company for damages.
She prayed that after due proceedings, judgment be rendered in her favor.

ISSUE(S):
1. W/N Suelto is guilty of reckless imprudence which resulted in the damage of Valdellons
property
HELD:
Yes. Respondent People of the Philippines was able to prove beyond reasonable doubt that petitioner
Suelto swerved the bus to the right with recklessness, thereby causing damage to the terrace of private
respondents apartment.

RATIO:
Although she did not testify to seeing the incident as it happened, petitioner Suelto himself admitted this
in his answer to the complaint and when he testified in the trial court.
Suelto narrated that he suddenly swerved the bus to the right of the road causing it to hit the column of
the terrace of private respondent. Petitioners were burdened to prove that the damage to the terrace of
private respondent was not the fault of petitioner Suelto. We have reviewed the evidence on record and
find that petitioners failed to prove that petitioner acted on an emergency caused by the sudden intrusion
of a passenger jeepney into the lane of the bus he was driving.

It was the burden of petitioners herein to prove petitioner Sueltos defense that he acted on an
emergency, that is, he had to swerve the bus to the right to avoid colliding with a passenger jeep coming
from EDSA that had overtaken another vehicle and intruded into the lane of the bus.

It is clear from the photographs submitted by the prosecution that the commercial apartment of Dr.
Valdellon sustained heavy damage caused by the bus being driven by Suelto. "It seems highly
improbable that the said damages were not caused by a strong impact. And, it is quite reasonable to
conclude that, at the time of the impact, the bus was traveling at a high speed when Suelto tried to avoid
the passenger jeepney."

The damages could not have been caused except by a speeding bus. Had the accused not been speeding,
he could have easily reduced his speed and come to a full stop when he noticed the jeep. Were he more
prudent in driving, he could have avoided the incident or even if he could not avoid the incident, the
damages would have been less severe.

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

CASE #4: VILLAREY TRANSIT VS CA

Facts:
On March 17, 1960, Policronio Quintos, Jr. was riding the petitioners bus, when the said bus frontally
hit the rear side of a bullcart filled with hay. The protruding end of the bamboo pole at the rear of the
cart penetrated the windshield of the bus and landed at Policronios face. He died of traumatic shock
due to cerebral injuries. Private respondents are sisters and surviving heirs of the deceased. They
brought this action against Villa Rey Transit for breach of contract of carriage. The trial court found that
the death was caused by the negligence of the bus driver, for whom petitioner was liable under the
contract of carriage with the deceased.
Issues:
(1) The number of years to be used as basis of computation
(2) The rate at which the losses sustained by respondents should be fixed
Held:

(1) The determination of the indemnity to be awarded to the heirs of a deceased person has no fixed
basis. Much is left to the discretion of the court considering the moral and material damages involved,
and so it has been said that "(t)here can be no exact or uniform rule for measuring the value of a human
life and the measure of damages cannot be arrived at by precise mathematical calculation, but the
amount recoverable depends on the particular facts and circumstances of each case. The life
expectancy of the deceased or of the beneficiary, whichever is shorter, is an important factor.' Other
factors that are usually considered are: (1) pecuniary loss to plaintiff or beneficiary; (2) loss of support;
(3) loss of service; (4) loss of society; (5) mental suffering of beneficiaries; and (6) medical and funeral
expenses."

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

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

Damages consist, not of the full amount of his earnings, but of the support, they received or would have
received from him had he not died in consequence of the negligence of petitioner's agent. In fixing the
amount of that support, We must reckon with the "necessary expenses of his own living", which should
be deducted from his earnings. Only net earnings, not gross earning, are to be considered that is, the
total of the earnings less expenses necessary in the creation of such earnings or income and less living
and other incidental expenses.
All things considered, We are of the opinion that it is fair and reasonable to fix the deductible living and
other expenses of the deceased at the sum of P1,184.00 a year, or about P100.00 a month, and that,
consequently, the loss sustained by his sisters may be roughly estimated at P1,000.00 a year or
P33,333.33 for the 33-1/3 years of his life expectancy. To this sum of P33,333.33, the following should
be added: (a) P12,000.00, pursuant to Arts. 104 and 107 of the Revised Penal Code, in relation to Article
2206 of our Civil Code, as construed and applied by this Court; (b) P1,727.95, actually spent by private
respondents for medical and burial expenses; and (c) attorney's fee, which was fixed by the trial court, at
P500.00, but which, in view of the appeal taken by petitioner herein, first to the Court of Appeals and
later to this Supreme Court, should be increased to P2,500.00. In other words, the amount adjudged in
the decision appealed from should be reduced to the aggregate sum of P49,561.28, with interest thereon,
at the legal rate, from December 29, 1961, date of the promulgation of the decision of the trial court.

CASE #5: DANGWA VS CA

Laws Applicable: Art. 1733, Art. 1755


FACTS:
May 13, 1985: Theodore M. Lardizabal was driving a passenger bus belonging to Dangwa
Transportation Co. Inc. (Dangwa)
The bus was at full stop bet. Bunkhouses 53 and 54 when Pedro alighted
Pedro Cudiamat fell from the platform of the bus when it suddenly accelerated forward
Pedro was ran over by the rear right tires of the vehicle
Theodore first brought his other passengers and cargo to their respective destinationsbefore
bringing Pedro to Lepanto Hospital where he expired
Private respondents filed a complaint for damages against Dangwa for the death of Pedro Cudiamat
Dangwa: observed and continued to observe the extraordinary diligence required in the operation of
the co. and the supervision of the employees even as they are not absolute insurers of the public at
large
RTC: in favour of Dangwa holding Pedrito as negligent and his negligence was the cause of his
death but still ordered to pay in equity P 10,000 to the heirs of Pedrito
CA: reversed and ordered to pay Pedrito indemnity, moral damages, actual and compensatory
damages and cost of the suit

ISSUE: W/N Dangwa should be held liable for the negligence of its driver Theodore

HELD: YES. CA affirmed.


A public utility once it stops, is in effect making a continuous offer to bus riders (EVEN when
moving as long as it is still slow in motion)
Duty of the driver: do NOT make acts that would have the effect of increasing peril to a passenger
while he is attempting to board the same
Premature acceleration of the bus in this case = breach of duty
Stepping and standing on the platform of the bus is already considered a passenger and is entitled
all the rights and protection pertaining to such a contractual relation
Duty extends to boarding and alighting
GR: By contract of carriage, the carrier assumes the express obligation to transport the passenger to
his destination safely and observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger is right away attributable to
the fault or negligence of the carrier
EX: carrier to prove that it has exercised extraordinary diligence as prescribed in Art. 1733 and
1755 of the Civil Code
Failure to immediately bring Pedrito to the hospital despite his serious condition = patent and
incontrovertible proof of their negligence
Hospital was in Bunk 56
1st proceeded to Bunk 70 to allow a passenger (who later called the family of Pedrito on his own
will) to alight and deliver a refrigerator
In tort, actual damages is based on net earnings
CASE #6: PPL VS QUILATON

FACTS: Appellant Gumercindo Quilaton was found guilty of murder and sentenced to suffer the
penalty of reclusion perpetua, and required to pay the heirs of the offended party various amounts of
money.
Appellant was tried and convicted under the following information:
"That on or about the 16th day of August 1983, the municipality of San Simon, province of Pampanga,
Philippines, and within the jurisdiction of this Honorable court, the above-named accused
GUMERCINDO QUILATON y EBAROLA alias 'ROBERTO SANDOVAL' armed with a knife
(balisong), with deliberate intent to kill, by means of treachery and with evident premeditation, did then
and there wilfully, unlawfully and feloniously attack, assault and wound ROLANDO S. MANAHAN,
thereby inflicting upon him serious and fatal injuries, which directly caused the death of the said
Rolando S. Manahan.

ISSUE: WON the damages awarded by the trial court were correct.

RULING:
In relation to the actual damages of P26,445.00, AFFIRMED as the brother of Rolando Manahan
testified on this matter and submitted various receipts in support of their claim for actual
damages.
In relation to P100,000.00 as indemnity for the death of Rolando Manahan, REDUCED to
P50,000 conformably with prevailing jurisprudence on the matter.
In relation to the award of moral damages in the amount of P250,000.00, ANALYZED, AND
CONSIDERED AS BEING LUMPED AS MORAL DAMAGES IN THIS CASE, as follows:

Aside from the ordinary indemnity for death, the appellant is obliged to pay the following, in
accordance to Art. 2206 o the New Civil Code:
a) to compensate the heirs of Rolando Manahan for the latter's loss of earning capacity
b) to give support in the form of expenses for education to the sisters of Rolando Manahan
who had been dependent on him therefor; and
c) to pay the heirs of Rolando Manahan moral damages for the mental anguish suffered by
them.

SC also laid down the following guidelines in determining the compensable amount of loss
earnings:
a) the number of years for which the victim would otherwise have lived
b) the rate of loss sustained by the heirs of the deceased

- Considering that Rolando Manahan was 26 years of age at the time of death, he was
expected to live for another 46 years. This is derived by using the generally accepted
formula in computing for life expectancy, based on the 1980 CSO table.
- But a man does not normally continue working to earn money up to the final month or
year of his life; hence 46 years could be reasonably reduced to 39 years. Besides,
Rolando Manahan was a government employee who is expected to retire at the age of 65.
- If there are 261 working days in a year and Rolando Manahan was receiving P23.00 a
day, Rolando Manahan's gross earnings would be approximately P234,000.00.
- A reasonable amount must be deducted therefrom that would represent Rolando
Manahan's necessary expenses had he been living, in this case P120,000.00.
- The net or compensable earnings lost by reason of Rolando Manahan's death is,
accordingly, P114,000.00.
SC also considered and awarded P20,000.00 as morral damages o the heirs of Rolando Manahan
as it was found hat their mother suffered a mild stroke upon learning of Rolando Manahan's
slaying which eventually led to her paralysis.
SC then modified the award of damages as follows:

1. P50,000.00 as indemnity for death;


2. P26,445.00 as actual damages;
3. P114,000.00 by way of lost earnings;
4. P10,000.00 by way of educational assistance to Rolando Manahan's two (2) sisters; and
5. P20,000.00 as moral damages.

CASE #7: PPL VS SIA

FACTS:

Christian Bermudez was beaten to death and the taxicab he was driving was taken by the
assailants. His lifeless body, wrapped in a carton box, was recovered several days later in a
fishpond in Meycauayan, Bulacan.
The accused in this case were tried for violation of R.A. 6539, otherwise known as the Anti-
Carnapping Law and Murder.
The trial court rendered a decision against both accused imposing upon them the supreme
penalty of Death. The accused were likewise adjudged to pay jointly and severally, the mother of
the deceased Christian Bermudez, the following:
P50,000.00 as compensatory damages for the death of Christian Bermudez
P200,000.00 as burial and other expenses incurred in connection with the death of Christian;
and
P3,307,199.60 (2/3 x [80-27] x 300 per day x 26 days (excluding Sundays) x 12 months)
representing the loss of earning capacity of Christian Bermudez as taxi driver.

ISSUE: WON civil indemnity awards, as awarded by the trial court were proper.

RULING:

Anent the award of P50,000.00 for death indemnity is proper following prevailing jurisprudence.
The award of civil indemnity may be granted without any need of proof other than the death of
the victim.
Without any express provision in the decision of the trial court, the SC also held that it is proper
to award P50,000.00 for moral damages taking into consideration the pain and anguish of the
victims family brought about by his death.
SC ruled the deletion of P200,000.00 for burial and other expenses incurred in connection
with the death of the victim deleted.

SC considered that there were no records of any receipt or voucher to justify the trial courts
award of burial and other expenses incurred in connection with the victims death. The rule
is that every pecuniary loss must be established by credible evidence before it may be
awarded and only those which are duly supported by receipts and other credible
evidence will only be the ones to be given credence.

SC likewise held that the trial court was correct in awarding damages for loss of earning
capacity despite the non-availability of documentary evidence. However, the amount of the trial
courts award needs to be recomputed and modified accordingly.

In determining the amount of income lost, the following must be taken into account:
the number of years for which the victim would otherwise have lived
the rate of loss sustained by the heirs of the deceased
- This is computed by multiplying the life expectancy by the net earnings of the deceased, meaning
total earnings less expenses necessary in the creation of such earnings or income less living and other
incidental expenses.
Considering that there is no proof of living expenses of the deceased, net earnings are
computed at fifty percent (50%) of the gross earnings.
In this case, the Court notes that the victim was 27 years old at the time of his death and his
mother testified that as a driver of the Tamaraw FX taxi, he was earning P650.00 a day.
Hence, the damages payable for the loss of the victims earning capacity is P2,996,867.20.

CASE #8: EASTERN SHIPPING VS CA

FACTS:

On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan by
defendant Eastern Shipping Lines under Bill of Lading.
Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the
custody of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad
order, which damage was unknown to plaintiff.
On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from
defendant Metro Port Service, Inc., one drum opened and without seal (per "Request for Bad
Order Survey." Exh. D).
On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the
shipment to the consignee's warehouse. The latter excepted to one drum which contained
spillages, while the rest of the contents was adulterated/fake (per "Bad Order Waybill" No.
10649, Exh. E).
The insurance company filed before the trial court.which rendered judgment ordering the
defendants to pay the plaintiffs, jointly and severally the following:
The amount of P19,032.95, with the present legal interest of 12% per annum from October 1,
1982, the date of filing of this complaints, until fully paid
P3,000.00 as attorney's fees and other costs.

ISSUES:

WON the applicable rate of interest, referred to above, is twelve percent (12%) or six percent
(6%)

WON the payment of legal interest on an award for loss or damage is to be computed from the
time the complaint is filed or from the date the decision appealed from is rendered;

RULING:

WON the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%)

WON the payment of legal interest on an award for loss or damage is to be computed from the time the
complaint is filed or from the date the decision appealed from is rendered

It should be at 6% computed from the date the decision & a rate of 12% (in lieu of the 6%) shall be
imposed on such amount upon finality of this decision until the payment thereof.

SC provided rules of thumb in the application of awards of interest:

When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages (governed by Title
XVIII on "Damages" of the Civil Code)

The award of interest should be further governed by the following principles:

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.

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 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.
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.

CASE #9: POLICARPIO VS CA

This petition asks for the setting aside of the April 30, 1990 decision of the Court of Appeals in CA-
G.R. Civil Case No. 16069 the dispositive portion of which reads:

WHEREFORE, the appealed decision is SET ASIDE and in lieu thereof another one is hereby entered.

(1) Ordering appellees, (1) to authorize Philippine Commercial International Bank (PCIB) to release
their mortgaged TCT No. 501812 upon payment by Urban Development Bank (URBAN Bank) of their
mortgage loan obligation with said PCIB; and thereafter (2) to transfer the title in appellant's name;

(2) Ordering appellants, (1) to pay appellees a monthly rent of P2,500.00 for their use of the subject
property during the period from December 18, 1983 to the filing of the complaint a quo on January 5,
1985 when the judicial demand was made on appellees, or P31,250 for 125 months at 12% interest per
annum; (2) to reimburse appellees P2,812.60 for the capital gains tax, stamps and other related expenses
paid for by appellees; and (3) to pay and/or authorize Urban Bank to pay to appellees the proceeds of
the loan granted to appellants to the extent of P145,000.00 (unpaid balance of the purchase price) less
whatever amount is to be paid to PCIB for the outstanding mortgage loan obligation of appellees with
said bank. (Rollo, p. 54)

On November 25,1983, petitioners-spouses Meynardo C. Policarpio and Lourdes Policarpio and private
respondents Evelyn Romulo and Clemente, all surnamed Catabas executed a "Contract to Sell" whereby
the private respondents agreed to buy and the petitioners-spouses to sell a residential lot of about 300
square meters with a house and other improvements located at Servillana Street, UE Village, Cainta,
Rizal. The property is covered by Transfer Certificate of Title No. 501812 Registry of Deeds, Province
of Rizal. The agreed purchase price was the amount of P270,000 payable as follows: (1) P10,000.00
upon signing of the Contract to Sell; and (2) the balance of P260,000.00 to be paid from the proceeds of
the private respondents' PAG-IBIG loan thru its designated bank, the Urban Bank and which they
guarantee and warrant to be approved and thereafter release on or before the first week of December
1983; and to deliver to the petitioners-spouses the whole amount of P260,000.00 on or before the first
week of December 1983.

The "Contract to Sell" also provides that failure on the part of the vendees to pay the balance on the first
week of December, 1983 will automatically annul the contract and the vendors shall immediately return
the downpayment and that after full payment of the purchase price the vendors shall execute a deed of
absolute sale in favor of the vendee.

The private respondents were not able to pay the balance price on the first week of December 1983.
However, the petitioners-spouses did not return the P10,000 downpayment. The private respondents
continued to make partial payments which were received by the petitioners-spouses. All in all, the
private respondents made partial payments of P75,000.00 broken down as follows: (1) P10,000.00 at the
time of the execution of the Contract to Sell; (2) P50,000.00 on May 9, 1984; (3) Pl0,000.00 on June 4,
1984 and (4) P5,000.00 on June 7, 1984.
On April 9, 1984, the parties executed a deed of absolute sale over the subject property. Thereafter, the
petitioners-spouses delivered physical possession of the property to the private respondents.

On March 1, 1985, the private respondents filed with the Regional Trial Court of Pasig, Metro Manila a
case for specific performance and damages against the petitioners-spouses. They claimed that in view of
the fact that their PAG-IBIG loan was not processed on time without fault on their part, the parties
executed a Deed of Absolute Sale over the same property. They also claimed that the balance of
P195,000.00 which is to be paid out of the proceeds of the PAG-IBIG loan was already processed,
approved and ready for availment provided all the required documents and title to the property in the
names of the private respondents are delivered to the Urban Bank. However, the petitioners-spouses
motivated by a desire to increase the contract price refused to deliver and transfer the title of the
property to the private respondents. They, therefore, prayed that the petitioners- spouses be ordered
to confirm the transfer to the private respondents of Transfer Certificate of Title No. 501812 covering
the property, subject matter of the "Deed of Absolute Sale" in order that the same may be used as
collateral for the approved PAG-IBIG loan; to execute all other documents and furnish the private
respondents certificate of clearance pursuant to existing laws so as to secure TCT No. 501812 in the
name of the private respondents. In addition, the private respondents asked for damages.

On the other hand, the petitioners-spouses averred that the Contract to Sell was automatically cancelled
when the private respondents violated the terms of the contract: (1) the balance of the purchase price
was not paid on or before the first week of December 1983; (2) the capital gains tax and documentary
stamps for the sale of the property were not paid by the private respondents. They, however, allowed the
private respondents to occupy the property when the latter agreed to the following terms:

a) The purchase price of the property shad be adjusted to P330,000.00 to cope with the adverse effects
of devaluation and full payment of the remaining balance shall be on or before May 30, 1984.

b) That within one (1) month plaintiffs (private respondents) would secure from other private sources at
least P90,000.00 so that defendants (petitioners) could pay their loan with the PCIB where the subject
property is mortgaged to enable the plaintiffs to pursue their PAG-IBIG loan, if they still so desire with
the defendants' title as security. (page 35, Rollo)

In accordance with the new terms, the parties allegedly executed the simulated Absolute Deed of Sale
dated April 9, 1984 and the petitioners-spouses accepted additional partial payment of P50,000.00. The
consideration stated in the deed of sale was undervalued to only P230,000.00 upon request of the
private respondents in order to save on expenses related to the transactions and also upon the private
respondents' representation that P230,000.00 was the maximum amount of loan they could obtain.
However, the private respondents failed to pay the remaining balance on or before May 30, 1984.
Nevertheless, the private respondents paid on two separate occasions the amount of P15,000.00 which
the petitioners-spouses accepted when the former promised that full payment would be made within
July 1984, regardless of the outcome of their PAG-IBIG loan. The petitioners-spouses asserted that the
private respondents' failure to obtain their PAG-IBIG loan was their own fault and that the private
respondents have never acquired title or ownership of the subject property despite the Deed of Absolute
Sale. They averred that the Deed is subject to the terms and conditions of the Contract to Sell and/or the
additional agreement of the parties. They also filed a counterclaim for damages. After due trial, the trial
court found for the petitioners-spouses. The complaint was dismissed. The dispositive portion of the
decision reads:
WHEREFORE, and in view of the foregoing considerations, decision is hereby rendered dismissing
plaintiffs' Complaint and rendering judgment in favor of defendants on their compulsory counterclaim,
as follows:

1) The Contract to Sell which has been superseded by a simulated Deed of Absolute Sale entered into by
and between the parties are (sic) hereby declared of no further legal force and effect, provided that the
P75,000.00 which the plaintiffs paid as downpayment for subject property shall, up to that amount, be
applied to the pecuniary awards in favor of defendants, to wit:

2) Plaintiffs are directed to vacate defendants' house and lot No. 22, Block 5 Servillana St., UE Village,
Cainta, Rizal, and to pay to defendants P2,500.00 monthly as reasonable value for the use and
occupation of the same since December 18, 1983 until possession thereof shall have been restored to the
defendants;

3) Plaintiffs shall reimburse defendants the sum of P6,500.00 paid by the latter as downpayment for a
lot in Mandaluyong, which was, however, forfeited, with 12% interest thereon per annum from date
said downpayment was made until the same shall have been fully reimbursed;

4) Plaintiffs shall pay to defendants P30,000.00 as moral damages; P20,000.00 as exemplary damages;
P30,000.00 for and as attorney's fees; and

5) Costs of suit. (Rollo, pp. 91-92)

As stated earlier, the trial court's decision was reversed and set aside by the Court of Appeals. A motion
for reconsideration was denied. Hence, this petition.

In view of the conflicting findings of facts of the trial court and the appellate court we have decided to
review the evidence on record in order to arrive at the correct findings based on the record. (Robleza v.
Court of Appeals, 174 SCRA 354 [1989]).

It is to be observed that the parties' conflicting evidence centers on the Contract to Sell and Deed of
Absolute Sale executed by the parties on April 9, 1984. The parties introduced conflicting testimonies
regarding the true nature of the subject documents. This, in effect results in the non-application of the
Parol Evidence Rule under Section 9, Rule 130 of the Rules of Court, to wit:

Sec. 9. Evidence of written agreements.When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed upon and there can be between the parties and
their successors in interest, no evidence of such terms other than the contents of the written agreement.

The record shows that neither of the parties objected to the different testimonies. Hence, the trial court
had no option but to admit these conflicting testimonies. The issue was, therefore, reduced to the
credibility of witnesses.

After a thorough examination of the record we are constrained to reverse the findings of the appellate
court.

The appellate court's conclusion that the petitioners-spouses were at fault in the non-release of the
private respondents' PAG-IBIG loan thru Urban Bank, has no factual basis.
The subject property was mortgaged to the Philippine Commercial and Industrial Bank (PCIB). This
fact was known to the private respondents. In such a case, it may be assumed that the PCIB would not
release the title of the land without first getting paid. Consequently, the petitioners-spouses' contention
that payment of the balance price of the subject parcel of land was not dependent upon the release of
their title from the PCIB which would be used as collateral by the private respondents to secure their
PAG-IBIG loan thru Urban Bank, is more credible.

Moreover, the Urban Bank letter signed by Assistant Manager Ms. Liza M. de los Reyes to PCIB dated
July 2, 1984 (Exhibits G and G-1) shows that there is no basis for the conclusion that the petitioner-
spouses " . . . reneged on their agreement that Urban Bank would pay their mortgage loan obligation
with PCIB so that their TCT No. 501812 over the subject property could be released free of
encumbrance and transferred in appellants' name as the latter intended to use the title as collateral for
their loan from Urban Bank." (page 45, Rollo) The pertinent portion of the letter reads:

This is with reference to the real estate property of Meynardo C. Policarpio located at Servillana St.,
U.E. Employees Village, Cainta, Rizal more particularly described as Lot 22, Block 5 covered by TCT
No. 501812, which is presently mortgaged in your favor to secure his loan with you.

Please be advised that Miss Evelyn Q. Catabas, who is purchasing the above-mentioned property has an
approved Pag-Ibig loan with us, part of which shall be used to settle Mr. Policarpio's loan with you.

Per the request of our client, with the conformity of Mr. Policarpio herein given, we shall release to you
the amount of NINETY SIX THOUSAND THREE HUNDRED THIRTY SEVEN & 94/100
(P96,337.94) PESOS upon transfer of title under the borrower's name, registration of mortgage in our
favor and upon loan approval and takeout of National Home Mortgage Finance Corporation.

Any difference between the above-mentioned amount and the outstanding obligation shall be for the
account of Miss Catabas and shall be transacted directly with you. This letter supersedes our letter of
Guaranty to Mr. Policarpio on February 01, 1984.

We trust that this is satisfactory to you. Thank you.

Very truly yours,

URBAN DEVELOPMENT BANK. (Rollo, pp. 45-46)

We find no relation between the supposed agreement on the part of the petitioners-spouses to have the
payment of the balance price dependent on the release of the PAG-IBIG loan and their alleged
obligation to have the title released by PCIB. On the contrary, this letter enhances the stand of the
petitioners-spouses that they signified their conformity to the letter upon the request of the private
respondents to facilitate the release of the PAG-IBIG loan.

According to the appellate court, the letter also disproves petitioners-spouses' "claim that the appellants
(private respondents) failed or refused to pay the defendants (petitioners-spouses) the P90,000.00 on
time with which to pay the latter's PCIB loan resulting in the plaintiffs' (private respondents') failure to
secure the release of their PAG-IBIG loan of P260,000.00 which is due the defendants (petitioner-
spouses) on or before the first week of December, 1983 as stipulated in the Contract to Sell" (Paragraph
15, Answer, Record, p. 35). (Page 46, Rollo)
We find the appellate court's conclusion unwarranted. The evidence on record shows that the private
respondents themselves did not blame the petitioners-spouses for the non-release of the PAG-IBIG loan
on December 1983 and that it was "due to time constraint the loan was not approved and released before
the deadline to pay the balance which expired the first week of December 1983." (page 82, Rollo) In
fact in their Memorandum the private respondents stated that: "private respondents failed to meet the
"First Week of December 1983" deadline so that the "Contract to Sell" would have been cancelled as
therein provided were it not for the fact that petitioners still pursued the sale and private respondents
were still willing to buy." (pp. 145-146, Rollo)

Moreover, the appellate court gave credence to the private respondents' contention that the petitioners-
spouses' main reason for reneging on the inter-bank arrangement between Urban Bank and PCIB was
due to the latter's insistence that the price of the subject property shall be increased to P330,000.00.

On the other hand, the petitioners-spouses maintain that there was an oral agreement between them and
the private respondents as regards the increased price.

On this matter, we are inclined to give more credence to the trial court's findings as they are borne by
the evidence on record, to wit:

The Court finds credence in the defendants' claim that the parties verbally agreed to increase the
consideration to P330,000.00. The price under the Contract to Sell which precluded transfer of
possession to the plaintiffs until after full payment in effect, was P270,000.00. The default of the
plaintiffs under the said contract, the non-availment by the defendants of the automatic cancellation
clause when the plaintiffs defaulted; the moving of the plaintiffs into the premises on December 18,
1983 invariably necessitating the defendants to transfer elsewhere, the devaluation of the peso, the
longer waiting period imposed upon the defendants, their conformity to the letter from Urban Bank
(Exh. "G") to PCIB and, finally, the execution of the Deed of Absolute Sale even without plaintiffs
paying for the price in full all taken together in their entirety, swing the pendulum of credibility towards
the fact of agreement of the parties to increase the price. Besides, it is highly improbable that after all
the rigors and the hassles the defendants had been exposed to, before and after the execution of the
simulated Deed of Absolute Sale, the defendants would agree to lower the price of P270,000.00 in the
Contract to sell to P230,000.00 in the Deed of Absolute Sale. (Rollo, p. 89)

xxx xxx xxx

Furthermore the mere fact that the plaintiffs offered in their letter (Exh. "L") dated November 23, 1984
to pay P312,000.00 which the defendants rejectedreinforces the truth of defendants' claim that the
parties, indeed, verbally agreed to increase the pace to P330,000.00. This intention must prevail and the
eleventh-hour repudiation by the plaintiffs, who under the present situation would continue enriching
themselves at the expense of the defendants cannot prevent its enforcement. At any rate, the Deed of
Absolute Sale executed by and between the parties is admittedly simulated, whereupon it cannot be a
valid basis as in this case, for an action for Specific Performance. (Rollo, p. 90)

It is to be noted that the appellate court questions the existence of Exhibit "L". The appellate court
states:

The trial court revealed the pivotal factor upon which it based its choice in reposing greater belief in
appellee Meynardo Policarpio's testimony. It is this factor, the trial court said, that reinforced the truth
of appellee's claim regarding the existence of an oral agreement to increase the purchase price. Said the
trial court:

xxx xxx xxx

Unfortunately, no such 'Exh. "L" exists in the record. The actual 'Exh. "L" included among the
documentary evidence on record is a letter dated November 7, 1985 signed jointly by Urban Bank's
Assistant Vice-President Prudeno L. Natividad and Mortgage Supervisor Marie Celine R. Gorres and
addressed to appellee Evelyn Catabas. (Rollo, pp. 48-49)

The record, however, reveals the existence of Exhibit L. In fact, the private respondents themselves
confirm the existence of the November 23, 1984 letter which they reproduced in their Memorandum, to
wit:

We are aware of our mutual endeavor to exhaust all possible means to find a solution to our problem of
finalizing our purchase of your house and lot here at Servillana Street, U.E. Village, Cainta, Rizal, more
particularly described as Lot 22 Block 5, covered by TCT No. 501812, towards maintaining our friendly
relation and avoiding a possible litigation for our mutual benefit. For our part therefore, to assuage your
feeling which obviously is influenced by the present economic situation and for a higher price on said
property, notwithstanding the agreed contract price of P270,000.00, we are offering our hand in
friendship and propose to increase the price to a grand total of P312,000.00, no matter our difficulties, I
have to confess, to be paid as follows: (Rollo, p. 147)

The tone of the letter gives credence to the petitioners-spouses' contention that the Absolute Deed of
Sale was only simulated, its execution only to facilitate the release of the private respondents' PAG-
IBIG loan from Urban Bank. It also gives credence to the petitioners-spouses' contention that they
agreed to push thru with the sale provided the price would be raised to P330,000.00. For, why then, did
the respondents refer to ". . . our problem of finalizing our purchase . . ." and offer P312,000.00 which
was beyond the initial price of the subject property of P270,000.00.

We rule that the findings of facts of the trial court which are at variance with those of the appellate court
are more in consonance with the evidence on record. The trial court stated:

The parties have common interests on the property. The defendants were interested to sell it in order to
settle their obligation with PCIB and to be able to buy another property. The plaintiffs were interested to
buy the property but were not ready to pay immediately the agreed consideration. Plaintiffs were
depending on the loan that they jointly applied for with PAG-IBIG. In fact, if only to augment their
resources for its purpose, plaintiff Clemente Catabas who used to work with the Philippine Long
Distance Telephone Company had to prematurely retire in order to collect his retirement benefits.

Obviously, the defendants knew and took into consideration this financial handicap of the plaintiffs in
the execution of the Contract to Sell. Hence, the grace period to pay the balance of P260,000.00 up to
the first week of December 1983. By then, the plaintiffs were expecting the release of the loan they
applied for which was being followed up by their acquaintance at Urban Bank. The deadline came and
passed but no payment was made. The contract provided that failure to pay the balance will
"automatically cancel this contract and the vendor shall immediately return the downpayment of
P10,000.00, to the Vendees" but the transaction was not called off nor the Pl0,000.00 returned.
Evidently, the parties wanted the sale to go through. Defendant Meynardo Policarpio testified, and it
was not denied, that the plaintiffs requested the defendants to wait a little longer as the person supposed
to help hasten the release of the loan was busy since it was Christmas time then, and to that request, the
defendants acceded. This is the logical explanation of the plaintiffs moving into the premises on
December 18, 1983. It is at this point that the Court is impressed with the defendants' gesture of good
faith and accommodation. For although the Contract to Sell provided: "Vendees shall not take
possession of the property until aforesaid balance of P260,000.00 shall have been paid" (emphasis
supplied), the defendants, barely two (2) weeks after the contract should have been automatically
cancelled for the non-payment of the balance, allowed the plaintiffs to move in even if they have to rent
another place to stay.

Against this backdrop, there was no difficulty for the plaintiffs insuring the defendants' cooperation to
accelerate the release of the loan. Hence, when defendants were told it was necessary for them to signify
their conformity to the letter (Exhs. "G", "6") sent by Urban Bank to PCIB, they readily obliged. The
same alacrity was displayed regarding the Deed of Absolute Sale without which Urban Bank would not
release the loan. Again, at this point, the defendants' good faith and implicit trust in the plaintiffs were
generously portrayed. Although the consideration of P230,000.00 stated in the Deed of Absolute Sale
was not fully paid (the plaintiffs had paid only P75,000.00, with the amounts of P10,000.00 and
P5,000.00, being paid after April 9, 1984) the defendants executed the document. True, there was the
motivation for the defendants to sign because of the plaintiffs' verbal conformity that the selling price
would be increased to P330,000.00; but this was still a contingency wholly dependent on plaintiff s
word of honor, while the defendants' leverage had become a fait accompli upon affixing their signatures
due to the absolute nature of the sale and physical possession of the premises delivered to the plaintiffs.

Up to this stage, the defendants have done everything within their capability to help the plaintiffs effect
the release of their loan.1wphi1 At this point, too, the only impediment to Urban Bank's release of the
loan was the non-delivery of the title. It was a hitch that was later to spell the non-release of the loan
which plaintiffs impute, was due to the fault of the defendants.

In the institution of the Complaint, the plaintiffs were of the impression that the delivery of the title to
Urban Bank was the duty of the defendants which they failed to discharge and for which, consequently,
they should be held accountable. This frame of mind while impressive at first blush, cannot be
countenanced and finds no support from the evidence adduced.

The plaintiffs fully knew from the inception of the transaction that the defendants' title was mortgaged
with PCIB (Romulo Catabas, TSN, March 10, 1984 p. 20). Much as they would want to, the defendants
could not just get the title from PCIB without the mortgage balance being paid. Precisely, the letter
(Exh. "G", also Exh. "6") itself of the Urban Bank bearing defendants' signatures affixed thereon, at the
behest of the plaintiffs themselves, was directed to PCIB requesting the latter for the delivery of the
title, among other things, before the former pays off the mortgage balance thereat as a pre-condition for
the release of the loan. The plaintiffs are now in estoppel to assumejust because it is expedient to do
so a posture inconsistent with this clear narration of facts. To hold the defendants responsible for an
act that PCIB alone could do is decidedly illogical and puerile (Rollo, pp. 85-87)

Moreover, under the contract to sell, it is provided therein that failure on the part of the vendees (private
respondents) to pay the balance of the price on the first week of December 1983 will automatically
cancel the contract. The private respondents' obligation to pay was a suspensive condition to the
obligation of the petitioners-spouses to sell and deliver the subject property. Since, admittedly, the
private respondents failed on their obligation to pay, this rendered the contract to sell ineffective and
without force and effect. (See Spouses Eduardo and Ann Agustin v. Court of Appeals G.R. No. 84751,
June 6, 1990)
The subsequent execution of the deed of sale did not in any manner transfer ownership of the property
to the private respondents. It is clear that the deed of sale was executed merely to facilitate the release of
the private respondents' PAG-IBIG loan from the Urban Bank and not for the purpose of actually
transferring ownership.

With these findings, we rule that the private respondents are not entitled to specific performance. The
obligation in a contract of sale is reciprocal. (Cortez v. Bibao and Borromeo 41 Phil. 298 [1920]).
Since, the vendees admittedly had not paid the full price of the property which was their obligation
under the subject contract they cannot now compel performance of the said contract.

Under the facts of the case, we agree with the trial court that the petitioners-spouses are entitled to
moral damages, to wit:

The defendants' claim of the trauma they suffered upon being sued by the plaintiffs inspires belief. After
doing everything in good faith within their capability to help accelerate the release of plaintiffs' loan,
their shock was understandable when the plaintiffs, in brazen disregard of their failure to comply with
their contractual obligation, suddenly filed the instant complaint. Rather than being commended, as
should have been expected, for walking the Biblical second mile in generous accommodation of the
plaintiffs, the defendants were instead unceremoniously brought to Court. (Rollo, p. 90)

However, we find the award of P30,000.00 as moral damages excessive. In the case of Prudenciado v.
Alliance Transport System, Inc. (148 SCRA 440 [1987]) cited in Radio Communications of the
Philippines, Inc. (RCPI), et al. v. Rodriguez, G.R. No. 83768 February 28,1990 we held that ". . . moral
damages are emphatically not intended to enrich a complainant at the expense of a defendant. They are
accorded only to enable the injured party to obtain means, diversion or amusements that will serve to
alleviate the moral suffering he has undergone by reason of the defendants' culpable action. The award
of moral damages must be proportionate to the suffering inflicted." We rule that the amount of
P15,000.00 as moral damages in favor of the petitioners-spouses would be reasonable considering the
facts and circumstances of the case.

The award of P20,000.00 exemplary damages is not proper considering that there is no showing that the
private respondents acted in "a wanton, fraudulent, reckless, oppressive, or malevolent manner."
(Article 2232, Civil Code).

Finally, we find the award of attorney's fees in favor of the petitioners-spouses unwarranted. In the case
of Radio Communications of the Philippines, Inc. v. Rodriguez, supra, citing the case of Stronghold
Insurance Company, Inc. v. Court of Appeals, 173 SCRA 619 [1989] we ruled:

In Abrogar v. Intermediate Appellate Court (G.R. No. 67970, January 15, 1988, 157 SCRA 57) the
Court had occasion to state that '[t]he reason for the award of attorney's fees must be stated in the text of
the court's decision, otherwise, if it is stated only in the dispositive portion of the decision, the same
shall be disallowed on appeal. (at p. 61, citing Mirasol v. dela Cruz, G.R. No. L-32552, July 31, 1978,
84 SCRA 337).

Nowhere does the text of the decision of the trial court mention the reason for the award of attorney's
fees. The trial court's decision failed to justify the award of P30,000.00 as attorney's fees. The award of
attorney's fees must, therefore, be deleted. (See also Spouses Eduardo and Ann Agustin v. Court of
Appeals, supra).

WHEREFORE, the questioned decision and Resolution of the Court of Appeals are REVERSED and
SET ASIDE. The decision of the Regional Trial Court Pasig, Metro Manila is hereby REINSTATED
except that the award for moral damages is reduced to P15,000.00 and the awards for exemplary
damages in the amount of P20,000.00 and attorney's fees in the amount of P30,000.00 are deleted.

SO ORDERED.

CASE #10: CITY BANK VS CABAMONGAN

A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily charge the amount so
paid to the account of the depositor whose name was forged.[45]Such principle equally applies here.
The time deposit subject matter of herein petition is a simple loan.The provisions of the New Civil
Code on simple loan govern the contract between a bank and its depositor. Specifically, Article 1980
thereof categorically provides that . . . savings . . . deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan. Thus, the relationship
between a bank and its depositor is that of a debtor-creditor, the depositor being the creditor as it
lends the bank money, and the bank is the debtor which agrees to pay the depositor on demand.

Facts: Souses Cabamongan opened a joint and/or foreign currency time deposit in favor of their two
children with Citibank. On When she left with the money, she left an identification card. The
account officer then called up the address. The spouses and their family knew of the incident.
They were presently residing in the US and there was a prior incident wherein they got robbed in their
house, with jewelry box, a the bank certificate and cards stolen. Subsequently, a person who claimed
to be Carmelita sought the pre-termination of the account. She presented identification cards to
ascertain her identity to the then account officer. The the person withdrew all the proceeds from
the dollar account.

Spouses made several demands for the return of the amount but Citibank refused to do so.
Subsequently, Citibank, thru a new counsel, contended that assuming that it was negligent, the
Cabamongan spouses were guilty of contributory negligence since they failed to notify Citibank that
they had migrated to the United States and were residents thereat and after having been victims of a
burglary, they should have immediately assessed their loss and informed Citibank of the disappearance
of the bank certificate, their passports and other identification cards, then the fraud would not have been
perpetuated and the losses avoided.It further argues that since the Cabamongan spouses are guilty of
contributory negligence, the doctrine of last clear chance is inapplicable.

Issue: Whether or not City Bank is negligent in letting the person withdraw all the funds from the dollar
account.

Held: Citibank was negligent. First, the depositor didnt present the Certificate of Deposit. Second,
from the internal memorandum issued by the Account Officer, he admitted to the fact that the specimen
signature was different from the one who misrepresented herself as Carmelita. Third, the bank
kept in its records pictures of its depositors. It is inconceivable how the bank was duped by an
impostor. As to the second ground, Citibank argues that the Cabamongan spouses are not entitled to
moral damages since moral damages can be awarded only in cases of breach of contract where the bank
has acted willfully, fraudulently or in bad faith. It submits that it has not been shown in this case that
Citibank acted willfully, fraudulently or in bad faith and mere negligence, even if the Cabamongan
spouses suffered mental anguish or serious anxiety on account thereof, is not a ground for awarding
moral damages.

In this case, it has been sufficiently shown that the signatures of Carmelita in the forms
forpretermination of deposits are forgeries.Citibank, with its signature verification procedure, failed to
detect the forgery.Its negligence consisted in the omission of that degree of diligence required of
banks. The Court has held that a bank is bound to know the signatures of its customers; and if it pays a
forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was forged. Such principle
equally applies here. The time deposit subject matter of herein petition is a simple loan.The provisions
of the New Civil Code on simple loan govern the contract between a bank and its depositor.
Specifically, Article 1980 thereof categorically provides that . . . savings . . . deposits of money in
banks and similar institutions shall be governed by the provisions concerning simple loan. Thus, the
relationship between a bank and its depositor is that of a debtor-creditor, the depositor being the creditor
as it lends the bank money, and the bank is the debtor which agrees to pay the depositor on demand. As
to moral damages, in culpa contractual or breach of contract, as in the case before the Court, moral
damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is found guilty
of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations. The
act of Citibanks employee in allowing the pretermination of Cabamonganspouses account despite the
noted discrepancies in Carmelitas signature and photograph, the absence of the original certificate of
time deposit and the lack of notarized waiver dormant, constitutes gross negligence amounting to bad
faith under Article 2220 of the Civil Code.

CASE #11: MANILA BANKING CORP VS IAC

FACTS: In the morning of July 10, 1975 herein private respondent Wilfredo J. Rivera deposited with
petitioner bank the sum of P80,189.19. In the afternoon of the same day, private respondent Rivera
issued a Manila Banking Corporation Check No. 16756626 in the amount of P80,000.00 under Current
Account No. 6-05350-5 payable to Collins Philippines with whom he had a business transaction.
Thereafter, private respondent's wife received a letter of demand from Collins Philippines. His wife
immediately informed him in the province about the letter of demand. Upon receipt of the message, Mr.
Rivera complained to the Public Relations Officer of petitioner bank, inviting attention to the letter
received by him from Collins Philippines complaining against the dishonor of his check. The Public
Relations Officer of the bank, upon investigation, found that the money deposited was credited into
another account and that was the reason why the check issued by him could not be encashed upon
presentation.

As a consequence, private respondent claimed that he suffered humiliation and embarrassment due to
the bank's gross negligence. Complaint was filed in court which awarded private respondent damages,
as follows:
1) P75,000.00 as actual damages, to compensate plaintiff for the loss of business and business
opportunities;

2) P25,000.00 as moral damages, to compensate plaintiff for the embarrassment, humiliation and mental
anguish suffered;

3) P10,000.00 as exemplary damages;

4) P25,000.00 as and for attorney's fees; and

5) Cost of suit. (pages 25-26, rollo).

On appeal to the Intermediate Appellate Court, the judgment of the trial court was modified in the sense
that

... the award of actual damage in the sum of P75,000.00 be eliminated and instead the sum of Ten
Thousand (P10,000.00) Pesos be awarded as temperate damage and the reduction of the award of
attorney's fees to the sum of Fifteen Thousand (P15,000.00) Pesos, the decision is affirmed in toto in all
other respects. (page 28, rollo).

Upon the foregoing facts, respondent court ruled that

The award for actual damages has no factual basis. How the sum of P75,000.00 in the form of actual
and compensatory damages was arrived at, was not at all shown by any means before the Court a quo.
While actual damages may have been suffered, the law requires that such damages be proven by facts
and figures. Indeed, while the appellee overlooked presenting adequate proof of actual and
compensatory damages. We, however, find and so hold that there may indeed have been actual damages
although the amount thereof was not established. We merely award the sum of P10,000.00 in the form
of temperate damage in favor of the appellee.

The appellant belittle the negligence of the bank especially so since the appellee's check was ultimately
encashed. The argument is specious. It does not require too much imagination to visualize the
possibility that the appellee could have died right after the deposit was made. Then the appellee could
not have issued the check in question. The appellee could not have complained to the appellant about
his check that was dishonored. The Bank may not have known about the wrong entry to the irreparable
loss of the appellee. Indeed, the appellee is entitled to temperate damage.

Regarding the award of attorney's fees, we find no reason to disturb it except as to the amount awarded
which We find quite exorbitant and which We accordingly reduce to the sum of P15,000.00. Appellee is
obviously entitled to it. (Art. 2208, New Civil Code)

We, however, find no merit in the challenge against the award for moral and exemplary damages. The
appellant argues that no moral damage should have been awarded because no court action was taken by
Collins Philippines against the appellee for issuing a check that was dishonored. Moreover, the check
was encashed the second time it was presented. This being so, whatever warning or threat the Collins'
letter posed the same was rendered moot and academic when the check was ultimately honored. We do
not agree. When the Collins' letter (Exhibit "C") was received by the appellee, the latter immediately
felt embarrassed and humiliated. The mere fact that the check was honored afterwards, did not repair the
harm done. It may have only mitigated it.

Insofar as the award for the exemplary damage is concerned, suffice it to say that Banks are required to
safeguard public interest as mandated by Banking Laws, practices and procedure. They are called upon
to protect the faith of the people in the banking system. The bank was remiss with its sworn duty. The
Court a quo correctly awarded the sum of P10,000.00 by way of exemplary damages. (pp. 27-28, rollo).

It is the submission of petitioner that (1) there is no evidence on record to support an award of temperate
damages in favor of respondent Rivera; (2) private respondent is not entitled to moral damages because
his credit and business standing was not impaired and he did not suffer serious anxiety and/or mental
anguish; and (3) petitioner should not be made to pay exemplary damages, attorney's fees and the costs
of suit.

It will be noted that in respondent appellate court's decision, judgment was rendered eliminating the
award of actual damages and, instead, the amount of P10,000.00 was awarded the private respondent by
way of temperate damages and attorney's fees in the reduced amount of P15,000.00, and affirming the
lower court's decision in all other respects. This would mean that the amount of P25,000.00 as moral
damages and P10,000.00 as exemplary damages still stay.

We agree with petitioner that private respondent is not entitled to moral damages considering that in a
matter of four hours the mistake was rectified and the payee, Collins Philippines, was paid the full
amount of the check. In the case of Singson vs. Bank of Philippine Island, 23 SCRA 1117, the plaintiffs
commenced the action against the bank and its President, Santiago Freixas for damages (P100,000.00 as
moral damages, P20,000.00 as exemplary damages, P20,000.00 as nominal damages, and P10,000.00
for attorney's fees and expenses of litigation, plus the costs) in consequence of illegal freezing of
plaintiff's account. This Court held that since "the wrong done to the plaintiffs was remedied as soon as
the President of the bank realized the mistake he and his subordinate employee had committed, the
Court finds that an award of nominal damages the amount of which need not be proven in the
sum of P1,000.00, in addition to attorney's fees in the sum of P500.00, would suffice to vindicate
plaintiff's rights."

In the case at bar, temperate or moderate damages are proper not for indemnification of loss suffered but
for the vindication or recognition of a right violated or invaded. Considering the facts of the case under
appeal, the sum of P5,000.00 as temperate or moderate damages would suffice, plus attorney's fees of
P5,000.00.

WHEREFORE, the judgment appealed from is modified in the sense that petitioner bank is hereby
sentenced to pay private respondent Wilfredo J. Rivera the sums of P5,000.00, as temperate or moderate
damages and P5,000.00, as attorney's fees, apart from the costs.

SO ORDERED.

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