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G.R. No. 100401 August 24, 1992

CONSOLIDATED DAIRY PRODUCTS CO., JESUS B. BITO a! "EDERICO B. GUILAS, asA#t$g T%ust&&s o' CONSOLIDATED P(ILIPPINES, INC. a! DAIRY E)PORT CO.,INC., petitioners,vs.T(E COURT O" APPEALS a! STANDARD IN*EST+ENT CORPORATION, respondents.

+EDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. CVNo. 016 entitled !Consolidated "air# $roducts Co., et al., versus The Court of Appeals and%tandard &nvest'ent Corporation,! which affir'ed in toto the decision of the then Court of (irst&nstance )now Re*ional Trial Court+ of Rial )$asa# Cit#+.

The facts of the case as su''aried # the trial court and adopted # the Court of Appeals areas follows

%o'eti'e in 1/6 Consolidated "air# $roducts Co'pan#, &nc., a forei*n corporation in%eattle, ashin*ton, 2.%.A. )hereinafter referred to as Consolidated %eattle+, a*reed with%antia*o %#3uco, &nc. )hereinafter referred to as %#3uco, &nc.+ to *o into a 3oint venture to'anufacture and sell "ari*old 'il4 and other dair# products in this countr#. To achieve thispurpose, the# or*anied and incorporated defendant Consolidated $hilippines, &nc. )hereinafter referred to as Consolidated $hilippines+,with offices at $ara5aue, Rial. Consolidated %eattleowned 17 of the capital stoc4 while the re'ainin* /7 of the capital stoc4 was owned # the%#3uco &nc. Thereafter, Consolidated %eattle e8tended to Consolidated $hilippines thee8clusive ri*ht to use the tradena'e "ari*old in the $hilippines. &n turn, Consolidated$hilippines e*an processin* and distriutin* "ari*old evaporated filled 'il4 in the $hilippines.

At the start of its operation, Consolidated $hilippines was i'portin* its can reuire'ents fro'the 2nited %tates. 9owever, due to econo'ic polic# then prevailin* in the countr#,Consolidated $hilippines was constrained to secure its can reuire'ent fro' local sources.9ence, on April :, 1//, Consolidated $hilippines entered into a contract with plaintiff %tandard&nvest'ent Corporation )hereinafter referred to as %tandard+, operatin* under the tradena'e%tandard Can Co'pan#. 2nder the said can suppl# a*ree'ent, Consolidated $hilippinesa*reed to purchase fro' the latter all its reuire'ents of can up to ;a# <1, 1/6/ )=8hiit C+.$ursuant to this a*ree'ent, plaintiff constructed a can-'a4in* plant and purchased thereuired 'achineries and euip'ent and sent technicians to train in the 2nited %tates underand for the account of Consolidated $hilippines.

&n 1/66, "air# =8port Co'pan# )hereinafter referred to as "e8co+, a susidiar# of

Consolidated %eattle and also holdin* office at 6< = lliot Avenue est, %eattle, ashin*ton,2.%.A. with Consolidated %eattle, applied for a license to do usiness in the $hilippines whichwas approved # the %ecurities and =8chan*e Co''ission. &t held office in the ver# office ofConsolidated $hilippines. Thereafter, on %epte'er <0, 1/66, "e8co entered into a contractwith Consolidated $hilippines where# the latter a*reed to purchase fro' the for'er pac4a*edsweetened condensed filled 'il4.

>n ;a# 6, 1/6?, plaintiff %tandard, Consolidated $hilippines and "e8co si*ned a'e'orandu' of a*ree'ent # virtue of which the tenure of the can suppl# a*ree'ent of :, 1// etween the plaintiff and Consolidated $hilippines was e8tended up to "ece'er1/?1.

>n @anuar# 1:, 1/:, Consolidated %eattle thru Bouis Arri*oni, notified Consolidated$hilippines that the for'er was placin* the control and licensin* of the "ari*old trade'ar4the >rient, includin* the Repulic of the $hilippines, into the hands of "e8co )=8hiit ?+.

>n Au*ust :?, 1/, Consolidated %eattle, throu*h its $resident, "r. Bouis Arri*oni, wrote Au*usto %#3uco of %#3uco, &nc, a personal and confidential letter offerin* to sell to hi' the

interest of Consolidated %eattle in Consolidated $hilippines, alle*in* a *reat 'an# econo'could e 'ade # a sin*le 'ana*e'ent and production or*aniation runnin* the threeor*aniations, the %tandard, Consolidated $hilippines and "e8co, as the set up then e8istwill ulti'atel# result in the de'ise of Consolidated $hilippines )=8hiit >+. This was refuse;r. Au*usto %#3uco.

>n Nove'er 1<, 1/, "e8co wrote Consolidated $hilippines that it was cancellin* effec@anuar# :, 1/ the license *ranted to Consolidated $hilippines to use the tradena'e"ari*old )=8hiit $+.

;r. Au*usto %#3uco, in his ehalf and in ehalf of %#3uco, &nc., the 'inorit# stoc4holder inConsolidated $hilippines, protested the cancellation of the license )=8hiit +.

%useuentl#, "r. Bouis Arri*oni, spea4in* as $resident of Consolidated %eattle, offered%#3uco, &nc. to sell )sic + Consolidated %eattleDs share in Consolidated $hilippines for $ 1.0to u# %#3uco, &nc.Ds share in Consolidated $hilippines or to file an4ruptc# proceedin*s fo

Consolidated $hilippines.

Beft with no etter choice, %#3uco, &nc. chose to sell its /7 euit# in Consolidated $hilippto Consolidated %eattle. Conseuentl#, on >ctoer ?, 1/6, %#3uco, &nc. e8ecuted a'e'orandu' a*ree'ent # virtue of which it a*reed to sell to Consolidated %eattle all its&nterest in Consolidated $hilippines and to dissolve Consolidated $hilippines, su3ect to thcondition that the ri*ht of plaintiff to su'it clai's it 'a# have shall e respected in caseConsolidated $hilippines is not dissolved )=8hiit =+.

Accordin*l#, Consolidated %eattle ou*ht the entire interest of %#3uco, &nc. and itsstoc4holdin*s Consolidated $hilippines and proceeded to dissolve Consolidated $hilippin)T%N, >ctoer ::, 1//, p. :0+.

Eefore Consolidated $hilippines could e dissolved, however, "e8co the wholl# ownedsusidiar# of Consolidated %eattle too4 over the 'ar4etin* act ivities of Consolidated$hilippines )=8hiits A and A-1+ and proceeded to sell 'il4 under the t radena'e "ari*old

the dissolution of Consolidated $hilippines )T%N, >ctoer ::, 1//, pp. <1 and 10F =8hi AA, AA-1, AA-:, AA-, EE, EE-1 and EE-<+.

=arlier, however, on Nove'er <, 1/6, =.B. Eenite, then *eneral 'ana*er of Consolidat$hilippines, notified plaintiff that it was cancellin* the can suppl# contract of April :, 1//)=8hiit E+, pro'ptin* plaintiff to de'and rei'urse'ent for the separation pa# of the

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e'plo#ees concerned due to the cessation of their operation on Nove'er 1, 1/6 in thea'ount of $1,0::,:./ and pa#'ent of unrealied profits )=8hiits 9, & and N+.

%ince plaintiffDs de'ands were re3ected )=8hiit 11+, it was constrained to file this case and toen*a*e the services of counsel for :7 of all recoveries )=8hiit +.

After su''ons have een validl# served on the defendants, defendant "e8co in its answerclai's that plaintiff %tandard had no cause of action a*ainst it considerin* that the asis for itsinstant action was the can suppl# contract etween the said plaintiff and Consolidated$hilippines wherein "e8co was not a part# and therefore no)t+ priv# )to the+ contract e8istin*etween the', and that assu'in* that it was ound # the can suppl# contract and liale to theplaintiff, this action was pre'ature as no de'and relative thereto was 'ade.

"efendant Consolidated $hilippines, throu*h its trustees, defendant @esus Eito and (edericoGuilas, clai's that the plaintiffDs action was pre'ature as the sa'e never referred to ani'partial referee which was provided for # can suppl# a*ree'ent, that the dissolution andliuidation of Consolidated $hilippines was 'utuall# a*reed upon # the Consolidated %eattleand %#3uco, &nc., and that the dissolution and liuidation of Consolidated $hilippinese8tin*uished its oli*ation under the can suppl# contract, and f inall# that the *uaranteee8tended # Consolidated %eattle for Consolidated $hilippinesD liailit# under the can suppl#contract covered onl# liailities for cans alread# supplied and not liailities accruin*suseuent to the e8ecution of the 'e'orandu' a*ree'ent of >ctoer ?. &n oth answersConsolidated $hilippines as well as "e8co filed Counterclai's which were denied # theplaintiff.

"efendant, Consolidated %eattle did not file an# answer. )pp. 1-, "ecisionF p. 1, Record+ )pp.<-6, Rollo+

After the parties presented their respective evidence, the trial court rendered 3ud*'ent in favorof %tandard. The dispositive portion of which reads

&N V&= >( T9= (>R=G>&NG, this Court here# orders the defendants, na'el#,Consolidated "air# $roducts Co'pan# of %eattle, ashin*ton, 2.%.A. andHor its alter e*o"air# =8port Co'pan# &nc., as well as Consolidated $hilippines. &nc. )represented # its Actin*Trustees @esus E. Eito and (ederico E. Guilas+ to pa# plaintiff, 3ointl# and severall#, thefollowin*

a+ $1,0::,:./ representin* the separation pa# that plaintiff had to pa# its e'plo#ees plus67 interest per annum co'puted fro' the date of the filin* of this case on April , 1/ untilthe defendants full# pa# their oli*ationF

+ $?,10,/<1.1< representin* plaintiffDs a**re*ate unrealied profit fro' the #ears 1/ to1/?1 plus 67 interest per annum co'puted fro' April , 1/, the date of the filin* of this caseuntil defendants full# pa# their oli*ationF

c+ $l,10,1/.?0 representin* inventor# losses suffered # plaintiff plus 67 interest perannumco'puted fro' April , 1/ until defendants full# settle their oli*ationF and

d+ $l,000,000.00 as e8e'plar# da'a*es, considerin* the da'a*es caused the plaintiff and thefraudulent sche'e used # the defendants, plus :7 of all the aove'entioned a'ounts asattorne#Ds fees.

The counterclai' of the defendants Consolidated $hilippines and "e8co are denied for la'erit. )pp. /-10, "ecisionF pp. 6-6, Record+

Not satisfied with the decision of the trial court, Consolidated %eattle and Consolidated$hilippines, thru its actin* trustees, appealed to the Court of Appeals. >n April 1/, 1//1, tCourt of Appeals rendered a decision affir'in* the decision of the trial court in toto.

&n this petition for review, Consolidated %eattle and Consolidated $hilippines pra# for thereversal of the decision of the Court of Appeals and the dis'issal of the co'plaint of %tanThe followin* assi*n'ent of errors were raised

(&R%T A%%&GN;=NT >( =RR>RT9= B>=R C>2RT =RR=" &N N>T "&%;&%%&NG T9= A;=N"=" C>;$BA&NT (>R(A&B2R= T> %TAT= A CA2%= >( ACT&>N AGA&N%T "=(=N"ANT "A&RI =$>RTC>;$ANI &NC. )"=C>+.

%=C>N" A%%&GN;=NT >( =RR>R

T9= B>=R C>2RT =RR=" &N N>T R2B&NG T9AT $BA&NT&(( 9A" JN>B="G= > AN" A$$R>V=", >R AT B=A%T, AGR==" T>, T9= "&%%>B2T&>N >( C>N%>B&"AT=$9&B&$$&N=% &NC. )C$&+ 9&C9 >2B" N=C=%%AR&BI 9AV= T9= =((=CT >(T=R;&NAT&NG T9= CAN %2$$BI C>NTRACT )=9&E&T !C!+ AN" =T&NG2&%9&NG C>EB&GAT&>N% 2N"=R %A&" C>NTRACT.

T9&R" A%%&GN;=NT >( =RR>R

T9= B>=R C>2RT =RR=" &N N>T R2B&NG T9AT $BA&NT&((D% ACT&>N &% $R=;AT

(>R (A&B2R= >( $BA&NT&(( T> (&R%T R=(=R &T% CBA&; T> AN &;$ART&AB R=(=R A% CABB=" (>R 2N"=R T9= CAN %2$$BI C>NTRACT.

(>2RT9 A%%&GN;=NT >( =RR>R

T9= B>=R C>2RT =RR=" &N %2%TA&N&NG $BA&NT&((D% CBA&; (>R 2NR=AB&K="$R>(&T%.

(&(T9 A%%&GN;=NT >( =RR>R

T9= B>=R C>2RT =RR=" &N AAR"&NG $BA&NT&(( &NV=NT>RI B>%%=% &N T9=%2; >( $1,10,1/.00

%&T9 A%%&GN;=NT >( =RR>R

T9= B>=R C>2RT =RR=" &N AAR"&NG ==;$BARI "A;AG=% AN" ATT>RN=(==% &N (AV>R >( $BA&NT&((.)pp. 1-16, Rollo+

&t is a settled rule that onl# uestions of law 'a# e raised in a petition for certiorari under of the Rules of Court. (indin*s of fact of the Court of Appeals are final and indin* upoCourt unless it is shown that the# are *rounded entirel# on speculations, sur'ises orcon3ectures. &n this case, e have carefull# reviewed the records and found that the f indinfacts of oth the court a quo and the appellate court are supported # evidence.

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&n its first assi*ned error, petitioner faulted respondent appellate court in affir'in* the decisionof the trial court den#in* "e8coDs 'otion to dis'iss a'ended co'plaint filed # respondent-plaintiff %tandard on the *round that in the a'ended co'plaint %tandard i'pleaded asadditional defendant herein petitioner "e8co ut said a'ended co'plaint did not state an#cause of action a*ainst the latter.

The pertinent alle*ations in the a'ended co'plaint which tended to show "e8coDs participationin the transactions su3ect of this case states

1. That suseuent to the aritrar# ter'ination of the Can %uppl# Contract #C$&, - defendant "e8co too4 over the usiness of C$& with =.B. Eenite, the ;ana*er of C$&ein* appointed # "r. Boius Arri*oni, the $resident of defendant C"$C and defendant"=C> in the 2nited %tates of A'erica, as the new General ;ana*er of the "e8co ranch inthe $hilippinesF

16. That the dissolution of C$& which pre3udiced plaintiff %tandard was caused # defendantC"$C in order for its "e8co ranch in the $hilippines to e ale to ta4e over the usiness ofC$&F

1. That the act of defendants C"$C and "e8co 'entioned aove, constituted a reach ofcontract with plaintiff, in ad faithF

1?. That defendant "e8co is not onl# a susidiar# of defendant C"$C, ut also an alter e*o ofthe latter, defendant C"$C 'a4in* use of defendant "e8co as a vehicle for the evasion of itsoli*ation under the !Can %uppl# Contract! and ;e'orandu' A*ree'ent )Anne8es !A! and!E! hereof+F

1/. That, therefore, defendant "e8co and defendant C"$C ein* one and the sa'e 3uridical

person, the liailit# of defendant C"$C to plaintiff for evadin* its oli*ation is, li4ewise, theliailit# of defendant "e8coF . . . )p. :0, Rollo+.

A cause of action is the fact or co'ination of facts which affords a part# a ri*ht to 3udicialinterference in his ehalf. The cause of action 'ust alwa#s consist of two ):+ ele'ents )1+ theplaintiffDs pri'ar# ri*ht and the defendantDs correspondin* pri'ar# dut#, whatever 'a# e thesu3ect to which the#relate L person, character, propert# or contractF and ):+ the delict or wron*ful act or o'issionof the defendant, # which the pri'ar# ri*ht and dut# have een violated )"e Gu'an, @r., v.CA, G.R. No. /:0:/-<0, :0 "ece'er 1//0+. The alle*ations in the a'ended co'plaint weresufficient to 'a4e out a case a*ainst "e8co. &t alle*ed that "e8co too4 over the usiness ofConsolidated $hilippines and that oth corporations are actuall# one and the sa'e, the for'erein* the alter e*o of the latter and that "e8co was used as a vehicle for the evasion #Consolidated %eattle )the 'other co'pan# of Consolidated $hilippines in %eattle+ of itsliailities to %tandard. &ndeed, if these alle*ations are proven, "e8co can e held liale to

%tandard # appl#in* the doctrine of piercin* the veil of corporate entit#. The applicale law tothe set of facts stated in the co'plaint need not e set out directl#. &n this case, it is sufficientthat %tandard clai'ed it had a ri*ht a*ainst Consolidated $hilippines # virtue of the cansuppl# contract it e8ecuted with the' and that the ter'ination of Consolidated $hilippines wasonl# a plo# to escape fro' its liailities in favor of %tandard ecause in truth, Consolidated$hilippines continued to do its usiness thru "e8co, which is an alter e*o of the for'er. Thetest of sufficienc# of the facts alle*ed is whether or not the Court could render a valid 3ud*'ent

as pra#ed for, acceptin* as true the e8clusive facts set forth in the co'plaint )%u'alino* v"oronio, G.R. No. ::?1, 6 April 1//0+.

The petitioners further ar*ue that "e8co cannot e held liale ecause it was not priv# to can suppl# contract etween %tandard and Consolidated $hilippines. &t is true that in thea*ree'ent where# %tandard undertoo4 to suppl# cans to Consolidated $hilippines, "e8cwas not a part#. The said a*ree'ent dated April :, 1// was for %tandard to suppl# andConsolidated $hilippines to u#. &t should e noted that efore the e8piration of the first casuppl# contract in 1/6/ "e8co, another susidiar# of Consolidated %eattle, was alread#or*anied and was licensed to do usiness in the $hilippines in 1/66. Thus, on ;a# 6, 1/

the said can suppl# a*ree'ent was e8tended to "ece'er <1, 1/?1 and "e8co was a pathis e8tension. "e8co, in this e8tension a*ree'ent was in fact an active part#. As held #respondent appellate court

&t is ar*ued that the can suppl# contract dated April :, 1// was, e8ecuted # %tandard&nvest'ent Corporation and Consolidated $hilippines onl# and therefore "e8co should noound # the contents thereof, 'uch less oli*ated to answer for the underta4in*s thereu# reason of the rule on privit# of contracts. Veril#, "e8co nonchalantl# ad'itted that it si*the suseuent a*ree'ent on ;a# 6, 1/6? with plaintiff-appellee )%tandard+ and Consolid$hilippines )=8hiit !"!+ ut its participation therein was li'ited onl# to the contract dated%epte'er <0, 1/66 etween Consolidated $hilippines and "e8co referred to in para*rapof =8hiit !"-l.! $ursuin* this chain of ar*u'ents, if, indeed, "e8co was never priv# to thetransaction dated April :, 1//, it is a wonder then for "e8co to have si*ned and approvede8tension of that contract in the ;e'orandu' of A*ree'ent dated ;a# 6, 1/6? whichprincipall# stipulated

1. That certain A*ree'ent dated April :, 1// etween the aove-na'ed %TAN&N and theaove-na'ed C$&, relatin* to the suppl# of cans # %TAN&N to C$& )a cop# of whicha*ree'ent is attached hereto as =8hiit !A! and # this reference incorporated herein+ ishere# e8tended for a period co''encin* on its present e8piration date and endin* on"ece'er <1, 1/?1, upon the ter's and conditions set forth in the said a*ree'ent dated :, 1// )=8hiit "-1+. )p. 6<, Rollo+

The petitioners also alle*ed that %tandard should e estopped fro' de'andin* an# clai'the' ecause %tandard and %#3uco, &nc. had identical officers. %ince the officers of %#3uco&nc. voted for the dissolution of Consolidated $hilippines and acceded to the dissolution o%tandard, the# cannot now co'plain and as4 for da'a*es in favor of %tandard a*ainst thepetitioners. &t is alle*edl# proper that the veil of corporate fiction of %tandard and %#3uco, &should e pierced and considerin* that %%& had 4nowled*e of the dissolution and in factaccepted the dissolution of C$&, %tandard is therefore ound # the dissolution.

The records revealed that %#3uco, &nc. which ori*inall# owned /7 of the shares of stoc4 Consolidated $hilippines )with Consolidated %eattle ownin* 17+ was left with no choice sell its shares in Consolidated $hilippines to Consolidated %eattle. Consolidated $hilippinhowever, cannot continue its e8istence ecause Consolidated %eattle cancelled the licens*ranted to it to use the tradena'e "ari*old. ith the cancellation of the license Consolida$hilippines had no 'ore reason to continue its e8istence. ;oreover, while %#3uco, &nc. a*to the suseuent dissolution of C$&, it si*ned the a*ree'ent )=8hiit =+ ecause of the

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condition that Consolidated %eattle in ashin*ton will *uarantee full pa#'ent of Consolidated$hilippinesD liailities to %tandard in the can suppl# contract M$ar. 6)d+ of the ;e'orandu' of A*ree'ent.

The appellate court alle*edl# erred when it ruled that the clause on %ection 6)d+ of the;e'orandu' of A*ree'ent )p. , =8hiit !=!+ which provided

)d+ &t *uarantees the full pa#'ent under the ter's of the Can %uppl# Contract etween C$&and %tandard Can Co'pan#, of C$&Ds liailit# to %tandard Can Co'pan# for cans alread#supplied # %tandard Can Co'pan#. This however does not preclude %tandard Can Co'pan#fro' su'ittin* directl# to C$& other clai's that it 'a# have under the Can %uppl# Contract.

was enou*h safe*uard for the preservation of %tandardDs clai's without elaoratin* on thereason wh# it held so. &t is the opinion of the petitioners that the aove clause referred onl# toclai's alread# due and owin* as of the effective date of Consolidated $hilippinesD dissolution,ut does not refer to clai's for rei'urse'ent of separation pa# and for loss of e8pectedprofits for the une8pired portion of the can suppl# contract.

hile the first para*raph of the said clause had specific reference to Consolidated $hilippinesDliailit# to %tandard for cans alread# supplied, the second part of the clause covers all otherclai's which %tandard 'a# have a*ainst Consolidated $hilippines. The ter's of thea*ree'ent are clear and need no e8planation or interpretation. None could suit petitionerDscontention le*all#.

e a*ree with respondent appellate court that petitioners had no ri*ht to invo4e the defensethat the clai' 'ust f irst e referred to an i'partial referee as provided for in the can suppl#a*ree'ent ecause there was an outri*ht re3ection # the petitioners of private respondentDsclai'. The records showed that two ):+ letters dated Nove'er and 1?, 1/6 were sent #private respondent de'andin* the pa#'ent of separation pa# to its e'plo#ees ut petitioners,throu*h the law offices of %alcedo, del Rosario, Eito, ;isa and Boada, denied the clai'outri*ht )p. <, Records, =8h. 11+ ecause these clai's were alle*edl# outside of the cost ofthe purchased and delivered cans as a*reed upon in the contract.

e now *o to the propriet# of the award of da'a*es. The trial court received evidence tosupport private respondentDs clai' for da'a*es. &t should e e'phasied here that theda'a*es clai'ed # private respondents do not refer to clai's which were alread# due fro'the can suppl# contract. The clai's here are for da'a*es caused # the fraudulent ter'ination# petitioners of the can suppl# contract four )+ #ears efore the end of its ter' and for such ashort notice. e reproduce herein the findin*s of the trial court and adopt the' with'odifications as re*ards the a'ount

$laintiffDs first clai' is for rei'urse'ent for the separation pa# it paid its e'plo#ees due to theter'ination of the can suppl# a*ree'ent in the a'ount of $l,0::,:./.

The evidence supports plaintiffDs clai' aove )su-par. A and C, par. 111 of =8hiit C and=8hiit @-1+. The a'ount actuall# paid # plaintiffs to the separated e'plo#ee is $/:/,:0.)=8hiits B and R to R-+. To this was added 107 since 107 'ust e added to costs ofproduction, thus 'a4in* the total of $1,0::,:./ )=8hiit C and &+.)p. :1, Record+

There is no uestion that %tandard paid these a'ounts to their separated e'plo#ees. &t woli*ed to do so # virtue of the CEA it si*ned with the e'plo#ees.

The second clai' of plaintiff is for unrealied profit a'ountin* to $?,101,/<1.1<. &n suppothis clai' plaintiff showed that fro' 1/1 to 1/ &t 'ade an a**re*ate profit of $?,10,/<1.1< )=8hiits ;, 2, 2-:, 2-, 2-6, 2-?, 2-10, 2-1:, 2-1, 2-16 and 2-1?+, andar*ued that since the can suppl# contract had another five )+ #ears to *o )1/ to 1/?1+plaintiff would have earned that 'uch. ) Ibid .+

&nde'nification for da'a*es shall co'prehend not onl# the value of the loss suffered, utthat of the profits which the oli*ee failed to otain )Art. ::00 NCC+. The presu'ption tha

%tandard would earn e8actl# the sa'e profit as it did five )+ #ears efore its closure isspeculative. A 'ore reasonale a'ount would e the avera*e of the #earl# profit for the fi#ears precedin* the closure )1/1-1/+ 'ultiplied # the nu'er of #ears re'ainin* asprovided for in the contract. The avera*e #earl# profit for 1/1 to 1/ is $1,01,0/.6 )p:?0, Records+. This a'ount 'ultiplied # five )#ears+ a'ounts to $,:0,?.?0.

e also affir' the findin*s of the appellate court on inventor# losses as it is sufficientl#supported # evidence, to wit

The financial state'ent of plaintiff further shows that it incurred inventor# losses in the #ea1/ )=8hiit V+, due to cans which rusted and could not have een disposed of )T%N,Nove'er :, 1//, p. 1<+, ad'inistrative e8penses connected with the cost of the cans, of raw 'aterials and depreciated portion of the 'achiner# all a'ountin* to $1,10,1/.?0)T%N, Nove'er :6, 1//, =8hiit V+. These losses were due to the cancellation of the casuppl# contract efore its a*reed e8piration date. &t is onl# ri*ht that defendants e held lia

for the'.)p. 6, Rollo+

There is no dout that the reach co''itted # the petitioners was 'ade in a wanton andfraudulent 'anner. There was no reason for petitioners to ter'inate the can suppl# contrawith %tandard. The latter was purposel# or*anied for the enefit of Consolidated $hilippiNeither was there a need to close Consolidated $hilippines ecause Consolidated %eattleall the intentions of continuin* its usiness onl# this ti'e to e underta4en # its solesusidiar#, "e8co to the pre3udice of %tandard. here a defendant violates a contract withplaintiff, the court 'a# award e8e'plar# da'a*es if the defendant acted in a wanton,fraudulent, rec4less, oppressive and 'alevolent 'anner )Art. ::<:, Civil Code+.

The clai' for attorne#Ds fees of :7 percent of all recoveries is unconscionale. &t is herereduced to 17.

ACC>R"&NGBI, the decision of respondent Court of Appeals is affir'ed with 'odification

the a'ount of da'a*es awarded as discussed aove.%> >R"=R=".

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G.R. No. 10/2 O#to&% 19, 2011

E+ERITA +. DE GU+AN, $etitioner,vs.ANTONIO +. TU+OL*A, Respondent.

" = C & % & > N

+ENDOA, J.:

This is a petition for review on certiorari under Rule of the Revised Rules of Court assailin*the (eruar# :, :00/ "ecision1 of the Court of Appeals )CA+ and its ;a# :6, :00/Resolution: in CA-G.R. %$. No. 10/ entitled ! Antonio M. Tumolva v. Emerita M. DeGuzman.!

T3& "a#ts

>n %epte'er 6, :00, petitioner ='erita ;. "e Gu'an (De Guzman), represented # herattorne#s-in-fact, Bourdes Rivera and "honna Chan, and respondent Antonio Tu'olva, doin*usiness under the na'e and st#le A.;. Tu'olva =n*ineerin* or4s (te Contractor), enteredinto a Construction A*ree'ent< (A!reement) for the construction of an orphana*e consistin* ofan ad'inistration uildin*, directorsH*uests house, dinin* and service uildin*, childrenOsdor'itor#, 'ale staff house, and covered wal4wa#s in Er*#. $ulon* Eun*a, $uro4 , %ilan*,Cavite, for a contract price of $ 1,/?:,10.</. &ncorporated in the A*ree'ent was the planand specifications of the peri'eter fence. The Contractor, however, 'ade deviations fro' thea*reed plan with respect to the peri'eter fence of the orphana*e.

>n %epte'er 6, :00, after the co'pletion of the pro3ect, "e Gu'an issued a Certificat Acceptance. (or his part, the Contractor issued a uitclai' ac4nowled*in* the ter'inationthe contract and the full co'pliance therewith # "e Gu'an.

&n Nove'er :006, durin* t#phoon !;ilen#o,! a portion of the peri'eter fence collapsed aother portions tilted. &n her Better dated "ece'er , :006, "e Gu'an, throu*h counsel,de'anded the repair of the fence in accordance with the plan. &n response, the Contractoclai'ed that the destruction of the fence was an act of God and e8pressed willin*ness todiscuss the 'atter to avoid unnecessar# liti*ation. "e Gu'an, however, reiterated herde'and for the restoration of the wall without additional cost on her part, or in the alternatfor the Contractor to 'a4e an offer of a certain a'ount # wa# of co'pensation for theda'a*es she sustained. 9er de'and was not heeded.

>n (eruar# 1, :00?, "e Gu'an filed a Reuest for Aritration of the dispute efore thConstruction &ndustr# Aritration Co''ission (CIAC). %he alle*ed that the Contractordelieratel# defrauded her in the construction of the peri'eter fence # !under siin* thereuired colu'n rears fro' 1:''. ased on the plan to onl# 10''., the reuired concrehollow loc4s fro' P6 to P, and the distance etween colu'ns fro' <.0' to .<'.!6 (urtthe Contractor neither anchored the lenten ea's to the colu'ns nor placed drains orweepholes alon* the lower walls. %he pra#ed for an award of actual, 'oral and e8e'plar#da'a*es, as well as attorne#Os fees and e8penses of liti*ation, and for the inspection andtechnical assess'ent of the construction pro3ect and the rectification of an# defect.

&n his Answer with Counterclai', the Contractor denied liailit# for the da'a*ed fenceclai'in*, a'on* others, that its destruction was an act of God. 9e ad'itted 'a4in* deviafro' the plan, ut pointed out that the sa'e were 'ade with the 4nowled*e and consent o

Gu'an throu*h her representatives, Architect uin Eaterna and $ro3ect =n*ineer Rodel%antos (En!ineer "antos)# who were present durin* the construction of the fence. 9e furtar*ued that pursuant to the A*ree'ent, the clai' for da'a*es was alread# arred # the 'onth period fro' the issuance of the Certificate of Acceptance of the pro3ect within whichfile the clai'. 9e, thus, pra#ed for the dis'issal of the action and interposed a counterclaiactual and co'pensator# da'a*es for the additional wor4Hchan*e orders 'ade on the proin the a'ount of $ :,06,00.00, attorne#Os fees and liti*ation e8penses.

After due proceedin*s, the C&AC issued the Award dated @ul# 1, :00? in favor of "e Guthe dispositive portion of which reads

(ERE"ORE, 3ud*'ent is here# rendered and AARD is 'ade on the 'onetar# clai'Clai'ant E+ERITA +. DE GU+AN, directin* R&s5o!&t Cot%a#to% ANTONIO +.TU+OL*A, to pa# her the followin* a'ounts

P 1/,09.00 as a#tua6 !a7ag&s for reconstructin* the collapsed and da'a*ed peri'etefence.

&nterest is awarded on the fore*oin* a'ount at the 6&ga6 %at& o' 8 5&% au7 co'putefro' the date of this Award. After finalit# thereof, interest at the rate of 12 per annu' shpaid thereon until full pa#'ent of the awarded a'ount shall have een 'ade, ! tis interim

period bein! deemed to be at tat time alread$ a %orbearance o% credit& (Eastern "ippin!'ines# Inc. v. Court o% Appeals ):< %CRA ? M1//+

P 100,000.00 as 7o%a6 !a7ag&s.

http://www.lawphil.net/judjuris/juri2011/oct2011/gr_188072_2011.html#fnt1















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P 100,000.00 as &:&756a%; !a7ag&s.

P 0,000.00 for attorne#Os fees and e8penses of liti*ation.

P 4/,09.00 < T>TAB A;>2NT "2= T9= CBA&;ANT

The C&AC staff is here# directed to 'a4e the necessar# co'putation of how 'uch has eenpaid # Clai'ant as its proportionate share of the aritration costs totalin* P 110,910.44, whichco'puted a'ount shall e rei'ursed # Respondent to the Clai'ant.

SO ORDERED.

A**rieved, the Contractor filed efore the CA a $etition for Review with pra#er for the issuanceof a te'porar# restrainin* order, challen*in* the C&ACOs award of da'a*es in favor of "e

Gu'an.>n (eruar# :, :00/, the CA 'odified the Award rendered # C&AC. The dispositive portion of the decision states

(ERE"ORE, the instant petition is 5a%t6; GRANTED. The assailed Award dated @ul# 1,:00? rendered # the C&AC in C&AC Case No. 0<-:00? is here# +ODI"IED, deletin* theaward of actual, 'oral and e8e'plar# da'a*es, ut awardin* te'perate da'a*es in thea'ount of $ 100,000.00 for reconstructin* the collapsed and da'a*ed peri'eter fence. Therest of the Award stands.

SO ORDERED.?

The CA held that althou*h the Contractor deviated fro' the plan, C&ACOs award of actualda'a*es was not proper inas'uch as "e Gu'an failed to estalish its e8tent with reasonalecertaint#. The CA, however, found it appropriate to award te'perate da'a*es considerin* that"e Gu'an suffered pecuniar# loss as a result of the collapse of the peri'eter fence due tothe ContractorOs ne*li*ence and violation of his underta4in*s in the A*ree'ent. &t further ruledthat there was no asis for awardin* 'oral da'a*es reasonin* out that "e Gu'anOs worr# for the safet# of the children in the orphana*e was insufficient to 3ustif# the award. Bi4ewise, itcould not sustain the award of e8e'plar# da'a*es as there was no showin* that theContractor acted in wanton, rec4less, fraudulent, oppressive, or 'alevolent 'anner.

"e Gu'an filed a 'otion for reconsideration of the said decision, ut it was denied for lac4 of'erit # the CA in its Resolution dated ;a# :6, :00/.

9ence, "e Gu'an interposed the present petition efore this Court anchored on the followin*

GR>2N"%

)&+

T(E COURT O" APPEALS ERRED IN RULING T(AT T(E E*IDENCE ON RECORD"AILED TO SU""ICIENTLY ESTABLIS( T(E A+OUNT O" ACTUAL DA+AGES T(ATPETITIONER DE GU+AN CAN RECO*ER "RO+ T(E RESPONDENT.

)&&+T(E COURT O" APPEALS ERRED IN RULING T(AT PETITIONER DE GU+AN IS NOTENTITLED TO AARDS O" +ORAL AND E)E+PLARY DA+AGES./

"e Gu'an ar*ues inter alia that the Contractor is liale for the actual da'a*es that shesuffered fro' the collapse of the peri'eter fence. 9e failed to put weep holes on the collapsed

portion of the said fence, which could have relieved the pressure fro' the wet soil of thead3oinin* hi*her *round.

"e Gu'an adds that the co'putation of the cost of reuildin* the collapsed portion of thperi'eter fence # =n*ineer %antos constituted sustantial evidence warrantin* an awardactual da'a*es. 9is affidavit served as his direct testi'on# in the case even if he did notappear durin* the hearin*. 9avin* een notaried, it 'ust e ad'issile in evidence withofurther proof of authenticit#.

(urther, "e Gu'an uestions the CAOs deletion of the award for 'oral and e8e'plar#da'a*es. %he insists that her an8iet# and sufferin* over the safet# of the children in the

orphana*e entitled her to an award of 'oral da'a*es. &t is li4ewise her position that theContractorOs wanton acts of delieratel# cheatin* the enefactors of the orphana*e # 'adeviations on the approved plan throu*h the use of construction 'aterials of inferior ualitwarranted the i'position of e8e'plar# da'a*es a*ainst the Contractor.

The CourtOs rulin*

There is no dout that "e Gu'an incurred da'a*es as a result of the collapse of theperi'eter fence. The Contractor is clearl# *uilt# of ne*li*ence and, therefore, liale for theda'a*es caused. As correctl# found # the CA

Nonetheless, the Court sustains the C&ACOs conclusion that the C>NTRACT>R was ne*lin failin* to place weepholes on the collapsed portion of the peri'eter fence. (ault orne*li*ence of the oli*or consists in his failure to e8ercise due care and prudence in theperfor'ance of the oli*ation as the nature of the oli*ation so de'ands, ta4in* into accothe particulars of each case. &t should e e'phasied that even if not provided for in the pthe C>NTRACT>R hi'self ad'itted the necessit# of puttin* weepholes and clai'ed to h

actuall# placed the' in view of the hi*her *round elevation of the ad3acent lot visvis the*round of the construction site. %ince he was the one who levelled the *round and was, thaware that the lowest portion of the ad3oinin* land was nearest the peri'eter fence, he shhave ensured that sufficient weepholes were placed ecause water would naturall# flowtowards the fence.

9owever, the C>NTRACT>R failed to refute ;r. Ra'osO clai' that the collapsed portion peri'eter fence lac4ed weepholes. Records also show that the o'ission of such weepholandHor their ein* plastered over resulted fro' his failure to e8ercise the reuisite de*ree supervision over the wor4, which is the sa'e reason he was unale to discover the deviatfro' the plan until the fence collapsed. 9ence, the C>NTRACT>R cannot e relieved froliailit# therefor .10

The Court finds no co'pellin* reason to deviate fro' this factual findin* # the C&AC, asaffir'ed # the CA. &t is settled that findin*s of fact of uasi-3udicial odies, which haveacuired e8pertise ecause their 3urisdiction is confined to specific 'atters, are *enerall#accorded not onl# respect, ut also f inalit#, especiall# when affir'ed # the CA. &n particufactual findin*s of construction aritrators are f inal and conclusive and not reviewale # tCourt on appeal.11

C&ACOs award of actual da'a*es, however, is indeed not proper under the circu'stances there is no concrete evidence to support the plea. &n deter'inin* actual da'a*es, one carel# on 'ere assertions, speculations, con3ectures or *uesswor4, ut 'ust depend on












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co'petent proof and on the est evidence otainale re*ardin* specific facts that could affordso'e asis for 'easurin* co'pensator# or actual da'a*es.1: Article :1// of the New CivilCode defines actual or co'pensator# da'a*es as follows

Art. :1//. =8cept as provided # law or # stipulation, one is entitled to an adeuateco'pensation onl# for such pecuniar# loss suffered # hi' as he has !u6; 5%o=&!. %uchco'pensation is referred to as actual or co'pensator# da'a*es.

2nfortunatel#, "e Gu'an failed to adduce evidence to satisfactoril# prove the a'ount ofactual da'a*e incurred. Contrar# to her assertion, the handwritten calculation of reconstructioncosts 'ade # =n*ineer %antos and attached to his affidavit cannot e *iven an# proativevalue ecause he never too4 the witness stand to affir' the veracit# of his alle*ations in his

affidavit and e cross-e8a'ined on the'. &n this re*ard, it is well to uote the rulin* of theCourt in the case of Tatin! v. Marcella,1< to wit

There is no issue on the ad'issiilit# of the su3ect sworn state'ent. 9owever, thead'issiilit# of evidence should not e euated with wei*ht of evidence. The ad'issiilit# ofevidence depends on its relevance and co'petence while the wei*ht of evidence pertains toevidence alread# ad'itted and its tendenc# to convince and persuade. Thus, a particular ite'of evidence 'a# e ad'issile, ut its evidentiar# wei*ht depends on 3udicial evaluation withinthe *uidelines provided # the rules of evidence. &t is settled that affidavits are classified ashearsa# evidence since the# are not *enerall# prepared # the affiant ut # another who useshis own lan*ua*e in writin* the affiantOs state'ents, which 'a# thus e either o'itted or'isunderstood # the one writin* the'. ;oreover, the adverse part# is deprived of theopportunit# to cross-e8a'ine the affiant. (or this reason, affidavits are *enerall# re3ected forein* hearsa#, unless the affiants the'selves are placed on the witness stand to testif#thereon.

Neither is there an# evidence presented to sustantiate =n*ineer %antosO co'putation of thereconstruction costs. (or such co'putation to e considered, there 'ust e so'e otherrelevant evidence to corroorate the sa'e.1Thus, the CA was correct in disre*ardin* theaffidavit of =n*ineer %antos for ein* hearsa# and in not *ivin* proative wei*ht to it. Thereein* no tan*ile docu'ent or concrete evidence to support the award of actual da'a*es, thesa'e cannot e sustained.

Nevertheless, "e Gu'an is indeed entitled to te'perate da'a*es as provided under Article::: of the Civil Code for the loss she suffered. hen pecuniar# loss has een suffered utthe a'ount cannot, fro' the nature of the case, e proven with certaint#, te'perate da'a*es'a# e recovered. Te'perate da'a*es 'a# e allowed in cases where fro' the nature of thecase, definite proof of pecuniar# loss cannot e adduced, althou*h the court is convinced thatthe a**rieved part# suffered so'e pecuniar# loss.1 2ndoutedl#, "e Gu'an sufferedpecuniar# loss rou*ht aout # the collapse of the peri'eter fence # reason of theContractorOs ne*li*ence and failure to co'pl# with the specifications. As she failed to prove the

e8act a'ount of da'a*e with certaint# as reuired # law, the CA was correct in awardin*te'perate da'a*es, in lieu of actual da'a*es. 9owever, after wei*hin* carefull# the attendantcircu'stances and ta4in* into account the cost of reuildin* the da'a*ed portions of theperi'eter fence, the a'ount of $ 100,000.00 awarded to "e Gu'an should e increased.This Court, in reco*nition of the pecuniar# loss suffered, finds the award of $ 10,000.00 #wa# of te'perate da'a*es as reasonale and 3ust under the pre'ises.

As to the C&ACOs award of $ 100,000.00 as 'oral da'a*es, this Court is one with the CA "e Gu'an is not entitled to such an award. The record is ereft of an# proof that she actsuffered 'oral da'a*es as conte'plated in Article ::1 of the Code, which provides

Art. ::1. ;oral da'a*es include ph#sical sufferin*, 'ental an*uish, fri*ht, serious an8iees'irched reputation, wounded feelin*s, 'oral shoc4, social hu'iliation, and si'ilar in3uThou*h incapale of pecuniar# co'putation, 'oral da'a*es 'a# e recovered if the# arepro8i'ate result of the defendantOs wron*ful act or o'ission.

Certainl#, the award of 'oral da'a*es 'ust e anchored on a clear showin* that she acte8perienced 'ental an*uish, es'irched reputation, sleepless ni*hts, wounded feelin*s,

si'ilar in3ur#. There could not have een a etter witness to this e8perience than "e Gu'herself .16 9er testi'on#, however, did not provide specific details of the sufferin* she alle*went throu*h after the fence collapsed while she was 'iles awa# in the 2nited %tates. As CA aptl# oserved, !the testi'on# of the >N=R as to her worr# for the safet# of the childin the orphana*e is insufficient to estalish entitle'ent thereto.! 1 %ince an award of 'orada'a*es is predicated on a cate*orical showin* # the clai'ant that she actuall# e8periee'otional and 'ental sufferin*s, it 'ust e disallowed asent an# evidence thereon.1?

;oreover, under the aforeuoted provision, 'oral da'a*es cannot e recovered as theperi'eter fence collapsed in the 'idst of the stron* t#phoon !;ilen#o.! &t was not clearl#estalished that the destruction was the pro8i'ate result of the ContractorOs act of 'a4in*deviation fro' the plan. As correctl# concluded # the CA, viz

9owever, while it cannot e denied that the Contractor deviated fro' the plan, there was nclear showin* whether the sa'e caused or contriuted to the collapseHtiltin* of the su3ecperi'eter fence. No co'petent evidence was presented to estalish such fact. As the C&A

itself ac4nowled*ed, !)t+here is no wa# # which to accuratel# resolve this issue # theevidence su'itted # the parties.! The state'ent of =dwin E. Ra'os, =n*ineerin* Aide >ffice of the ;unicipal =n*ineer of %ilan*, Cavite, who conducted an ocular inspection of collapsed peri'eter fence, that the oserved deviations fro' the plan !affected the stren*the fence and 'ade it wea4er, such that its chance of withstandin* the pressure of water fthe other side thereof was *reatl# di'inished or affected! was 'erel# an e8pression of op As he hi'self ad'itted, he is not ualified to render an e8pert opinion.1/

(urther, "e Gu'an was not ale to show that her situation fell within an# of the casesenu'erated in Article ::1/:0 of the Civil Code upon which to ase her de'and for the awa'oral da'a*es.

Neither does the reach of contract co''itted # the Contractor, not ein* fraudulent or 'in ad faith, warrant the *rant of 'oral da'a*es under Article :::0 which provides that

Art. :::0. illful in3ur# to propert# 'a# e a le*al *round for awardin* 'oral da'a*es if tcourt should find that, under the circu'stances, such da'a*es are 3ustl# due. The sa'e rapplies to reaches of contract where the defendant acted fraudulentl# or in ad faith.

"e Gu'an cannot e awarded e8e'plar# da'a*es either, in the asence of an# evidenshowin* that the Contractor acted in a wanton, fraudulent, rec4less, oppressive, or 'alevo'anner as provided in Article ::<: of the Civil Code. The rulin* in the case of *a+pil and v. Court o% Appeals,:1 relied upon # "e Gu'an, where it was e'phasied that the wantone*li*ence in effectin* the plans, desi*ns, specifications, and construction of a uildin* is



























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euivalent to ad faith in the perfor'ance of the assi*ned tas4, finds no application in the caseat ench. As alread# pointed out, there is ne*li*ence on the part of Contractor, ut it is neitherwanton, fraudulent, rec4less, oppressive, nor 'alevolent.

The award of e8e'plar# da'a*es cannot e 'ade 'erel# on the alle*ation of "e Gu'anthat the ContractorOs deviations fro' the plans and specifications without her written consentwas deplorale and conde'nale. The Court re*ards the deviations as e8cusale due to theunavailailit# of the approved construction 'aterials. Eesides, these were 'ade 4nown to "eGu'anOs pro3ect 'ana*er who was present all the ti'e durin* the construction. &ndeed, nodelierate intent on the part of the Contractor to defraud the orphana*eOs enefactors was ever shown, 'uch less proved. As 'a# e *leaned fro' his testi'on#

888:.:.0 hat can #ou sa# to the clai' that the colu'n rears were reduced in sie fro' 1:''to 10''Q

A That is untrue.

:.:.1 h# did #ou sa# that it was untrueQ

A Eecause the colu'n rears that we used is 1:'' and not 10'' contrar# to the clai' ofthe clai'ant. The colu'n rears that clai'ant and his en*ineers clai'ed to have eenundersied Mwere those alread# su3ected to stretchin*. "ue to the lateral load on theperi'eter fence co'in* fro' the water that accu'ulated thereon, the stren*th of the colu'nars was su3ected to such 4ind of force e#ond its capacit# there# resultin* the' to #ield or!'apatid.! As a result of such stretchin*, the colu'n rears were defor'ed there# causin* itMto chan*e its width ut the len*th was e8tended. Iou can co'pare it to a cand# li4e !tira-tira!which if #ou stretch it eco'es lon*er ut its width is reduced. The other colu'n rears on the

peri'eter fence which Mwere not su3ected to stretchin* will prove what & a' statin*.:.:.: Also, in the said reuest for aritration, it was clai'ed that the reuired hollow loc4s)C9E+ was reduced also fro' P6 to P, how would #ou e8plain thisQ

A &t is true ut such deviation was 4nown to the' in view of the fact that there was noavailale C9E P6 in %ilan*, Cavite and so to save on the travel cost in rin*in* 'aterials fro';anila to the site, it was a*reed that such C9E P shall e used instead.

:.:.< hat was the effect of such deviation in usin* C9E P instead of C9E P6Q

A No effect, 'ada'.

:.:. h# did #ou state so, ;r. itnessQ

A Eecause the entire area of the land which is ein* secured # the peri'eter fence was full#covered with the fence which is 'ade of C9E. This si'pl# i'plies that even thou*h we used a'uch lesser sie of C9E, ut we increased the co'pressive stren*th of the 'ortar and fillerused in the pre'ises. This has reall# no effect ecause we cover the entire place with fence.

:.:. &t was also clai'ed that the distance etween colu'ns was deviated fro' <.0 '. to .0', will #ou please e8plain this 'atter.

A The co'putation of the distance etween the colu'ns of the peri'eter fence as appearin*on the plan was <.0 ' inside to inside. 9owever, the co'putation 'ade # the en*ineer of theclai'ant as alle*ed in their Reuest for Aritration was .0 '. outside to outside which shoulde <.6 '. outside to outside as correct distance.

:.:.6 &t now appears fro' #our state'ent that there was a deviation as etween the <.0 inside to inside co'putation in the plan and the actual <.6 '. outside to outside co'putat'ade # the en*ineers of the clai'ant. ;# uestion ;r. itness is, what would e the effsuch deviation on the colu'nsQ

A &t is true that there was such a deviation on the distance of the colu'n ut it will have neffect ecause still the factor of safet# was well provided for. =ven the e8istin* law on uilconstruction supports this 'atter. & even sou*ht =n*ineer Ro''el A'ante on the 'atter ahis report supports '# alle*ation.

:.:. as such deviation approved # the clai'ant or the representatives of the clai'an

A Ies ecause durin* all the ti'e the construction of the peri'eter fence was done, thepro3ect 'ana*er of the clai'ant was present and oservin* the wor4s. (urther, the# havee8ecuted a Certificate of (inal Acceptance of the pro3ect.::

888

As re*ards the award of attorne#Os fees, the Court upholds "e Gu'anOs entitle'ent toreasonale attorne#Os fees, althou*h it reco*nies that it is a sound polic# not to set a preon the ri*ht to liti*ate.:< &t 'ust e recalled that "e Gu'anOs repeated de'ands for the reof the fence or the pa#'ent of da'a*es # wa# of co'pensation, were not heeded # theContractor. The latterOs un3ust refusal to satisf# "e Gu'anOs valid, 3ust and de'andale cconstrained her to liti*ate and incur e8penses to protect her interest. Article ::0? of the CCode, thus, provides

Art. ::0?. &n the asence of stipulation, attorne#Os fees and e8penses of liti*ation, other th 3udicial costs, cannot e recovered, e8cept

888):+ hen the defendantOs act or o'ission has co'pelled the plaintiff to liti*ate with thirdpersons or to incur e8penses to protect his interestF

888

(inall#, the dis'issal of the ContractorOs counterclai' is sustained for lac4 of 'erit.1avvphhis Co''ent: and ;e'orandu',: the Contractor pleaded that da'a*es should have eawarded to hi'. This deserves scant consideration. A perusal of the record reveals that th'atter as re*ards the return of what he had donated # reason of "e Gu'anOs in*ratitudwas not a'on* the issues raised in this petition. Thus, the sa'e cannot e ta4en co*nia# the Court.

(ERE"ORE, the petition is "=N&=". The "ecision of the Court of Appeals dated (eru:, :00/ and its Resolution dated ;a# :6, :00/ are A""IR+ED with the +ODI"ICATIONthe award of $ 100,000.00 as te'perate da'a*es is increased to $ 10,000.00. The awashall earn interest at the rate of 1:7 per annu' rec4oned fro' the f inalit# of this 3ud*'enfull# paid.

%> >R"=R=".










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G.R. No. 142049 Jaua%; 0, 2001

GER+AN +ARINE AGENCIES, INC. a! LUBECA +ARINE +ANAGE+ENT (>LTD., petitioners,vs.NATIONAL LABOR RELATIONS CO++ISSION a! "ROILAN S. DE LARA, respondents.

GONAGA?REYES, J .@

>n 1 >ctoer 1//, private respondent was hired # petitioners to wor4 as a radio officer onoard its vessel, the ;HV T.A. V>IAG=R. %o'eti'e in @une, 1//, while the vessel was

doc4ed at the port of New Kealand, private respondent was ta4en ill. 9is worsenin* healthcondition was rou*ht # his crew'ates to the attention of the 'aster of the vessel. 9owever,instead of dise'ar4in* private respondent so that he 'a# receive i''ediate 'edicalattention at a hospital in New Kealand, the 'aster of he vessel proceeded to ;anila, a vo#a*eof ten da#s, durin* which ti'e the health of private respondent rapidl# deteriorated. 2ponarrival in ;anila, private respondent was not i''ediatel# dise'ar4ed ut was 'ade to waitfor several hours until a vacant slot in the ;anila pier was availale for the vessel to doc4.$rivate respondent was confined in the ;anila "octors 9ospital, wherein he was treated # atea' of 'edical specialists fro' : @une 1// to :6 @ul# 1//.,-pi,.n/t

After private respondent was dischar*ed fro' the hospital, he de'anded fro' petitioners thepa#'ent of his disailit# enefits and the unpaid alance of his sic4ness wa*es, pursuant tothe %tandard ='plo#'ent Contract of the parties. 9avin* een assured # petitioners that allhis enefits would e paid in ti'e, private respondent waited for al'ost a #ear, to no avail.=ventuall#, petitioners told private respondent that, aside fro' the sic4ness wa*es that he had

alread# received, no other co'pensation or enefit was forthco'in*.1 $rivate respondent fileda co'plaint with the National Baor Relations Co''ission )NBRC+ for pa#'ent of disailit#enefits and the alance of his sic4ness wa*es. >n <1 @ul# 1//, the laor ariter rendered adecision,: the pertinent parts of which are uoted hereunder

&n the case at ar, there is no issue on the propriet# or ille*alit# of co'plainantDs dischar*e orrelease fro' e'plo#'ent as Radio >perator. hat co'plainant is pursuin* is li'ited to

co'pensation enefits due a sea'an pursuant to $>=A %tandard ='plo#'ent Contract, &&, %ection C, para*raph )c+ and para*raph , which reads

!%=CT&>N C. C>;$=N%AT&>N E=N=(&T

!. The liailities of the e'plo#er when the sea'an suffers in3ur# or illness durin* the ter'his contract are as follows

c. The e'plo#er shall pa# the sea'an his asic wa*es fro' the ti'e he leaves the vesse'edical treat'ent. After dischar*e fro' the vessel, the sea'an is entitled to one hundredpercent )1007+ of his asic wa*es until he is declared fit to wor4 or the de*ree of per'andisailit# has een assessed # the co'pan#-desi*nated ph#sician, ut is Msic no case shthis period e8ceed one hundred twent# )1:0+ da#s. (or this purpose, the sea'an shall suhi'self to a post-e'plo#'ent 'edical e8a'ination # the co'pan#-desi*nated ph#sicianwithin three wor4in* da#s upon his return, e8cept when he is ph#sicall# incapacitated to din which case the written notice to the a*enc# within the sa'e period is dee'ed as co'p8 8 8.

!. &n case of per'anent total or partial disailit# of the sea'en Msic Mdurin* the ter' ofe'plo#'ent caused # either in3ur# or illness, the sea'en Msic shall e co'pensated inaccordance with the schedule of enefits enu'erated in Appendi8 1 of this Contract.Co'putation of his enefits arisin* fro' an illness or disease shall e *overned # the ratand the rules of co'pensation applicale at the t i'e of Msic the illness or disease wascontracted.!

The aforecited provisions of the $>=A %tandards Msic ='plo#'ent Contract is clear andun'ista4ale that its literal 'eanin* should e preserved.

Thus, the onl# uestion at which the liailit# of respondents is anchored is whether co'plawas reall# fit to wor4 in his position as radio operator. &f this is so, it could 'ean that he is entitled to disailit# co'pensation which respondents vi*orousl# disputed, citin* in supporcertification 'ade # "ra. Victoria (orendo Msic Ca#a#a, alle*edl# !the officiall# accredand desi*nated ph#sician of respondents, which is li4ewise, accredited with the $hilippine>verseas ='plo#'ent Ad'inistration! where it is stated that !Nothin* Msic his 3o descripas a radio operator, ;r. "e Bara 'a# e allowed to *o ac4 to wor4.! )Anne8 " S =+.Co'plainant on the other hand disputes respondentDs aove posture contendin* that the 'persuasive and authentic evidence for purposes of decidin* his fitness or lac4 of fitness tois the certificate issued # ;s. Naneth Msic "o'in*o-Re#es, ;", ($;A where it appears after su'ittin* hi'self to another 'edical e8a'ination # his attendin* ph#sicians at the;anila "octors 9ospital on "ece'er , 1//6, to verif# possile 'ista4e in his post treat'e8a'ination on ;arch :, 1//6, fir'l# !was c lassified under partial per'anent disailit# anot fit to *o ac4 to his previous wor4 due to 'ental state.! )Anne8 !C!, co'plainantDs rep

respondentDs position paper+.

e have *one into a 3udicious stud# and anal#sis of the ar*u'ents and e8hiits particularones relied upon # the parties and find that of the co'plainant worth# of consideration.Boo4in* closel# at Anne8es !"! and !=! of respondentsD position paper, there is hardl# an#clear affir'ation that co'plainant was full# fit to resu'e his wor4 as radio operator. Althouthe docu'ent alluded to, declares that co'plainant 'a# e allowed to *o ac4 to wor4, th

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tenor of the sa'e see's uncertain that co'plainant is fit to resu'e his wor4, and thatassu'in* that such was the 'essa*e, the words !'a# e! can not e ta4en as overridin* thatco'in* fro' the ;anila "octor 9ospital which in the e*innin* handled the 'edical case ofco'plainant and to which respondents unconditionall# referred hi' and # reason of which si8or seven 'edical especialists Msic of the hospital too4 turn Ms s tud#in* and reviewin* hisuncertain ail'ent after release # respondents. >therwise stated, unli4e the 'essa*e ofanne8es " to = of respondents, anne8 !C! of co'plainant is clear and un'ista4ale andconfir' co'plainantDs partial per'anent disailit# and his definite unfitness to *o ac4 to hisprevious wor4 due to his 'ental health. %o'e pronounce'ents in this e8hiit 'entions alsothat when co'plainant was ad'itted an e'er*in* asis for drowsiness, ehavioral chan*e andoff and on fever! and different procedures were resorted alon* his case, li4e e'er*enc# CT

scan on the rain and his ad'ission in @une :, 1// was catastropic, whereas, 'ore could esaid in three docu'entMs issued # "ra. Victoria (lorendo Ca#a#a.

(inall#, respondents contend that the anne8es issued # "r. "o'in*o-Re#es of the ;anila"octors 9ospital should not e *iven wei*ht ecause it is not issued # the hospital or doctordul# accredited # the $>=A. Neither would a close loo4 on the applicale provision forsea'en show that a dul# accredited hospital or doctor is needed for purposes of the *rant ofco'pensation enefits to a such Msic or ailin* sea'en. e are 'ore persuaded ased on thear*u'ents of the co'plainant a'on* others, that it is asurd to reuire an ailin* sea'an inhi*h seas or in a forei*n land to still wait until the ship where he is wor4in* land in the countr#to secure treat'ent in a dul# accredited hospital or doctor.

>n the asis of the aove therefore, and convinced that co'plainantDs !partial per'anentdisailit#! which was contracted in the course or on account of his e'plo#'ent as radiooperator in forei*n principalDs vessel, he is entitled to disailit# enefit in accordance with the

schedule of enefits enu'erated in Appendi8 1 of the Contract, the 'a8i'u' of which is 2%0,000. Eut since the a'ount pra#ed for is 2%:,000.00 which were presu'e has a 'orerealistic asis, the sa'e is here# *ranted.

Concernin* the sic4ness wa*e, respondents averred that the sa'e had alread# een paid.9owever, there is no evidence that the sa'e has een paid e8cept the pa#'ent to theco'plainant of $/,6.00. %ince co'plainantDs salar# as 2%?0 and a sea'anDs sic4 wa*eentitle'ent is fi8ed to a 'a8i'u' of 1:0 da#s, his !sic4ness wa*es would rest to a total su' of 2%<,?0 or its peso euivalent. >n this, co'plainant has een paid onl# M$/,6.00)2%1,/<+, there# leavin* for co'plainant a alance of 2%1,<. (inall#, it is also ar*uedthat as re*ards the alance, the sa'e has een paid citin* as proof the %ic4ness Release anduitclai' si*ned # co'plainant )Anne8es !C! S !C-1!+. Co'plainant, on the other handdenied this, and contended that the uitclai' and release is invalid. Considerin* that there isno proof on record that this alance of 2%1,< was paid, unli4e the $/,6.00, the sa'e is*ranted.

9=R=(>R=, pre'ises aove-considered, a decision is here# issued orderin* respondentGer'an ;arine A*encies &nc. to pa# co'plainant the followin* su's

)a+ "isailit# enefit - - - - - - - - - - - - - - - - - 2%:,000.00

)+ %ic4ness wa*e alance - - - - - - - - - - - - - - - - - 2% 1,1<.00

all in the a**re*ate of Twent# %i8 Thousand >ne 9undred Thirt# %even "ollars)2%:6,1<.00+ or its peso euivalent, the clai' for da'a*es ein* here# dis'issed forof 'erit, plus ten )107+ percent attorne#Ds fees.

%> >R"=R=".

>n :/ @ul# 1//?, the NBRC< affir'ed the laor ariterDs decision in toto and declared that latterDs findin*s and conclusions were supported # sustantial evidence. After its 'otionreconsideration was denied # the NBRC on :0 ;a# 1///, petitioners repaired to the Cou Appeals. The appellate courtDs assailed decision was pro'ul*ated on 1 "ece'er 1///,upholdin* the decision of the NBRC, with the 'odification that petitioners were ordered to

private respondent e8e'plar# da'a*es in the a'ount of $0,000.00. The appellate courtreasoned out its decision,6 thus

The asic issue here is hether or not petitioner is liale to pa# private respondentDs claiawarded # the NBRC, and whether or not there was ause of discretion on the part of theNBRC in affir'in* such decision on appealQ To resolve this issue, this Court too4 ti'e inloo4in* closel# at the pertinent provision of the %tandard ='plo#'ent Contract Governin*='plo#'ent of (ilipino %eafarers on Eoard >cean-Goin* Vessels, particularl# $ART &&,%=CT&>N C, par. no. )c+, and par. no. , which states as follows

!%=CT&>N C. C>;$=N%AT&>N E=N=(&T

!. The liailities of the e'plo#er when the sea'an suffers in3ur# or illness durin* the ter'his contract are as follows

!888 888 888

c. The e'plo#er shall pa# the sea'an his asic wa*es fro' the ti'e he leaves the vesse'edical treat'ent. After dischar*e fro' the vessel, the sea'an is entitled to one hundredpercent )1007+ of his asic wa*es until he is declared fit to wor4 or his de*ree of per'anedisailit# has een assessed # the co'pan#-desi*nated ph#sician, ut in no case shall tperiod e8ceed one hundred twent# )1:0+ da#s. 8 8 8 8.

!. &n case of per'anent total or partial disailit# of the sea'en durin* the ter' of hise'plo#'ent caused # either in3ur# or illness the sea'en shall e co'pensated in accordwith the schedule of enefits enu'erated in Appendi8 1 of his Contract. Co'putation of henefits arisin* fro' an illness or disease shall e *overned # the rates and the rules ofco'pensation applicale at the ti'e the illness or disease was contracted.

888 888 888. . .!

A cursor# readin* of these applicale contractual provisions and a thorou*h evaluation of supportin* evidence presented # oth parties, lends stron* credence to the contentions a

ar*u'ents presented # private respondent.The award of disailit# co'pensation has a clear and valid asis in the %tandard ='plo#'Contract and the facts as supported # the 'edical certificate issued # "r. Nannette"o'in*o-Re#es of the ;anila "octors 9ospital. $etitionersD contention, that dr. "o'in*o-Re#es is not co'pan# desi*nated is far fro' the truth. The desi*nation of the ;anila "oc9ospital # petitioners as the co'pan# doctor for private respondent cannot e denied. Th

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ver# act of co''ittin* private respondent for treat'ent at the ;anila "octors 9ospital underthe care of its ph#sician is tanta'ount to co'pan# desi*nation. The ver# act of pa#in* thehospital ills # the petitioners constitutes their confir'ation of such desi*nation. 9ence,petitioners cannot resort to the convenience of den#in* this fact 3ust to evade their oli*ation topa# private respondent of his clai's for disailit# enefit.

This Court also finds no asis on )sic+ the petitionersD contention that the co'pan#-desi*natedMph#sician 'ust also e accredited with the $>=A efore he can en*a*ed in the 'edicaltreat'ent of a sic4 sea'an. There is nothin* in the %tandard ='plo#'ent Contract thatprovides this accreditation reuire'ent, and even if there is, this would e asurd and contrar#to pulic polic# as its effect will den# and deprive the ailin* sea'an of his asic ri*ht to see4

i''ediate 'edical attention fro' an# co'petent ph#sician. The lac4 of $>=A accreditation ofa ph#sician who actuall# treated the ailin* sea'an does not render the findin*s of suchph#sician )declarin* the sea'an per'anentl# disaled+ less authoritative or credile. To our'ind, it is the co'petence of the attendin* ph#sician, not the $>=A accreditation, thatdeter'ines the true health status of the patient-sea'an, which in this instant case, is Msic theattendin* ph#sicians fro' the ;anila "octors 9ospital.

As to the award of the alance of wa*es, this Court is inclined not to distur the factual findin*sof the NBRC. The failure of the petitioners to present a stron* and credile evidence supportin*the fact of alle*ed pa#'ent of the alance of sic4ness 3ustified the award of such clai'. Thelon* standin* doctrine in laor cases that !in case of dout, the dout is resolved in favor oflaor! applies. (or there are indications that the evidence presented # petitioners appears toe of duious ori*in as private respondent challen*ed the petitioners to present the ori*inalcop# of the uitclai' and the vouchers in a 'otion de'andin* fro' petitioners to produce theori*inal cop# of those docu'ents purportin* to show that he had received the alle*ed su' of

$</,?0<.<0, which alle*edl# shows the pa#'ent of the alance of his sic4ness wa*es. This'otion was vehe'entl# opposed # petitioners. To our 'ind, such opposition onl# created'ore douts and eroded the veracit# and credence of petitionersD docu'entar# evidence.

As to the award of attorne#Ds fees, the sa'e is 3ustified # the fact that private respondentactuall# hired the services of a law#er to vindicate his ri*ht to clai' for his disailit# enefitwhich is ein* aritraril# denied to hi' # petitioners. 9ad it not een for the aritrar# denial ofpetitioners, private respondent could not have een co'pelled to hire the services of a law#erto pursue his clai's in court, for which he is presu'ed to have incurred costs.

ith respect to private respondentDs clai' for da'a*es, this Court finds that the NBRCoverloo4ed the attendance of ne*li*ence on the part of petitioners in their failure to providei''ediate 'edical attention to private respondent. &t further appears that ne*li*ence not onl#e8ists ut was delieratel# perpetrated # petitioners # its aritrar# refusal to co''it the ailin*private respondent to a hospital in New Kealand or at an# nearest port deprived of his ri*ht toi''ediate 'edical attention # petitioners, which resulted to the serious deterioration of hishealth that caused his per'anent partial disailit#. %uch deprivation of i''ediate 'edicalattention appears delierate # the clear 'anifestation fro' petitionersD own words whichstates that, &te proposition o% te complainant tat respondents sould ave ta+en tecomplainant to te nearest port o% *e 0ealand is easier said tan done. It is ort$ to notetat deviation %rom te route o% te vessel ill de%initel$ result to loss o% a %ortune in dollars not

onl$ to te respondents but li+eise to te oners o% te car!oes bein! sipped b$ te savessel.&

E# petitionersD own state'ent, the# reveal their utter lac4 of concern for their (ilipino crew4ind of attitude cannot e ta4en to pass # this Court without appropriate sanction # wa#pa#'ent of e8e'plar# da'a*es, if onl# to show that the life of a (ilipino crew 'ust eaccorded due attention and respect # the petitioners. (or after all, had it not een for theof this crew, a'on* others, petitioners would not e doin* as *ood in their usiness and'a4in* &%ortunes in dollars.&

&n affir'in* the decision of the Baor Ariter, this Court finds that the NBRC never aused

discretion nor e8ceeded its 3urisdiction.9ence, this Court finds no valid asis to distur the findin*s of the NBRC.

9=R=(>R=, the decision of the NBRC dated :/ @ul# 1//?, and the >rder dated :0 ;a1///, are here# A((&R;=", and in addition thereto, petitioners are ordered to pa# e8e'da'a*es to private respondent in the su' of (ift# Thousand $esos )$0,000.00+.

%> >R"=R=".

$etitionersD 'otion for reconsideration was denied # the Court of Appeals in its Resolutio11 (eruar# :000. 9ence, the present appeal.

Disabilit$ 1ene%its

$etitioners contend that the e8istence and de*ree of a sea'anDs disailit# 'ust e declara !co'pan#-desi*nated ph#sician! who 'ust e accredited with the $>=A. (ollowin* thisof reasonin*, petitioners clai' that private respondent is not entitled to disailit# enefits

ecause he was found fit to return to wor4 # "r. Victoria (lorendo Ca#a#a, the desi*naph#sician of petitioners, who is also accredited with the $>=A.

"isa*reein* with petitionersD stand, the laor ariter ruled that, for purposes of deter'inin*co'pensation enefits under the %tandard ='plo#'ent Contract, an ailin* sea'an needhave his condition assessed # a doctor or hospital accredited with the $>=A. Conseuethe laor ariter *ave 'ore wei*ht to the opinion of the specialists fro' the ;anila "octor9ospital who treated private respondent and declared hi' as havin* sustained a partialper'anent disailit# and unfit to *o ac4 to his previous wor4.? ;eanwhile, the Court of Appeals held that petitionersD act of co''ittin* private respondent for treat'ent at the ;a"octors 9ospital and of pa#in* his hospital ills therein is tanta'ount to !co'pan#-desi*nation,! and therefore, the certificate issued # "r. Nanette "o'in*o-Re#es of the ;"octors 9ospital descriin* private respondent as sufferin* fro' a partial per'anent disashould e construed as decisive in the 'atter of private respondentDs entitle'ent to disaienefits. The appellate court also declared that nothin* in the %tandard ='plo#'ent Contreuires the co'pan#-desi*nated ph#sician or hospital to also e accredited with the $>=

&n the case at ar, the parties are at odds as to the proper interpretation of the $>=A %tan='plo#'ent Contract Govern'ent the ='plo#'ent of All (ilipino %ea'en >n Eoard >ceGoin* Vessels )%tandard ='plo#'ent Contract+, particularl# $art &&, %ection C thereof, whprovides that

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888 888 888

. The liailities of the e'plo#er when the sea'an suffers in3ur# or illness durin* the ter' of hiscontract are as follows

a. The e'plo#er shall continue to pa# the sea'an his asic wa*es durin* the ti'e he is onoard the vesselF

. &f the in3ur# or illness reuires 'edical andHor dental treat'ent in a forei*n port, the e'plo#er shall e liale for the full cost of such 'edical, dental, sur*ical and hospital treat'ent as wellas oard and lod*in* until the sea'an is declared f it to wor4 or to e repatriated.

9owever, if after repatriation the sea'an still reuires 'edical attention arisin* f ro' said in3ur#

or illness, he shall e so provided at cost to the e'plo#er until such ti'e he is declared fit orthe de*ree of his disailit# has een estalished # the co'pan#-desi*nated ph#sician.

c. The e'plo#er shall pa# the sea'an his asic wa*es fro' the ti'e he leaves the vessel for'edical treat'ent. After dischar*e fro' the vessel the sea'an is entitled to one hundredpercent )1007+ of his asic wa*es until he is declared fit to wor4 or the de*ree of per'anentdisailit# has een assessed # the co'pan#-desi*nated ph#sician, ut in no case shall thisperiod e8ceed one hundred twent# )1:0+ da#s. (or this purpose, the sea'an shall su'ithi'self to a post-e'plo#'ent 'edical e8a'ination # the co'pan#-desi*nated ph#sicianwithin three wor4in* da#s upon his return e8cept when he is ph#sicall# incapacitated to do so,in which case a written notice to the a*enc# within the sa'e period is dee'ed as co'pliance.(ailure of the sea'an to co'pl# with the 'andator# reportin* reuire'ent shall result in hisforfeiture of the ri*ht to clai' the aove enefits.

888 888 888

. &n case of per'anent total or partial disailit# of the sea'an durin* the ter' of e'plo#'entcaused # either in3ur# or illness the sea'an shall e co'pensated in accordance with theschedule of enefits enu'erated in Appendi8 1 of his Contract. Co'putation of his enefitsarisin* fro' an illness or disease shall e *overned # the rates and the rules of co'pensationapplicale at the ti'e the illness or disease was contracted.

888 888 888

$etitionersD contention that the e8istence and *rade of a sea'anDs disailit# 'ust epronounced # a ph#sician accredited # the $>=A does not f ind an# support in theaovecited provision, nor in an# other portion of the %tandard ='plo#'ent Contract. &n order toclai' disailit# enefits under the %tandard ='plo#'ent Contract, it is the !co'pan#-desi*nated! ph#sician who 'ust proclai' that the sea'an suffered a per'anent disailit#,whether total or partial, due to either in3ur# or illness, durin* the ter' of the latterDse'plo#'ent. There is no provision reuirin* accreditation # the $>=A of such ph#sician. &n

fact, aside fro' their own *ratuitous alle*ations, petitioners are unale to cite a sin*le provisionin the said contract in support of their assertions or to offer an# credile evidence tosustantiate their clai'. &f accreditation of the co'pan#-desi*nated ph#sician wasconte'plated # the $>=A, it would have e8pressl# provided for such a ualification, #specificall# usin* the ter' !accreditation! in the %tandard ='plo#'ent Contract, to denote itsintention. (or instance, under the Baor Code it is e8pressl# provided that ph#sicians andhospitals providin* 'edical care to an in3ured or sic4 e'plo#ee covered # the %ocial %ecurit#

%#ste' or Govern'ent %ervice &nsurance %#ste' 'ust e accredited # the ='plo#eesCo'pensation Co''ission.10 &t is a cardinal rule in the interpretation of contracts that if thter's of a contract are clear and leave no dout upon the intention of the contractin* partthe literal 'eanin* of its stipulation shall control. 11 There & no a'i*uit# in the wordin* of t%tandard ='plo#'ent Contract the onl# ualification prescried for the ph#sician entruswith the tas4 of assessin* the sea'anDs disailit# is that he e !co'pan#-desi*nated.! hthe lan*ua*e of the contract is e8plicit, as in the case at ar, leavin* no dout as to theintention of the drafters thereof, the courts 'a# not read into it an# other intention that wocontradict its plain i'port.1:

The word !desi*nate! 'eans to specif#, to 'ar4 out and 'a4e 4nown, to identif# # na'eindicate, to show, to distin*uish # 'ar4 or description, or to set apart for a purpose ordut#.1< The Court a*rees with the appellate courtDs rulin* that petitionersD act of co''ittin*private respondent for treat'ent at the ;anila "octors 9ospital and pa#in* the hospital itherein is tanta'ount to !co'pan#-desi*nation.! E# such uneuivocal acts, petitioners cleset apart and distin*uished the ;anila "octors 9ospital, to*ether with its tea' of specialisas the ones ualified to assess the e8istence and de*ree of private respondentDs disailit#there# resolve the uestion of the latterDs entitle'ent to disailit# enefits under the %tan='plo#'ent Contract.

&n addition to their havin* een effectivel# desi*nated # petitioners, it was the ph#siciansthe ;anila "octors 9ospital who e8a'ined and treated private respondent for a little 'oreone 'onth, su3ectin* the latter to a series of 'edical procedures, such as 'edical therapneurolo*ical sur*ical draina*e for rain ascess, ilateral thala'ic area %H$ cranioto'# )E9ole+, and opthal'olo*ical )orit+ sur*er# for soc4et revision and reconstruct ion of his left

The e8tensive 'edical attention *iven to private respondent enaled the ;anila "octors9ospital specialists to acuire a detailed 4nowled*e and fa'iliarit# with private responden'edical condition.1 No dout such specialied 4nowled*e enaled these ph#sicians to arat a 'uch 'ore accurate appraisal of private respondentDs condition, includin* the de*reean# disailit# which he 'i*ht have sustained, as co'pared to another ph#sician not priv# private respondentDs case fro' the ver# e*innin*. Thus, the appellate court was not 'istin *ivin* 'ore wei*ht to the certificate issued # "r. Nanette "o'in*o-Re#es of the ;anil"octors 9ospital dated "ece'er , 1//6, than to the one issued # "r. Victoria (lorendoCa#a#a.

>n the stren*th of "r. "o'in*o-Re#esDs 'edical certificate which stated that privaterespondent !can e classified under partial per'anent disailit# and is not fit to *o ac4 toprevious wor4 due to his 'ental state,! the laor ariter awarded :,000.00 as disailit#enefits, which award was upheld # the NBRC and the appellate court. $etitioners insist there is no factual asis for the award of :,000.00 since there is no findin* as to the *ra

per'anent partial disailit# sustained # private respondent, in accordance with Appendi8the %tandard ='plo#'ent Contract )%chedule of "isailit# or &'pedi'ent (or &n3uries %ufand "iseases or &llness Contracted+, and therefore, no 'eans of deter'inin* the e8act a'of co'pensation to which private respondent 'a# e entitled.1

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The Court does not a*ree with petitionersD position. 2nder the %tandard ='plo#'ent Contractthe *rade of disailit# suffered # the sea'an 'ust e ascertained in accordance with Appendi8 1 of such contract, which is partiall# reproduced herein

Appendi8 1%C9="2B= >( "&%AE&B&TI >R &;$="&;=NT

(>R &N@2R&=% %2((=R=" AN" >R &BBN=%% C>NTRACT="

9=A"

Trau'atic head in3uries that result to

1. Apperture unfilled with one not over three )<+ incheswithout rain in3ur# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . Gr. /

:. Apperture unfilled with one over three )<+ inches withoutrainin3ur# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . Gr. <

<. %evere paral#sis of oth upper or lower e8tre'ities or oneupper and one lower e8tre'it# . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . Gr. 1

. ;oderate paral#sis of two ):+ e8tre'ities producin*'oderate difficult# in 'ove'ents with self careactivities . . . . . . . . . . . Gr. 6

. %li*ht paral#sis affectin* one e8tre'it# producin* sli*ht

difficult# with self-careactivit ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gr. 106. %evere 'ental disorder or %evere Co'ple8 Cereral

function disturance or post trau'atic ps#choneurosiswhich reuire re*ular aid and attendance as to renderwor4er per'anentl# unale to perfor' an# wor4 . . . . . . . .. . . . . . . . . . . . . . . . . . Gr. 1

. ;oderate 'ental disorder or 'oderate rain functionaldisturance which li'its wor4er to the activities of dail#livin* with so'e directed care or attendance . . . . . . . . . . .. . . . . . . . Gr. 6

?. %li*ht 'ental disorder or disturance that reuires littleattendance or aid and which interferes to a sli*ht de*reewith the wor4in* capacit# of the clai'ant . . . . . . . . . . . . . .. . . . . . Gr. 10

/. &ncurale i'ecilit# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . Gr. 1

=ach *rade under Appendi8 1 has an euivalent disailit# allowance or enefit e8pressed inter's of a percenta*e of the 'a8i'u' a'ount of 0,000.00. This is specified in Appendi8 1-Aof the %tandard ='plo#'ent Contract

A$$=N"& 1-A

%C9="2B= >( "&%AE&B&TI ABB>ANC=%

&'pedi'entGrace

&'pedi'ent

1 ;a8i'u' Rate 8 1:0.007: ! 8 ??.?17< ! 8 ?.<67 ! 8 6?.667

! 8 ?./676 ! 8 0.007 ! 8 1.?07? ! 8 <<./7/ ! 8 :6.1:710 ! 8 :0.1711 ! 8 1./<71: ! 8 10.71< ! 8 6.:71 ! 8 <.7

;a8i'u' Rate 2%0,000.

To e paid in $hilippine Currenc# euivalent at the e8chan*e rate prevailin* durin* the ti'pa#'ent.

$rivate respondent as4ed petitioner for disailit# enefits in the a'ount of :,000.00, or percent )07+ of the 'a8i'u' rate of 0,000.00, which, under Appendi8 1-A, is awardedwhen the sea'an sustains a *rade 6 disailit#. >ne of the *rade 6 head in3uries listed in Appendi8 1, specificall# nu'er seven )+, is descried as a !'oderate 'ental disorder o'oderate rain functional disturance which li'its wor4er to the activities of dail# livin* wiso'e directed care or attendance.! This coincides with "r. "o'in*o-Re#esD dia*nosis ofprivate respondentDs condition, as follows

888 888 888

or4-ups and ;ana*e'ent

$atient was ad'itted on an e'er*enc# ases for drowsiness, ehavioral chan*e and on aoff fever. This started with headaches since the first wee4 of @une 1// while on dut# )onvo#a*e+. $atient pro*ressivel# deteriorated and arrived here alread# deh#drated with hi*h

*rade fever. )e'phasis supplied+='er*enc# CT %can of the rain revealed rounded 'asses in oth thala'us on the rainlar*er 'ass was situated at the ri*ht.

Eurr hole at the ri*ht parietal and draina*e of the ri*ht thala'ic ascess was done on @un1//. Repair of shallow forni8 of left e#e and iops# was done for culture studies thereafte

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;r. "e Bara sta#ed in the hospital for << da#s and was still in edridden state when dischar*e.9e eca'e a'ulant on 'id-Au*ust 1//6 but is cerebral %unctions (co!nitive and beavioral)remain impaired.

This is his 1?th 'onth of illness. 9is ad'ission last @une :, 1// is considered catastrophic.9e now can e classified under partial per'anent disailit# and is not fit to *o ac4 to hisprevious wor4 due to his 'ental state. 16 )e'phasis supplied+

888 888 888

Thus, the 'edical certificate of "r. "o'in*o-Re#es is 'ore than sufficient asis for the awardof disailit# enefits in the a'ount of :,000.00 in favor of private respondent.

"ic+ness a!es$etitioners assert that the award of 1,1<.00, representin* the alance of the sic4ness wa*esowed to private respondent, is erroneous and in asolute disre*ard of their docu'entar#evidence particularl# the three chec4 vouchers in the total a'ount of $?/,<.?0, all issuedin 1// in favor of either private respondent or his wife, and the !%ic4wa*es Release Suitclai'! which, accordin* to petitioners, ta4en to*ether would prove that the# had paidprivate respondent the total a'ount of $?/,<.?0, or <,?0.00, correspondin* to the 1:0da#s sic4ness wa*es as reuired under the %tandard ='plo#'ent Contract.

Contrar# to petitionersD assertions, the laor ariter held that onl# $/,6.00 )1,/<.00+ waspaid # petitioners and that private respondent is still entitled to the alance of the sic4nesswa*es in the a'ount of 1,<.00. Accordin* to the laor ariter, petitioners failed to prove thatthe# had paid this a'ount to private respondent, notwithstandin* the docu'ent entitled!%ic4ness Release S uitclai'! introduced # petitioners in evidence, which was not *ivencredence.1 The NBRC and the Court of Appeals concurred with the laor ariter on this issue.The appellate court held that the docu'entar# evidence of petitioners was insufficient tosupport their contentions.1?

The %upre'e Court has alwa#s accorded respect and f inalit# to the findin*s of fact of theNBRC, particularl# if the# coincide with those of the Baor Ariter, when supported #sustantial evidence. The reason for this is that a uasi-3udicial a*enc# li4e the NBRC hasacuired a uniue e8pertise ecause its 3urisdiction is confined to specific 'atters.1/ hetheror not petitioners actuall# paid the alance of the sic4ness wa*es to private respondent is afactual uestion. &n the asence of proof that the laor ariter or the NBRC had *ravel# ausedtheir discretion, the Court shall dee' conclusive and cannot e co'pelled to overturn thisparticular factual findin*.:0

Dama!es

e affir' the appellate courtDs findin* that petitioners are *uilt# of ne*li*ence in failin* toprovide i''ediate 'edical attention to private respondent. &t has een sufficientl# estalishedthat, while the ;HV T.A. V>IAG=R was doc4ed at the port of New Kealand, private respondentwas ta4en ill, causin* hi' to lose his 'e'or# and renderin* hi' incapale of perfor'in* hiswor4 as radio officer of the vessel. The crew i''ediatel# notified the 'aster of the vessel ofprivate respondentDs worsenin* condition. 9owever, instead of dise'ar4in* privaterespondent so that he 'a# receive i''ediate 'edical attention at a hospital in New Kealandor at a near# port, the 'aster of the vessel proceeded with the vo#a*e, in total disre*ard of

the ur*enc# of private respondentDD condition. $rivate respondent was 4ept on oard withoan# 'edical attention whatsoever for the entire duration of the trip fro' New Kealand to th$hilippines, a vo#a*e of ten da#s. To 'a4e 'atters worse, when the vessel f inall# arrived;anila, petitioners failed to directl# dise'ar4 private respondent for i''ediate hospitali$rivate respondent was 'ade to suffer a wait of several 'ore hours until a vacant slot waavailale at the pier for the vessel to doc4. &t was onl# upon the insistence of privaterespondentDs relatives that petitioners were co'pelled to dise'ar4 private respondent anfinall# co''it hi' to a hospital.:1 There is no dout that the failure of petitioners to provideprivate respondent with the necessar# 'edical care caused the rapid deterioration andinevitale worsenin* of the latterDs condition, which eventuall# resulted in his sustainin* a

per'anent disailit#.,-pi,.n/t &n li*ht of the fore*oin*, petitioners are liale for 'oral da'a*es for the ph#sical sufferin* 'ental an*uish caused to private respondent.:: There is no hard and fast rule in thedeter'ination of what would e a fair a'ount of 'oral da'a*es, since each case 'ust e*overned # its own peculiar circu'stances.:< &n the present case, the Court considers tha'ount of $0,000.00 in 'oral da'a*es as proper.:

;eanwhile, e8e'plar# da'a*es are i'posed # wa# of e8a'ple or correction for the pu*ood, pursuant to Article :::/ of the Civil Code. The# are i'posed not to enrich one part#i'poverish another ut to serve as a deterrent a*ainst or as a ne*ative incentive to cursociall# deleterious actions. hile e8e'plar# da'a*es cannot e recovered as a 'atter ori*ht, the# need not e proved, althou*h plaintiff 'ust show that he is entitled to 'oral,te'perate, or co'pensator# da'a*es efore the court 'a# consider the uestion of whetor not e8e'plar# da'a*es should e awarded.: &n uasi-delicts, e8e'plar# da'a*es 'a*ranted if the defendant acted with *ross ne*li*ence.:6 Co'in* now to the case at ar, theappellate court found that

U ne*li*ence not onl# e8ists ut was delieratel# perpetrated # petitioners # its aritrarrefusal to co''it the ailin* private respondent to a hospital in New Kealand or at an# neaport U which resulted to the serious deterioration of his health that caused his per'anentpartial disailit#. %uch deprivation of i''ediate 'edical attention appears delierate # thclear 'anifestation fro' petitionersD own words which states that, &te proposition o% tecomplainant tat respondents sould ave ta+en te complainant to te nearest port o% *e0ealand is easier said tan done. It is ort$ to note tat deviation %rom te route o% te vill de%initel$ result to loss o% a %ortune in dollars not onl$ to te respondents Mpetitionersherein but li+eise to te oners o% te car!oes bein! sipped b$ te said vessel .&

$etitioners never denied 'a4in* this state'ent. Given the prevailin* circu'stances, theappellate courtDs award of $0,000.00 as e8e'plar# da'a*es is adeuate, fair, andreasonale.:

Althou*h the laor ariter awarded attorne#Ds fees, which award was suseuentl# affir'ethe NBRC and the Court of Appeals, the asis for the sa'e was not discussed in his decisnor orne out # the records of this case, and should therefore e deleted. There 'ust alwe a factual asis for the award of attorne#Ds fees.:?This is consistent with the polic# that npre'iu' should e placed on the ri*ht to liti*ate.:/

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9=R=(>R=, the 1 "ece'er 1/// "ecision and 11 (eruar# :000 Resolution of the Courtof Appeals are A((&R;=", with the 'odification that petitioners 'ust also pa# privaterespondent $0,000.00 as 'oral da'a*es and the award of attorne#Ds fees is deleted. %>>R"=R=".

G.R. No. 1204 Jaua%; 1, 2014

T(E +ETROPOLITAN BAN> AND TRUST CO+PANY, $etitioner,vs.ANA GRACE ROSALES AND YO YU> TO, Respondents.

" = C & % & > N

DEL CASTILLO, J.:

Ean4 deposits, which are in the nature of a si'ple loan or 'utuu', 1 'ust e paid uponde'and # the depositor .:

This $etition for Review on Certiorari< under Rule of the Rules of Court assails the April :,:00? "ecision and the ;a# <0, :00? Resolution of he Court of Appeals CA+ in CA-G.R. CVNo. ?/0?6.

(actual Antecedents

$etitioner ;etropolitan Ean4 and Trust Co'pan# is a do'estic an4in* corporation dul#or*anied and e8istin* under the laws of the $hilippines.6 Respondent Ana Grace Rosales

)Rosales+ is the owner of China Golden Erid*e Travel %ervices, a travel a*enc#.? RespondentIo Iu4 To is the 'other of respondent Rosales./

&n :000, respondents opened a @oint $eso Account10 with petitionerOs $ritil-Tondo Eranch.11 Asof Au*ust , :00, respondentsO @oint $eso Account showed a alance of $:,1,6/<.:.1:

&n ;a# :00:, respondent Rosales acco'panied her client Biu Chiu (an*, a Taiwanese Nationalappl#in* for a retireeOs visa fro' the $hilippine Beisure and Retire'ent Authorit# )$BRA+, topetitionerOs ranch in =scolta to open a savin*s account, as reuired # the $BRA. 1< %ince BiuChiu (an* could spea4 onl# in ;andarin, respondent Rosales acted as an interpreter for her .1

>n ;arch <, :00<, respondents opened with petitionerOs $ritil-Tondo Eranch a @oint "ollar Account1 with an initial deposit of 2%1,000.00.16

>n @ul# <1, :00<, petitioner issued a !9old >ut! order a*ainst respondentsO accounts.1

>n %epte'er <, :00<, petitioner, throu*h its %pecial Audit "epart'ent 9ead Antonio &van A*uirre, filed efore the >ffice of the $rosecutor of ;anila a cri'inal case for =stafa throu*h

(alse $retences, ;isrepresentation, "eceit, and 2se of (alsified "ocu'ents, doc4eted as &.%.No. 0<&-:01,1? a*ainst respondent Rosales.1/$etitioner accused respondent Rosales and anunidentified wo'an as the ones responsile for the unauthoried and f raudulent withdrawal of2%,000.00 fro' Biu Chiu (an*Os dollar account with petitionerOs =scolta Eranch. :0$etitioneralle*ed that on (eruar# , :00<, its ranch in =scolta received fro' the $BRA a ithdrawalClearance for the dollar account of Biu Chiu (an*F:1 that in the afternoon of the sa'e da#,

respondent Rosales went to petitionerOs =scolta Eranch to infor' its Eranch 9ead, Celia AGutierre )Gutierre+, that Biu Chiu (an* was *oin* to withdraw her dollar deposits incashF:: that Gutierre told respondent Rosales to co'e ac4 the followin* da# ecause than4 did not have enou*h dollarsF:< that on (eruar# 6, :00<, respondent Rosalesacco'panied an unidentified i'postor of Biu Chiu (an* to the an4F: that the i'postor wale to withdraw Biu Chiu (an*Os dollar deposit in the a'ount of 2%,000.00F: that on;arch <, :00<, respondents opened a dollar account with petitionerF and that the an4 latdiscovered that the serial nu'ers of the dollar notes deposited # respondents in the a'of 2%11,?00.00 were the sa'e as those withdrawn # the i'postor.:6

Respondent Rosales, however, denied ta4in* part in the fraudulent and unauthoried

withdrawal fro' the dollar account of Biu Chiu (an*. : Respondent Rosales clai'ed that sdid not *o to the an4 on (eruar# , :00<.:?Neither did she infor' Gutierre that Biu Chi(an* was *oin* to close her account.:/ Respondent Rosales further clai'ed that after Biu(an* opened an account with petitioner, she lost trac4 of her.<0 Respondent RosalesO versthe events that transpired thereafter is as follows

>n (eruar# 6, :00<, she received a call f ro' Gutierre infor'in* her that Biu Chiu (an* at the an4 to close her account.<1 At noon of the sa'e da#, respondent Rosales went to tan4 to 'a4e a transaction.<: hile she was transactin* with the teller, she cau*ht a *li'a wo'an seated at the des4 of the Eranch >peratin* >fficer, ;elinda $ere )$ere+.<< Aftco'pletin* her transaction, respondent Rosales approached $ere who infor'ed her thatChiu (an* had closed her account and had alread# left. < $ere then *ave a cop# of theithdrawal Clearance issued # the $BRA to respondent Rosales.< >n @une 16, :00<,respondent Rosales received a call fro' Biu Chiu (an* inuirin* aout the e8tension of he$BRA Visa and her dollar account. <6 &t was onl# then that Biu Chiu (an* found out that her

account had een closed without her 4nowled*e.< Respondent Rosales then went to the to infor' Gutierre and $ere of the unauthoried withdrawal.<? >n @une :<, :00<, responRosales and Biu Chiu (an* went to the $BRA >ffice, where the# were infor'ed that theithdrawal Clearance was issued on the asis of a %pecial $ower of Attorne# )%$A+ e8ec# Biu Chiu (an* in favor of a certain Richard %o.</ Biu Chiu (an*, however, denied e8ecuthe %$A.0 The followin* da#, respondent Rosales, Biu Chiu (an*, Gutierre, and $ere 'the $BRA >ffice to discuss the unauthoried withdrawal.1"urin* the conference, the an4officers assured Biu Chiu (an* that the 'one# would e returned to her.:

>n "ece'er 1, :00<, the >ffice of the Cit# $rosecutor of ;anila issued a Resolutiondis'issin* the cri'inal case for lac4 of proale cause.< 2nfaed, petitioner 'oved forreconsideration.

>n %epte'er 10, :00, respondents filed efore the Re*ional Trial Court )RTC+ of ;anilCo'plaint for Ereach of >li*ation and Contract with "a'a*es, doc4eted as Civil Case 0110?/ and raffled to Eranch :1, a*ainst petitioner. Respondents alle*ed that the#atte'pted several ti'es to withdraw their deposits ut were unale to ecause petitioner placed their accounts under !9old >ut! status. No e8planation, however, was *iven #petitioner as to wh# it issued the !9old >ut! order.6 Thus, the# pra#ed that the !9old >ut!e lifted and that the# e allowed to withdraw their deposits. The# li4ewise pra#ed for ac'oral, and e8e'plar# da'a*es, as well as attorne#Os fees.?

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$etitioner alle*ed that respondents have no cause of action ecause it has a valid reason forissuin* the !9old >ut! order ./ &t averred that due to the fraudulent sche'e of respondentRosales, it was co'pelled to rei'urse Biu Chiu (an* the a'ount of 2%,000.000 and tofile a cri'inal co'plaint for =stafa a*ainst respondent Rosales.1

hile the case for reach of contract was ein* tried, the Cit# $rosecutor of ;anila issued aResolution dated (eruar# 1?, :00, reversin* the dis'issal of the cri'inal co'plaint.: An&nfor'ation, doc4eted as Cri'inal Case No. 0-:<610<,< was then filed char*in* respondentRosales with =stafa efore Eranch 1 of the RTC of ;anila.

Rulin* of the Re*ional Trial Court

>n @anuar# 1, :00, the RTC rendered a "ecision findin* petitioner liale for da'a*es for

reach of contract.6

The RTC ruled that it is the dut# of petitioner to release the deposit torespondents as the act of withdrawal of a an4 deposit is an act of de'and # thecreditor . The RTC also said that the recourse of petitioner is a*ainst its ne*li*ent e'plo#eesand not a*ainst respondents.? The dispositive portion of the "ecision reads

9=R=(>R=, pre'ises considered, 3ud*'ent is here# rendered orderin* Mpetitioner;=TR>$>B&TAN EANJ S TR2%T C>;$ANI to allow Mrespondents ANA GRAC= R>%AB=%and I> I2J T> to withdraw their %avin*s and Ti'e "eposits with the a*reed interest, actualda'a*es of $0,000.00, 'oral da'a*es of $0,000.00, e8e'plar# da'a*es of $<0,000.00and 107 of the a'ount due M respondents as and for attorne#Os fees plus the cost of suit.

The counterclai' of Mpetitioner is here# "&%;&%%=" for lac4 of 'erit.

%> >R"=R="./

Rulin* of the Court of Appeals

A**rieved, petitioner appealed to the CA.

>n April :, :00?, the CA affir'ed the rulin* of the RTC ut deleted the award of actualda'a*es ecause !the asis for MrespondentsO clai' for such da'a*es is the professional feethat the# paid to their le*al counsel for Mrespondent RosalesO defense a*ainst the cri'inalco'plaint of Mpetitioner for estafa efore the >ffice of the Cit# $rosecutor of ;anila and notthis case.!60 Thus, the CA disposed of the case in this wise

9=R=(>R=, pre'ises considered, the "ecision dated @anuar# 1, :00 of the RTC, Eranch:1, ;anila in Civil Case No. 0-110?/ is A((&R;=" with ;>"&(&CAT&>N that the award ofactual da'a*es to M respondents Rosales and Io Iu4 To is here# "=B=T=".

%> >R"=R=".61

$etitioner sou*ht reconsideration ut the sa'e was denied # the CA in its ;a# <0, :00?Resolution.6:

&ssues

9ence, this recourse # petitioner raisin* the followin* issues

A. T9= MCA =RR=" &N R2B&NG T9AT T9= !9>B"->2T! $R>V&%&>N &N T9= A$$B&CAT&>N AN" AGR==;=NT (>R "=$>%&T ACC>2NT ">=% N>T A$$BI &N T9&% CA%=.

E. T9= MCA =RR=" 9=N &T R2B=" T9AT $=T&T&>N=RO% =;$B>I==% =R=N=GB&G=NT &N R=B=A%&NG B&2 C9&2 (ANGO% (2N"%.

C. T9= MCA =RR=" &N A((&R;&NG T9= AAR" >( ;>RAB "A;AG=%, ==;$BARI"A;AG=%, AN" ATT>RN=IO% (==%.6<

$etitionerOs Ar*u'ents

$etitioner contends that the CA erred in not appl#in* the !9old >ut! clause stipulated in th Application and A*ree'ent for "eposit Account.6 &t posits that the said clause applies to aand all 4inds of oli*ation as it does not distin*uish etween oli*ations arisin* e8 contrace8 delictu.6 $etitioner also contends that the fraud co''itted # respondent Rosales wasclearl# estalished # evidenceF66 thus, it was 3ustified in issuin* the !9old->ut!order .6 $etitioner li4ewise denies that its e'plo#ees were ne*li*ent in releasin* the dollarclai's that it was the deception e'plo#ed # respondent Rosales that caused petitionerOse'plo#ees to release Biu Chiu (an*Os funds to the i'postor.6/

Bastl#, petitioner puts in issue the award of 'oral and e8e'plar# da'a*es and attorne#Os&t insists that respondents failed to prove that it acted in ad faith or in a wanton, f raudulenoppressive or 'alevolent 'anner.0

RespondentsO Ar*u'ents

Respondents, on the other hand, ar*ue that there is no le*al asis for petitioner to withhotheir deposits ecause the# have no 'onetar# oli*ation to petitioner.1 The# insist thatpetitioner 'iseral# failed to prove its accusations a*ainst respondent Rosales. : &n fact, ndocu'entar# evidence was presented to show that respondent Rosales participated in theunauthoried withdrawal.< The# also uestion the fact that the list of the serial nu'ers odollar notes fraudulentl# withdrawn on (eruar# 6, :00<, was not s i*ned or ac4nowled*edthe alle*ed i'postor. Respondents li4ewise 'aintain that what was estalished durin* thtrial was the ne*li*ence of petitionerOs e'plo#ees as the# allowed the withdrawal of the fu

without properl# verif#in* the identit# of the depositor.

(urther'ore, respondents contendtheir deposits are in the nature of a loanF thus, petitioner had the oli*ation to return thedeposits to the' upon de'and.6 (ailin* to do so 'a4es petitioner liale to pa# responde'oral and e8e'plar# da'a*es, as well as attorne#Os fees.

>ur Rulin*

The $etition is ereft of 'erit.

At the outset, the relevant issues in this case are )1+ whether petitioner reached its contrwith respondents, and ):+ if so, whether it is liale for da'a*es. The issue of whetherpetitionerOs e'plo#ees were ne*li*ent in allowin* the withdrawal of Biu Chiu (an*Os dollardeposits has no earin* in the resolution of this case. Thus, we find no need to discuss thsa'e.

The !9old >ut! clause does not appl#

to the instant case.

$etitioner clai's that it did not reach its contract with respondents ecause it has a validreason for issuin* the !9old >ut! order. $etitioner anchors its ri*ht to withhold respondentdeposits on the Application and A*ree'ent for "eposit Account, which reads

Authorit# to ithhold, %ell andHor %et >ff

The Ean4 is here# authoried to withhold as securit# for an# and all oli*ations with the Eall 'onies, properties or securities of the "epositor now in or which 'a# hereafter co'e i





































































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the possession or under the control of the Ean4, whether left with the Ean4 for safe4eepin* orotherwise, or co'in* into the hands of the Ean4 in an# wa#, for so 'uch thereof as will esufficient to pa# an# or all oli*ations incurred # "epositor under the Account or # reason ofan# other transactions etween the sa'e parties now e8istin* or hereafter contracted, to sell inan# pulic or private sale an# of such properties or securities of "epositor, and to appl# theproceeds to the pa#'ent of an# "epositorOs oli*ations heretofore 'entioned.

8 8 8 8

@>&NT ACC>2NT

8 8 8 8

The Ean4 'a#, at an# ti'e in its discretion and with or without notice to all of the "epositors,

assert a lien on an# alance of the Account and appl# all or an# part thereof a*ainst an#indetedness, 'atured or un'atured, that 'a# then e owin* to the Ean4 # an# or all of the"epositors. &t is understood that if said indetedness is onl# owin* fro' an# of the "epositors,then this provision constitutes the consent # all of the depositors to have the Account answerfor the said indetedness to the e8tent of the eual share of the detor in the a'ount creditedto the Account.?

$etitionerOs reliance on the !9old >ut! clause in the Application and A*ree'ent for "eposit Account is 'isplaced.

The !9old >ut! clause applies onl# if there is a valid and e8istin* oli*ation arisin* fro' an# ofthe sources of oli*ation enu'erated in Article 11/ of the Civil Code, to wit law, contracts,uasi-contracts, delict, and uasi-delict. &n this case, petitioner failed to show that respondentshave an oli*ation to it under an# law, contract, uasi-contract, delict, or uasi-delict. Andalthou*h a cri'inal case was filed # petitioner a*ainst respondent Rosales, this is not enou*hreason for petitioner to issue a !9old >ut! order as the case is still pendin* and no final 3ud*'ent of conviction has een rendered a*ainst respondent Rosales. &n fact, it is si*nificantto note that at the ti'e petitioner issued the !9old >ut! order, the cri'inal co'plaint had not#et een filed. Thus, considerin* that respondent Rosales is not liale under an# of the fivesources of oli*ation, there was no le*al asis for petitioner to issue the !9old >ut! order. Accordin*l#, we a*ree with the findin*s of the RTC and the CA that the !9old >ut! clause doesnot appl# in the instant case.

&n view of the fore*oin*, we f ind that petitioner is *uilt# of reach of contract when itun3ustifial# refused to release respondentsO deposit despite de'and. 9avin* reached itscontract with respondents, petitioner is liale for da'a*es.

Respondents are entitled to 'oral ande8e'plar# da'a*es and attorne#Os fees.1âwphi1

&n cases of reach of contract, 'oral da'a*es 'a# e recovered onl# if the defendant actedfraudulentl# or in ad faith,?0 or is !*uilt# of *ross ne*li*ence a'ountin* to ad faith, or in

wanton disre*ard of his contractual oli*ations.!?1

&n this case, a review of the circu'stances surroundin* the issuance of the !9old >ut! orderreveals that petitioner issued the !9old >ut! order in ad faith. (irst of all, the order was issuedwithout an# le*al asis. %econd, petitioner did not infor' respondents of the reason for the!9old >ut.!?: Third, the order was issued prior to the filin* of the cri'inal co'plaint. Recordsshow that the !9old >ut! order was issued on @ul# <1, :00<,?< while the cri'inal co'plaint was

filed onl# on %epte'er <, :00<.? All these ta4en to*ether lead us to conclude that petitioacted in ad faith when it reached its contract with respondents. As we see it then,respondents are entitled to 'oral da'a*es.

As to the award of e8e'plar# da'a*es, Article :::/? of the Civil Code provides thate8e'plar# da'a*es 'a# e i'posed !# wa# of e8a'ple or correction for the pulic *oodaddition to the 'oral, te'perate, liuidated or co'pensator# da'a*es.! The# are awardeonl# if the *uilt# part# acted in a wanton, fraudulent, rec4less, oppressive or 'alevolent'anner.?6

&n this case, we find that petitioner indeed acted in a wanton, fraudulent, rec4less, oppresor 'alevolent 'anner when it refused to release the deposits of respondents without an# asis. e need not elaor the fact that the an4in* industr# is i'pressed with pulicinterest.? As such, !the hi*hest de*ree of dili*ence is e8pected, and hi*h standards of intand perfor'ance are even reuired of it.! ?? &t 'ust therefore !treat the accounts of itsdepositors with 'eticulous care and alwa#s to have in 'ind the fiduciar# nature of itsrelationship with the'.!?/ (or failin* to do this, an award of e8e'plar# da'a*es is 3ustifiedset an e8a'ple.

The award of attorne#Ds fees is li4ewise proper pursuant to para*raph 1, Article ::0?/0 of tCivil Code.

&n closin*, it 'ust e stressed that while we reco*nie that petitioner has the ri*ht to proteitself fro' fraud or suspicions of fraud, the e8ercise of his r i*ht should e done within theounds of the law and in accordance with due process, and not in ad faith or in a wantondisre*ard of its contractual oli*ation to respondents.

9=R=(>R=, the $etition is here# "=N&=". The assailed April :, :00? "ecision and th

;a# <0, :00? Resolution of the Court of Appeals in CA-G.R. CV No. ?/0?6 are here# A((&R;=". %> >R"=R=".

+ARIANO C. DEL CASTILLO Associate @ustice

= C>NC2R































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G.R. No. 1829/ +a; 21, 2009

SO"IA +. GUILLANG, %&5%&s&t&! ; SUSAN GUILLANG?CABATBAT, REYNALDO,GERARDO, BIEN*ENIDO, DANA, a! NELLIE, a66 su%a7&! GUILLANG, GENAROGUILLANG, JOSE DIGNADICE, a! AL*IN LLANILLO, $etitioners,vs.RODOL"O BEDANIA a! RODOL"O DE SIL*A, Respondents.

" = C & % & > NCARPIO, J.:

T3& Cas&

This is a petition for review1 of the < @une :00< "ecision: and the :< ;arch :00Resolution< of the Court of Appeals in CA-G.R. CV No. 6/:?/. The < @une :00< "ecision set

aside the "ece'er :000 "ecision of the Re*ional Trial Court, Eranch <0, ;anila )trialcourt+. The :< ;arch :00 Resolution denied the 'otion for reconsideration.

T3& "a#ts

>n : >ctoer 1//, at aout in the afternoon, petitioner Genaro ;. Guillan* )Genawas drivin* his rand new To#ota Corolla GB& sedan with conduction stic4er no. -"(T )calon* ='ilio A*uinaldo 9i*hwa# )hi*hwa#+ in Cavite. Genaro, Antero Guillan* )Antero+, (e@urilla, @ose "i*nadice )"i*nadice+, and Alvin Blanillo )Blanillo+ had all 3ust left fro' GoldeCit#, "as'ari5as, Cavite, and were on their wa# to ;anila. At the other side of the hi*hwarespondent Rodolfo A. Eedania )Eedania+ was drivin* a ten-wheeler &suu car*o truc4 witplate no. CAC-/:< )truc4+ towards Ta*a#ta# Cit#. The truc4 was owned # respondent Ro

de %ilva )de %ilva+.

Alon* the hi*hwa# and the road leadin* to the >rchard Golf Course, Eedania ne*otiated aturn. hen the truc4 entered the opposite lane of the hi*hwa#, GenaroOs car hit the ri*ht pof the truc4. The truc4 dra**ed GenaroOs car so'e five 'eters to the ri*ht of the road.

As a conseuence, all the passen*ers of the car were rushed to the "e Ba %alle 2niversit;edical Center in "as'ari5as, Cavite for treat'ent. Eecause of severe in3uries, Antero wlater transferred to the $hilippine General 9ospital. 9owever, on < Nove'er 1//, Anterdied due to the in3uries he sustained fro' the collision. The car was a total wrec4 while thetruc4 sustained 'inor da'a*e.

>n : April 1//, petitioners Genaro, Blanillo, "i*nadice, and the heirs of Antero instituteco'plaint for da'a*es ased on uasi-delict a*ainst respondents Eedania and de %ilva.

>n "ece'er :000, the trial court rendered a decision in favor of petitioners. The trial cofound Eedania *rossl# ne*li*ent for rec4lessl# 'aneuverin* the truc4 # 'a4in* a sudden

turn in the hi*hwa# without due re*ard to traffic rules and the safet# of other 'otorists. Thcourt also declared de %ilva *rossl# ne*li*ent in the selection and supervision of his driveEedania. The dispositive portion of the decision provides

9=R=(>R=, 3ud*'ent is here# rendered orderin* defendants Rodolfo A. Eedania andRodolfo de %ilva, 3ointl# and severall#, to pa# plaintiffs, as follows

1. The su' of $0?,66.0< representin* the da'a*eHrepair costs of the To#ota to plaintiffGenaro ;. Guillan*.

:. The su' of $0,000.00 for the death of Antero Guillan* plus $1?,000.00 for his uriale8penses, to the heirs of Antero Guillan*.

<. (or hospital and 'edical e8penses as reflected in =8hiits =, =-1 to =-<0 to plaintiffs G;. Guillan*, @ose "i*nadice and Alvin Blanillo.

. The su' of $0,000.00 as 'oral da'a*es for the heirs of the deceased Antero Guillan

. The su' of $0,000.00 as 'oral da'a*es each to plaintiffs @ose "i*nadice, Alvin Blanand Genaro Guillan*.

6. The su' of $0,000.00 as e8e'plar# da'a*es.

. The su' of $100,000.00 as and for attorne#Os fess.

?. The costs of the suit.

%> >R"=R=".6

http://www.lawphil.net/judjuris/juri2009/may2009/gr_162987_2009.html#fnt1













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Respondents appealed to the Court of Appeals.

>n < @une :00<, the Court of Appeals rendered its decision in favor of respondents. Thedispositive portion of the decision provides

&N V&= >( ABB T9= (>R=G>&NG, the appealed decision is R=V=R%=" and %=T A%&"=.The co'plaint of the herein appellees in Civil Case No. /-<666 is "&%;&%%=", for lac4 of'erit. The appellantsO counterclai's in the instant case are li4ewise "&%;&%%=". Nopronounce'ent as to cost.

%> >R"=R=".

$etitioners filed a 'otion for reconsideration. >n :< ;arch :00, the Court of Appeals deniedthe 'otion.

9ence, this petition.

T3& Ru6$g o' t3& R&g$oa6 T%$a6 Cou%t

Accordin* to the trial court, there is a presu'ption that a person drivin* a 'otor vehicle haseen ne*li*ent if at the ti'e of the 'ishap, he was violatin* an# traffic re*ulation. ? &n this case,the trial court found that the Traffic Accident &nvesti*ation Report )report+,/ corroorated # thetesti'onies of the witnesses, showed that the truc4 co''itted a t raffic violation # e8ecutin* a2-turn without si*nal li*hts. The trial court also declared that Eedania violated %ections)+,10 ?,11 and 1: of Repulic Act No. 1<61< when he e8ecuted the sudden 2-turn. Thetrial court added that Eedania violated another traffic rule when he aandoned the victi's afterthe collision.1The trial court concluded that Eedania was *rossl# ne*li*ent in his drivin* andheld hi' liale for da'a*es.

;oreover, the trial court found that Eedania did not 'a4e the 2-turn at an intersection. Accordin* to the trial court, vehicles tr#in* to 'aneuver to chan*e directions 'ust see4 an

intersection where it is safer to 'aneuver and not rec4lessl# 'a4e a 2-turn in a hi*hwa#. Thetrial court said Eedania should have oserved e8tre'e caution in 'a4in* a 2-turn ecause itwas une8pected that a lon* car*o truc4 would e8ecute a 2-turn alon* the hi*hwa#.

The trial court also said that EedaniaOs *ross ne*li*ence raised the le*al presu'ption that de%ilva, as EedaniaOs e'plo#er, was ne*li*ent in the selection and supervision of his e'plo#ees.The trial court said that, under Articles :161 and :1?016 of the Civil Code, de %ilvaOs liailit#was ased on culpa aquiliana which holds the e'plo#er pri'aril# liale for tortious acts of hise'plo#ees, su3ect to the defense that he e8ercised all the dili*ence of a *ood father of afa'il# in the selection and supervision of his e'plo#ees. The trial court ruled that de %ilvafailed to prove this defense and, conseuentl#, held hi' liale for da'a*es.

T3& Ru6$g o' t3& Cou%t o' A55&a6s

The Court of Appeals reversed the trial courtOs decision and said that the trial court overloo4edsustantial facts and circu'stances which, if properl# considered, would 3ustif# a differentconclusion and alter the results of the case.

The Court of Appeals dis'issed the testi'onies of the witnesses and declared that the# were!contrar# to hu'an oservation, 4nowled*e and e8perience.! The Court of Appeals also saidthat the followin* were the ph#sical evidences in the case

1. &t was not #et dar4 when the incident transpiredF

:. The four-lane hi*hwa# the appellees were cruisin* on was wide, strai*ht, dr#, relativel#and with no ostructions to the driverO s visionF

<. The point of i'pact of the collision is on the lane where the car was cruisin* and the cathe *as tan4 of the truc4 located at its ri*ht 'iddle portion, which indicates that the truc4 halread# properl# positioned itself and had alread# e8ecuted the 2-turn efore the i'pactoccurredF

. Genaro Guillan* was not ale to stop the car in ti'e and the car Os front portion was totawrec4ed. This ne*ates appelleesO contention that the# were travelin* at a 'oderate speed

. The sheer sie of the truc4 'a4es it i'proale for the said vehicle to ne*otiate a 2-tursudden and fast speed as appellees vi*orousl# su**est without topplin* over on itsside.1 )Citations o'itted+

The Court of Appeals concluded that the collision was caused # GenaroOs ne*li*ence. ThCourt of Appeals declared that the truc4 arrived at the intersection wa# ahead of the car ahad alread# e8ecuted the 2-turn when the car, travelin* at a fast speed, hit the t ruc4Os sidThe Court of Appeals added that considerin* the ti'e and the favorale visiilit# of the roaand the road conditions, Genaro, if he was alert, had a'ple ti'e to react to the chan*in*conditions of the road. The Court of Appeals found no reason for Genaro not to e prudenecause he was approachin* an intersection and there was a *reat possiilit# that vehiclewould e traversin* the intersection either *oin* to or fro' >rchard Golf Course. The Cou Appeals said Genaro should have slowed down upon reachin* the intersection. The Cour Appeals concluded that GenaroOs failure to oserve the necessar# precautions was thepro8i'ate cause of AnteroOs death and the in3uries of the petitioners.

The Court of Appeals also relied on the testi'on# of $olice Traffic &nvesti*ator =fren Vide

)Videna+ that the car was runnin* at a fast speed and overtoo4 another vehicle 3ust eforecollision occurred.1? The Court of Appeals concluded that Genaro did not see the truc4 as other vehicle te'poraril# loc4ed his view of the intersection. The Court of Appeals also *wei*ht to VidenaOs testi'on# that it was nor'al for a ten-wheeler truc4 to 'a4e a 2-turn opart of the hi*hwa# ecause the entrance to >rchard Golf Course was spacious.1/

T3& Issu&s

$etitioners raise the followin* issues

1. "id the Court of Appeals decide a uestion of sustance in this case in a wa# proal#accord with law or with the applicale decisions of the 9onorale %upre'e CourtQ

:. "id the Court of Appeals depart fro' the accepted and usual course of 3udicial proceedparticularl# when it revised, and recast the f indin*s of facts of the t rial court pertainin* tocrediilit# of witnesses of which the trial court was at the vanta*e point to evaluateQ

<. "id the Court of Appeals act with *rave ause of discretion a'ountin* to lac4 of 3urisdic

when it rendered the palpal# uestionale Court of AppealsO "ecision that ta'pered withfindin*s of fact of the trial court for no 3ustifiale reasonQ

. &s the Court of AppealsO 3ud*'ent and resolution reversin* the decision of the trial courtsupported # the evidence and the law and 3urisprudence applicaleQ:0

The issue in this case is who is liale for the da'a*es suffered # petitioners. The trial coheld Eedania and de %ilva, as EedaniaOs e'plo#er, liale ecause the pro8i'ate cause of




































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collision was the sudden 2-turn e8ecuted # Eedania without an# si*nal li*hts. >n the otherhand, the Court of Appeals reversed the trial courtOs decision and held Genaro liale ecausethe pro8i'ate cause of the collision was GenaroOs failure to stop the car despite seein* thatEedania was 'a4in* a 2-turn.

T3& Ru6$g o' t3& Cou%t

The principle is well-estalished that this Court is not a trier of facts. Therefore, in an appeal# certiorari under Rule of the Rules of Court, onl# uestions of law 'a# e raised. Theresolution of factual issues is the function of the lower courts whose f indin*s on these 'attersare received with respect and are, as a rule, indin* on this Court.:1

9owever, this rule is su3ect to certain e8ceptions. >ne of these is when the findin*s of the

appellate court are contrar# to those of the trial court.::

(indin*s of fact of the trial court and theCourt of Appeals 'a# also e set aside when such findin*s are not supported # the evidenceor where the lower courtsO conclusions are ased on a 'isapprehension of facts.:< %uch is thesituation in this case and we shall re-e8a'ine the facts and evidence presented efore thelower courts.

Article :16 of the Civil Code provides that whoever # act or o'ission causes da'a*e toanother, there ein* fault or ne*li*ence, is oli*ed to pa# for the da'a*e done. %uch fault orne*li*ence, if there is no pre-e8istin* contractual relations etween the parties, is called auasi-delict. To sustain a clai' ased on uasi-delict, the followin* reuisites 'ust concur )a+da'a*e suffered # the plaintiffF )+ fault or ne*li*ence of defendantF and )c+ connection ofcause and effect etween the fault or ne*li*ence of defendant and the da'a*e incurred # theplaintiff.:

There is no dispute that petitioners suffered da'a*es ecause of the collision. 9owever, theissues on ne*li*ence and pro8i'ate cause are disputed.

On the Presumption of Negligence and Proximate Cause

Ne*li*ence is defined as the failure to oserve for the protection of the interest of anotherperson that de*ree of care, precaution, and vi*ilance which the circu'stances 3ustl# de'and,where# such other person suffers in3ur#. &n 2icart v. "mit,: we held that the test ofne*li*ence is whether the defendant in doin* the alle*ed ne*li*ent act used that reasonalecare and caution which an ordinar# person would have used in the sa'e situation.

The conclusion of the Court of Appeals that Genaro was ne*li*ent is not supported # theevidence on record. &n rulin* that Genaro was ne*li*ent, the Court of Appeals *ave wei*ht andcredence to VidenaOs testi'on#. 9owever, we find that VidenaOs testi'on# was inconsistentwith the police records and report that he 'ade on the da# of the collision. (irst, Videnatestified that the car was runnin* fast and overtoo4 another vehicle that alread# *ave wa# tothe truc4.:6 Eut this was not indicated in either the report or the police records. ;oreover, if thecar was speedin*, there should have een s4id 'ar4s on the road when Genaro stepped onthe ra4es to avoid the collision. Eut the s4etch of the accident showed no s4id 'ar4s 'ade #the car.: %econd, Videna testified that the petitioners ca'e f ro' a drin4in* spree ecause hewas ale to s'ell liuor.:? Eut in the report,:/ Videna indicated that the condition of Genaro was!nor'al.! Videna did not indicate in the report that Genaro !had een drin4in* liuor! or thatGenaro !was oviousl# drun4.! Third, Videna testified that when he arrived at the scene,Eedania was inside his truc4.<0 This contradicts the police records where Videna stated thatafter the collision Eedania escaped and aandoned the victi's.<1 The police records also

showed that Eedania was arrested # the police at his arrac4s in Anau, &'us, Cavite anwas turned over to the police onl# on :6 >ctoer 1//.<:

2nder Article :1? of the Civil Code, unless there is proof to the contrar#, a person drivin*vehicle is presu'ed ne*li*ent if at the ti'e of the 'ishap, he was violatin* an# trafficre*ulation.

&n this case, the report<< showed that the truc4, while 'a4in* the 2-turn, failed to si*nal, aviolation of traffic rules. The police records also stated that, after the collision, Eedaniaescaped and aandoned the petitioners and his truc4.< This is another violation of a t raffire*ulation.< Therefore, the presu'ption arises that Eedania was ne*li*ent at the ti'e of t'ishap.

The evidence presented in this case also does not support the conclusion of the Court of Appeals that the truc4 had alread# e8ecuted the 2-turn efore the i'pact occurred. &f the had full# 'ade the 2-turn, it should have een hit on its rear.<6 &f the truc4 had alread#ne*otiated even half of the turn and is al'ost on the other side of the hi*hwa#, then the trshould have een hit in the 'iddle portion of the trailer or car*o co'part'ent. Eut theevidence clearl# shows, and the Court of Appeals even declared, that the car hit the truc4tan4, located at the truc4Os ri*ht 'iddle portion, which disproves the conclusion of the Cou Appeals that the truc4 had alread# e8ecuted the 2-turn when it was hit # the car.

;oreover, the Court of Appeals said that the point of i'pact was on the lane where the cacruisin*. Therefore, the car had ever# ri*ht to e on that road and the car had the ri*ht of wover the truc4 that was 'a4in* a 2-turn. Clearl#, the truc4 encroached upon the carOs lanewhen it suddenl# 'ade the 2-turn.

The Court of Appeals also concluded that Eedania 'ade the 2-turn at an intersection. A*

this is not supported # the evidence on record. The police s4etch<

does not indicate anintersection and onl# shows that there was a road leadin* to the >rchard Golf Course neaplace of the collision. (urther'ore, 2-turns are *enerall# not advisale particularl# on 'a3streets.<? Contrar# to VidenaOs testi'on#, it is not nor'al for a truc4 to 'a4e a 2-turn on ahi*hwa#. e a*ree with the trial court that if Eedania wanted to chan*e direction, he shousee4 an intersection where it is safer to 'aneuver the truc4. Eedania should have also turon his si*nal li*hts and 'ade sure that the hi*hwa# was clear of vehicles fro' the oppositdirection efore e8ecutin* the 2-turn.

The findin* of the Court of Appeals that it was not #et dar4 when the collision occurred is anot supported # the evidence on record. The report stated that the da#li*ht condition at thti'e of the collision was !dar4ness.! </

Contrar# to the conclusion of the Court of Appeals, the sheer sie of the t ruc4 does not 'ai'proale for the truc4 to e8ecute a sudden 2-turn. The trial courtOs decision did not statethe truc4 was travelin* at a fast speed when it 'ade the 2-turn. The trial court said the tru

'ade a !sudden! 2-turn, 'eanin* the 2-turn was 'ade une8pectedl# and with no warninshown # the fact that the truc4Os si*nal li*hts were not turned on.

Clearl#, EedaniaOs ne*li*ence was the pro8i'ate cause of the collision which clai'ed the Antero and in3ured the petitioners. $ro8i'ate cause is that which, in the natural and continseuence, unro4en # an# efficient, intervenin* cause, produces the in3ur#, and without wthe result would not have occurred.0 The cause of the collision is traceale to the ne*li*e
















































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of Eedania for if the 2-turn was e8ecuted with the proper precaution, the 'ishap in allproailit# would not have happened. The sudden 2-turn of the truc4 without si*nal li*htsposed a serious ris4 to onco'in* 'otorists. Eedania failed to prevent or 'ini'ie that ris4. Thetruc4Os sudden 2-turn tri**ered a series of events that led to the collision and, ulti'atel#, to thedeath of Antero and the in3uries of petitioners.

e a*ree with the trial court that de %ilva, as EedaniaOs e'plo#er, is also liale for theda'a*es suffered # petitioners. "e %ilva failed to prove that he e8ercised all the dili*ence of a*ood father of a fa'il# in the selection and supervision of his e'plo#ees.

On the Award of Damages and Attorney’s ees

Accordin* to prevailin* 3urisprudence, civil inde'nit# for death caused # a uasi-delict is

pe**ed at $0,000.1

;oral da'a*es in the a'ount of $0,000 is also awarded to the heirs ofthe deceased ta4in* into consideration the pain and an*uish the# suffered.: EienvenidoGuillan* )Eienvenido+, AnteroOs son, testified that %ofia, AnteroOs wife and his 'other, eca'edepressed after AnteroOs death and that %ofia died a #ear after.< Eienvenido also testified onthe pain and an*uish their fa'il# suffered as a conseuence of their fatherOs death. esustain the trial courtOs award of $0,000 as inde'nit# for death and $0,000 as 'oralda'a*es to the heirs of Antero.

As to funeral and urial e8penses, the court can onl# award such a'ount as are supported #proper receipts.&n this case, petitioners proved funeral and urial e8penses of $,000 asevidenced # Receipt No. 10?:,6$6,000 as evidenced # Receipt No. 116 and $1,000 asevidenced # Receipt No. 106,? all issued # the ;anila %outh Ce'eter# Association, &nc.,a**re*atin* $1<,000. e reduce the trial courtOs award of funeral and urial e8pensesfro' $1?,000 to $1<,000.

As to hospitaliation e8penses, onl# sustantiated and proven e8penses, or those that appear

to have een *enuinel# incurred in connection with the hospitaliation of the victi's will ereco*nied in court./ &n this case, the trial court did not specif# the a'ount of hospitaliatione8penses to e awarded to the petitioners. % ince petitioners presented receipts forhospitaliation e8penses durin* the trial, we will deter'ine the proper a'ounts to e awardedto each of the'. e award hospitaliation e8penses of $:,000./? to the heirs of Antero,0$10,??1.60 to Blanillo,1 $,<6. to "i*nadice,: and $<00 to Genaro< ecausethese are the a'ounts dul# sustantiated # receipts.

e affir' the trial courtOs award of $0?,66.0< for the repair of the car. The Court notes thatthere is no dispute that Genaro was drivin* a rand new To#ota Corolla GB& sedan and that,after the collision, the car was a total wrec4. &n this case, the repair order presented # Genarois sufficient proof of the da'a*es sustained # the car.1avvphi1.zw+

;oral da'a*es 'a# e recovered in uasi-delicts causin* ph#sical in3uries. 9owever, inaccordance with prevailin* 3urisprudence, we reduce the award of 'oral da'a*esfro' $0,000 to $<0,000 each to Blanillo, "i*nadice, and Genaro since the# onl# suffered

ph#sical in3uries rou*ht aout # the collision.6

&n uasi-delicts, e8e'plar# da'a*es 'a# e *ranted if the defendant acted with *rossne*li*ence. hile the a'ount of e8e'plar# da'a*es need not e proved, the plaintiff 'ustshow that he is entitled to 'oral, te'perate or co'pensator# da'a*es efore the court 'a#consider the uestion of whether or not e8e'plar# da'a*es should e awarded.? &n this case,Eedania was *rossl# ne*li*ent in suddenl# 'a4in* a 2-turn in the hi*hwa# without si*nal

li*hts. To serve as an e8a'ple for the pulic *ood, we affir' the trial courtOs award ofe8e'plar# da'a*es in the a'ount of $0,000.

(inall#, we affir' the trial courtOs award of attorne#Os fees in the a'ount of $100,000. 2nd Article ::0? of the Civil Code, attorne#Os fees 'a# e recovered when, as in this case,e8e'plar# da'a*es are awarded.

(ERE"ORE, we RE*ERSE the < @une :00< "ecision and :< ;arch :00 Resolution oCourt of Appeals in CA-G.R. CV No. 6/:?/. e REINSTATE with +ODI"ICATIONS the "ece'er :000 "ecision of the Re*ional Trial Court, Eranch <0, ;anila. e ORDER RodEedania and Rodolfo de %ilva, 3ointl# and severall#, to pa# the followin* a'ounts

1. (uneral and Eurial =8penses of $1<,000 to the heirs of Antero Guillan*F

:. 9ospitaliation =8penses of $:,000./? to the heirs of Antero Guillan*, $10,??1.60 to ABlanillo,$,<6. to @ose "i*nadice, and $<00 to Genaro Guillan*F and

<. ;oral da'a*es of $<0,000 each to Alvin Blanillo, @ose "i*nadice, and Genaro Guillan*

SO ORDERED.










































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G.R. No. 19021 Jaua%; 12, 2011

LETICIA TAN, +YRNA +EDINA, +ARILOU SPOONER, ROSALINDA TAN, a! +ARYJANE TAN, +ARY LYN TAN, CELEDONIO TAN, JR., +ARY JOY TAN, a! +AR> ALLANTAN, %&5%&s&t&! 3&%&$ ; t3&$% 7ot3&%, LETICIA TAN, $etitioners,vs.O+C CARRIERS, INC. a! BONI"ACIO ARA+BALA, Respondents.

R = % > B 2 T & > N

BRION, J.:

e resolve the 'otion for reconsideration1 filed # Beticia Tan, ;#rna ;edina, ;arilou%pooner, Rosalinda Tan, ;ar# @ane Tan, ;ar# B#n Tan, Celedonio Tan, @r., ;ar# @o# Tan,;ar4 Allan Tan )petitioners+, all heirs of the late Celedonio Tan as4in* us to reverse andaside our Resolution of (eruar# 1, :010.: e denied in this Resolution their petition forreview on certiorari for failin* to show an# reversile error in the assailed Court of Appealsdecision of @une ::, :00/< sufficient to warrant the e8ercise of our discretionar# appellate 3urisdiction.

The CA decision, in turn, affir'ed with 'odification the decision of the Re*ional Trial Cou)RTC+ of ;untinlupa Cit# in Civil Case No. /6-1?6, f indin* the respondents >;C Carrie

&nc. )>;C+ and Eonifacio Ara'ala *uilt# of *ross ne*li*ence and awardin* da'a*es topetitioners.

T9= (ACT%

>n %epte'er :, 1//6, the petitioners filed a co'plaint for da'a*es with the RTC a*ain>;C and Eonifacio Ara'ala. The co'plaint states that on Nove'er :, 1//, at arou61 a.'., Ara'ala was drivin* a truc4with a trailer 6 owned # >;C, alon* ;eralco Roa%ucat, ;untinlupa Cit#. hen Ara'ala noticed that the truc4 had suddenl# lost its ra4estold his co'panion to 3u'p out. %oon thereafter, he also 3u'ped out and aandoned the t"riverless, the truc4 ra''ed into the house and tailorin* shop owned # petitioner Beticiaand her husand Celedonio Tan, instantl# 4illin* Celedonio who was standin* at the doorwof the house at the ti'e.

The petitioners alle*ed that the collision occurred due to >;COs *ross ne*li*ence in notproperl# 'aintainin* the truc4, and to Ara'alaOs rec4lessness when he aandoned the

'ovin* truc4. Thus, the# clai'ed that the respondents should e held 3ointl# and severall#liale for the actual da'a*es that the# suffered, which include the da'a*e to their propertthe funeral e8penses the# incurred for Celedonio TanOs urial, as well as the loss of his eacapacit#. The petitioners also as4ed for 'oral and e8e'plar# da'a*es, and attorne#Os fee

The respondents denied an# liailit# for the collision, essentiall# clai'in* that the da'a*ethe petitioners was caused # a fortuitous event, since the truc4 s4idded due to the slippecondition of the road caused # spilled 'otor oil. /

T9= RTC "=C&%&>N

After trial, the RTC found >;C and Ara'ala 3ointl# and severall# liale to the petitionersda'a*es.10 Rel#in* on the doctrine of res ipsa louitur, the RTC held that it was unusual ftruc4 to suddenl# lose its ra4esF the fact that the t ruc4 ra''ed into the petitionersO houseraised the presu'ption of ne*li*ence on the part of the respondents. These, the respondefailed to refute.11

The RTC did not a*ree with the respondentsO clai' of a fortuitous event, pointin* out that with oil on the road, Ara'ala did not slow down or ta4e an# precautionar# 'easure to prethe truc4 fro' s4iddin* off the road. The alle*ed oil on the road did not also e8plain wh# thtruc4 lost its ra4es. 9ad >;C done a 'ore ri*id inspection of the truc4 efore its use, thedefective ra4e could have een discovered. The RTC, thus, held >;C 3ointl# and severaliale with Ara'ala for the da'a*e caused to the petitioners, ased on the principle ofvicarious liailit# e'odied in Article :1?01: of the Civil Code.1<




























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The dispositive portion of the decision stated

9=R=(>R=, in view of the fore*oin*, 3ud*'ent is here# rendered in favor of the plaintiffsand a*ainst the defendants orderin*

1. The defendants to pa# the plaintiffs 3ointl# and severall# the a'ount of $0,000.00 for thedeath of Celedonio TanF

:. The defendants to pa# the plaintiffs 3ointl# and severall# the a'ount of $00,000.00 for theloss of earnin* capacit# of Celedonio Tan, plus interest thereon fro' the date of death ofCeledonio TanF

<. The defendants to pa# the plaintiff Beticia Tan 3ointl# and severall# the a'ountof $<,?/.00 as actual da'a*esF

. The defendants to pa# the plaintiffs 3ointl# and severall# the a'ount of $00,000.00 as'oral da'a*esF

. The defendants to pa# the plaintiffs 3ointl# and severall# the a'ount of $00,000.00 ase8e'plar# da'a*esF and

6. The defendants to pa# the plaintiffs 3ointl# and solidaril# the a'ount of $00,000.00 asattorne#Os fees.

Costs a*ainst the defendants.

%> >R"=R=".1

T9= C>2RT >( A$$=AB% "=C&%&>N

>n appeal, the CA affir'ed the RTCOs findin*s on the issues of the respondentsO ne*li*enceand liailit# for da'a*es. 9owever, the CA 'odified the da'a*es awarded to the petitioners #reducin* the actual da'a*es award fro' $<,?/.00 to $:,:/.00. The CA oserved thatonl# the latter a'ount was dul# supported # official receipts.1

The CA also deleted the RTCOs award for loss of earnin* capacit#. The CA e8plained that thepetitioners failed to sustantiate Celedonio TanOs clai'ed earnin* capacit# with reasonalecertaint#F no docu'entar# evidence was ever presented on this point. &nstead, the RTC 'erel#relied on Beticia TanOs testi'on# re*ardin* Celedonio TanOs inco'e. The CA characteried thistesti'on# as self-servin*.16

The CA further reduced the e8e'plar# da'a*es fro' $00,000.00 to $:00,000.00, anddeleted the award of attorne#Os fees ecause the RTC 'erel# included the award in thedispositive portion of the decision without discussin* its le*al asis. 1

T9= $=T&T&>N

&n the petition for review on certiorari efore us,1? the petitioners assert that the CA erred whenit 'odified the RTCOs awarded da'a*es. The petitioners su'it the reasons outlined elow.

(irst, the CA erred when it reduced the RTCOs award of actual da'a*es fro' $<,?/.00to $:,:/.00. The petitioners clai' that the# sou*ht co'pensation for the da'a*e done topetitioner Beticia TanOs house, tailorin* shop, sewin* 'achines, as well as other householdappliances. %ince the da'a*es pri'aril# refer to the value of their destro#ed propert#, and notthe cost of repairin* or replacin* the', the value cannot e evidenced # receipts. Accordin*l#,the RTC correctl# relied on petitioner Beticia TanOs testi'on# and the docu'entar# evidencepresented, consistin* of pictures of the da'a*ed propert#, to prove their ri*ht to recover actualda'a*es for the destro#ed propert#.

%econd, the petitioners are entitled to actual da'a*es for the loss of Celedonio TanOs earcapacit#. hile the# ad'it that the# did not su'it an# docu'entar# evidence to sustantthis clai', the petitioners point out that Celedonio Tan was undisputal# a self-e'plo#ed twho owned a s'all tailor shopF in his line of wor4, no docu'entar# evidence is availale.

Third, the petitioners 'aintain that the# are entitled to e8e'plar# da'a*es in the a'ountof $00,000.00 ecause the RTC and the CA consistentl# found that the collision was cau# the respondentsO *ross ne*li*ence. ;oreover, the respondents acted with ad faith whthe# faricated the !oil slic4 on the road! stor# to avoid pa#in* da'a*es to the petitioners.oserved # the CA, the Traffic Accident &nvesti*ation Report did not 'ention an# 'otor othe road at the ti'e of the accident. %$> Ar'ando Ala'ro, the &nvesti*ation >fficer, li4

testified that there was no oil on the road at the ti'e of the accident. (or the pulic *ood aserve as an e8a'ple, the respondents should e 'ade to pa# $00,000.00 as e8e'plar#da'a*es.

Bastl#, the petitioners are entitled to attorne#Os fees ased on Article ::0? of the Civil Codwhich provides, a'on* others, that attorne#Os fees can e recovered when e8e'plar#da'a*es are awarded, and when the defendant acted in *ross and evident ad faith inrefusin* to satisf# the plaintiffOs plainl# valid, 3ust and de'andale clai'.

e initiall# denied the petition in our Resolution of (eruar# 1, :010, for the petitionersO fto show an# reversile error in the CA decision sufficient to warrant the e8ercise of ourdiscretionar# appellate 3urisdiction. &n our Resolution of Au*ust 11, :010, we reinstated thepetition on the asis of the petitionersO 'otion for reconsideration.

OUR RULING

(indin* 'erit in the petitionersO ar*u'ents, we 5a%t6; g%at the petition.

$rocedural &ssue As oth the RTC and the CA found that the respondentsO *ross ne*li*ence led to the deatCeledonio Tan, as well as to the destruction of the petitionersO ho'e and tailorin* shop, weno reason to distur this factual findin*. e, thus, concentrate on the sole issue of whatda'a*es the petitioners are entitled to.

e are *enerall# precluded fro' resolvin* a Rule petition that solel# raises the issue oda'a*es, an essentiall# factual uestion, ecause %ection 1, Rule of the Rules of Coue8pressl# states that

%ection 1. (ilin* of petition with %upre'e Court. A part# desirin* to appeal # certiorari f 3ud*'ent or final order or resolution of the Court of Appeals, the %andi*ana#an, the Re*Trial Court or other courts whenever authoried # law, 'a# file with the %upre'e Court averified petition for review on certiorari. The petition shall raise onl# uestions of law which'ust e distinctl# set forth.

&n li*ht, however of the RTCOs and the CAOs conflictin* findin*s on the 4ind and a'ount ofda'a*es suffered which 'ust e co'pensated, we are co'pelled to consider the case asof the reco*nied e8ceptions.1/ e loo4 into the partiesO presented evidence to resolve thiappeal.

T&75&%at& !a7ag&s $ 6$&u o' a#tua6 !a7ag&s















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e e*in # discussin* the petitionersO clai' for actual da'a*es arisin* fro' the da'a*einflicted on petitioner Beticia TanOs house and tailorin* shop, ta4in* into account the sewin*'achines and various household appliances affected. >ur asic law tells us that to recoverda'a*es there 'ust e pleadin* and proof of actual da'a*es suffered.:0 As we e8plained inViron Transportation Co., &nc. v. "elos %antos:1

Actual da'a*es, to e recoverale, 'ust not onl# e capale of proof, ut 'ust actuall# eproved with a reasonale de*ree of certaint#. Courts cannot si'pl# rel# on speculation,con3ecture or *uesswor4 in deter'inin* the fact and a'ount of da'a*es. To 3ustif# an award of actual da'a*es, there 'ust e co'petent proof of the actual a'ount of loss, credence can e*iven onl# to clai's which are dul# supported # receipts.::

The petitioners do not den# that the# did not su'it an# receipt to support their clai' for actualda'a*es to prove the 'onetar# value of the da'a*e caused to the house and tailorin* shopwhen the truc4 ra''ed into the'. Thus, no actual da'a*es for the destruction to petitionerBeticia TanOs house and tailorin* shop can e awarded.

Nonetheless, asent co'petent proof on the actual da'a*es suffered, a part# still has theoption of clai'in* te'perate da'a*es, which 'a# e allowed in cases where, fro' the natureof the case, definite proof of pecuniar# loss cannot e adduced althou*h the court is convincedthat the a**rieved part# suffered so'e pecuniar# loss. :< As defined in Article ::: of the CivilCode

Article :::. Te'perate or 'oderate da'a*es, which are 'ore than no'inal ut less thanco'pensator# da'a*es, 'a# e recovered when the court finds that so'e pecuniar# loss haseen suffered ut its a'ount can not, fro' the nature of the case, e proved with certaint#.

&n Canada v. All Co''odities ;ar4etin* Corporation,: we disallowed the award of actualda'a*es arisin* fro' reach of contract, where the respondent 'erel# alle*ed that it was

entitled to actual da'a*es and failed to adduce proof to support its plea. &n its place, weawarded te'perate da'a*es, in reco*nition of the pecuniar# loss suffered.

The photo*raphs the petitioners presented as evidence show the e8tent of the da'a*e done tothe house, the tailorin* shop and the petitionersO appliances and euip'ent.: &rrefutal#, thisda'a*e was directl# attriutale to Ara'alaOs *ross ne*li*ence in handlin* >;COs truc4.2nfortunatel#, these photo*raphs are not enou*h to estalish the a'ount of the loss withcertaint#. (ro' the attendant circu'stances and *iven the propert# destro#ed, :6 we find thea'ount of $:00,000.00 as a fair and sufficient award # wa# of te'perate da'a*es.

T&75&%at& !a7ag&s $ 6$&u o' 6oss o' &a%$g #a5a#$t;

%i'ilarl#, the CA was correct in disallowin* the award of actual da'a*es for loss of earnin*capacit#. "a'a*es for loss of earnin* capacit# are awarded pursuant to Article ::06 of theCivil Code, which states that

Article ::06. The a'ount of da'a*es for death caused # a cri'e or uasi-delict shall e at

least three thousand pesos, even thou*h there 'a# have een 'iti*atin* circu'stances. &naddition

)1+ The defendant shall e liale for the loss of the earnin* capacit# of the deceased, and theinde'nit# shall e paid to the heirs of the latterF such inde'nit# shall in ever# case eassessed and awarded # the court, unless the deceased on account of per'anent ph#sicaldisailit# not caused # the defendant, had no earnin* capacit# at the ti'e of his deathM.

As a rule, docu'entar# evidence should e presented to sustantiate the clai' for loss ofearnin* capacit#.: E# wa# of e8ception, da'a*es for loss of earnin* capacit# 'a# e awadespite the asence of docu'entar# evidence when )1+ the deceased is self-e'plo#ed aearnin* less than the 'ini'u' wa*e under current laor laws, in which case, 3udicial notic'a# e ta4en of the fact that in the deceasedDs line of wor4, no docu'entar# evidence isavailaleF or ):+ the deceased is e'plo#ed as a dail# wa*e wor4er earnin* less than the'ini'u' wa*e under current laor laws.:?

Accordin* to the petitioners, prior to his death, Celedonio was a self-e'plo#ed tailor whoearned appro8i'atel#$16,000.00 a #ear, or $1<,000.00 a 'onth. At the ti'e of his death1//, the prevailin* dail# 'ini'u' wa*e was $1.00,:/ or $<,0.00 per 'onth, provide

wa*e earner had onl# one rest da# per wee4. =ven if we ta4e 3udicial notice of the fact thas'all tailorin* shop nor'all# does not issue receipts to its custo'ers, and would proal#have an# docu'entar# evidence of the inco'e it earns, CeledonioOs alle*ed 'onthl# incoof$1<,000.00 *reatl# e8ceeded the prevailin* 'onthl# 'ini'u' wa*eF thus, the e8ceptionforth aove does not appl#.

&n the past, we awarded te'perate da'a*es in lieu of actual da'a*es for loss of earnin*capacit# where earnin* capacit# is plainl# estalished ut no evidence was presented tosupport the alle*ation of the in3ured part#Os actual inco'e.

&n $leno v. Court of Appeals,<0 we sustained the award of te'perate da'a*es in the a'ouof $:00,000.00 instead of actual da'a*es for loss of earnin* capacit# ecause the plaintiinco'e was not sufficientl# proven.

e did the sa'e in $eople v. %in*h,<1 and $eople v. Al'edilla,<: *rantin* te'perate da'ain place of actual da'a*es for the failure of the prosecution to present sufficient evidencethe deceasedOs inco'e.

%i'ilarl#, in Victor# Biner, &nc. v. Ga''ad,<< we deleted the award of da'a*es for loss ofearnin* capacit# for lac4 of evidentiar# asis of the actual e8tent of the loss. Neverthelessecause the inco'e-earnin* capacit# lost was clearl# estalished, we awarded theheirs $00,000.00 as te'perate da'a*es.

&n the present case, the inco'e-earnin* capacit# of the deceased was never disputed.$etitioners ;ar# @ane Tan, ;ar# B#n Tan, Celedonio Tan, @r., ;ar# @o# Tan and ;ar4 Allanwere all 'inors at the ti'e the petition was filed on (eruar# , :010, < and the# all relied'ainl# on the inco'e earned # their father fro' his tailorin* activities for their sustenancsupport. 2nder these facts and ta4in* into account the unreutted annual earnin*s of thedeceased, we hold that the petitioners are entitled to te'perate da'a*es in the a'ountof$<00,000.00 Mor rou*hl#, the *ross inco'e for two ):+ #ears to co'pensate for da'a*eloss of the earnin* capacit# of the deceased.

R&!u#t$o o' &:&756a%; !a7ag&s 5%o5&%

=8e'plar# or corrective da'a*es are i'posed # wa# of e8a'ple or correction for the pu*ood, in addition to 'oral, te'perate, liuidated or co'pensator# da'a*es.< &n uasi-dee8e'plar# da'a*es 'a# e *ranted if the defendant acted with *ross ne*li*ence.<6

Celedonio TanOs death and the destruction of the petitionersO ho'e and tailorin* shop wereunuestional# caused # the respondentsO *ross ne*li*ence. The law allows the *rant ofe8e'plar# da'a*es in cases such as this to serve as a warnin* to the puic and as a









































7/24/2019 g.rtf


deterrent a*ainst the repetition of this 4ind of deleterious actions.< The *rant, however, shoulde te'pered, as it is not intended to enrich one part# or to i'poverish another. (ro' thisperspective, we find the CAOs reduction of the e8e'plar# da'a*es awarded to the petitionersfro' $00,000.00 to $:00,000.00 to e proper.

Atto%&;s '&&s $ o%!&%

&n view of the award of e8e'plar# da'a*es, we find it also proper to award the petitionersattorne#Ds fees, in consonance with Article ::0?)1+ of the Civil Code.<? e find the award ofattorne#Os fees, euivalent to 107 of the total a'ount ad3ud*ed the petitioners, to e 3ust andreasonale under the circu'stances.

&nterests due

(inall#, we i'pose le*al interest on the a'ounts awarded, in 4eepin* with our rulin* in =astern%hippin* 'ines# Inc. v. Court o% Appeals,</ which held that

&. hen an oli*ation, re*ardless of its source, i .e., law, contracts, uasi-contracts, delicts oruasi-delicts is reached, the contravenor can e held liale for da'a*es. The provisionsunder Title V&&& on !"a'a*es! of the Civil Code *overn in deter'inin* the 'easure ofrecoverale da'a*es.lavvphil

&&. ith re*ard particularl# to an award of interest in the concept of actual and co'pensator#da'a*es, the rate of interest, as well as the accrual thereof, is i'posed, as follows

1. hen the oli*ation is reached, and it consists in the pa#'ent of a su' of 'one#, i .e., aloan or forearance of 'one#, the interest due should e that which 'a# have een stipulatedin writin*. (urther'ore, the interest due shall itself earn le*al interest fro' the ti'e it is 3udiciall# de'anded. &n the asence of stipulation, the rate of interest shall e 1:7 perannum to e co'puted fro' default, i .e., fro' 3udicial or e8tra3udicial de'and under andsu3ect to the provisions of Article 116/ of the Civil Code.

:. hen an oli*ation, not constitutin* a loan or forearance of 'one#, is reached, an intereston the a'ount of da'a*es awarded 'a# e i'posed at the discretion o% te court at the rateof 67 per annum. No interest, however, shall e ad3ud*ed on unliuidated clai's or da'a*ese8cept when or until the de'and can e estalished with reasonale certaint#. Accordin*l#,where the de'and is estalished with reasonale certaint#, the interest shall e*in to run fro'the ti'e the clai' is 'ade 3udiciall# or e8tra3udiciall# )Art. 116/, Civil Code+ ut when suchcertaint# cannot e so reasonal# estalished at the ti'e the de'and is 'ade, the interestshall e*in to run onl# fro' the date the 3ud*'ent of the court is 'ade )at which ti'e theuantification of da'a*es 'a# e dee'ed to have een reasonal# ascertained+. The actualase for the co'putation of le*al interest shall, in an# case, e on the a'ount finall# ad3ud*ed.

<. hen the 3ud*'ent of the court awardin* a su' of 'one# eco'es final and e8ecutor#, therate of le*al interest, whether the case falls under para*raph 1 or para*raph :, aove, shall e1:7 per annum fro' such finalit# until its satisfaction, this interi' period ein* dee'ed to e

# then an euivalent to a forearance of credit. Accordin*l#, le*al interest at the rate of 67 per annu' on the a'ounts awarded starts to runfro' ;a# 1, :00<, when the trial court rendered 3ud*'ent. (ro' the ti'e this 3ud*'enteco'es final and e8ecutor#, the interest rate shall e 1:7 per annu' on the 3ud*'enta'ount and the interest earned up to that date, until the 3ud*'ent is wholl# satisfied.

(ERE"ORE, pre'ises considered, we $ART&ABBI GRANT the petition. The @une ::, :decision of the Court of Appeals in CA-G.R. CV. No. ?<<, which 'odified the decision oRe*ional Trial Court of ;untinlupa Cit#, Eranch :6, in Civil Case No. /6-1?6, is A((&R;=with ;>"&(&CAT&>N. As 'odified, respondents >;C Carriers, &nc. and Eonifacio Ara'aare ordered to 3ointl# and severall# pa# the petitioners the followin*

)1+ $0,000.00 as inde'nit# for the death of Celedonio TanF

):+ $:,:/.00 as actual da'a*es for funeral e8pensesF

)<+ $:00,000.00 as te'perate da'a*es for the da'a*e done to petitioner BeticiaOs housetailorin* shop, household appliances and shop euip'entF

)+ $<00,000.00 as da'a*es for the loss of Celedonio TanOs earnin* capacit#F)+ $00,000.00 as 'oral da'a*esF

)6+ $:00,000.00 as e8e'plar# da'a*esF and

)+ 107 of the total a'ount as attorne#Os feesF and costs of suit.

&n addition, the total a'ount ad3ud*ed shall earn interest at the rate of 67 per annu' fro'1, :00<, and at the rate of 1:7 per annu', fro' the finalit# of this Resolution on the alaand interest due, until full# paid.

SO ORDERED.







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G.R. No. L?29 Jaua%; , 19/

RA"AEL ULUETA, ET AL., plaintiffs-appellees,vs.PAN A+ERICAN ORLD AIRAYS, INC., defendant-appellant.

R = % > B 2 T & > N

CONCEPCION, C.J.:

Eoth parties in this case have 'oved for the reconsideration of the decision of this Courtpro'ul*ated on (eruar# :/, 1/:. $laintiffs 'aintain that the decision appealed fro' shoulde affir'ed in toto. The defendant, in turn, pra#s that the decision of this Court e !set aside ...

with or without a new trial, ... and that the co'plaint e dis'issed, with costsF or, in thealternative, that the a'ount of the award e'odied therein e consideral# reduced.! .

%useuentl# to the filin* of its 'otion for reconsideration, the defendant filed a !petition toannul proceedin*s andHor to order the dis'issal of plaintiffs-appelleesD co'plaint! upon the*round that !appelleesD co'plaint actuall# see4s the recover# of onl# $,0:.? as actualda'a*es, ecause, for the purpose of deter'inin* the 3urisdiction of the lower court, the

unspecified su's representin* ite's of alle*ed da'a*es, 'a# not e considered, under tsettled doctrines of this 9onorale Court,! and !the 3urisdiction of courts of first instance wthe co'plaint in the present case was filed on %ept. <0, 1/6! was li'ited to cases !in whthe de'and, e8clusive of interest, or the value of the propert# in controvers# a'ounts to 'than ten thousand pesos! and !the 'ere fact that the co'plaint also pra#s for unspecified'oral da'a*es and attorne#Ds fees, does not rin* the action within the 3urisdiction of thecourt.!

e find no 'erit in this contention. To e*in with, it is not true that !the unspecified su'srepresentin* ite's or other alle*ed da'a*es, 'a# not e considered! L for the purpose odeter'inin* the 3urisdiction of the court L !under the settled doctrines of this 9onorale C

&n fact, not a sin*le case has een cited in support of this alle*ation.%econdl#, it has een held that a cla' for 'oral da'a*es is one not susceptile of pecunesti'ation. 1 &n fact, Article ::1 of the Civil Code of the $hilippines e8plicitl# provides that!)t+hou*h incapale of pecuniar# co'putation, 'oral da'a*es 'a# e recovered if the# athe pro8i'ate result of the defendantDs wron*ful act or o'ission.! 9ence, !)n+o proof peculoss necessar#! L pursuant to Article ::16 of the sa'e Code L !in order that 'oral ...da'a*es 'a# e ad3udicated.! And !)t+he assess'ent of such da'a*es ... is left to thediscretion of the court! - said article adds - !accordin* to the circu'stances of each case.! AppelleesD co'plaint is, therefore, within the ori*inal 3urisdiction of courts of first instance,which includes !all civil actions in which the su3ect of the liti*ation is not capale of pecunesti'ation.! 2

Thirdl#, in its answer to plaintiffsD ori*inal and a'ended co'plainants, defendant had set ucounterclai' in the a**re*ate su' of $1:,000, which is, also, within the ori*inal 3urisdictiosaid courts, there# curin* the alle*ed defect if an#, in plaintiffsD co'plaint.

e need not consider the 3urisdictional controvers# as to the a'ount the appellant sues torecover ecause the counterclai' interposed estalishes the 3urisdiction of the "istrictCourt. Mercants3 4eat 5 'i!t Co. v. 6ames 1. Clo 5 "ons, :0 2.%. :?6, : %. Ct. :?B. =d. ??F 7. 6. 'eis Mercantile Co. v. 8lepner , 16 (. << )C.C.A. :+, certiorari denied 2.%. 6:0, <0 % Ct. , B. =d. 61. ... . 4

... courts have said that !when the 3urisdictional a'ount is in uestion, the tenderin* of acounterclai' in an a'ount which in itself, or added to the a'ount clai'ed in the petition,'a4es up a su' eual to the a'ount necessar# to the 3urisdiction of this court, 3urisdictionestalished, whatever 'a# e the state of the plaintiffDs co'plaint.! A'erican %heet S Tin Co. v. ineler )".C.+ :: (. <:1, <:.

Thus, in A!o v. 1uslon, 8 e held

... . Then, too, petitionerDs counterclai' for $<,000.00 was, also, within the e8clusive ori*

3urisdiction of the latter courts, and tere are ample precedents to te e%%ect tat &altou!ori!inal claim involves less tan te 9urisdictional amount# ... 9urisdiction can be sustained counterclaim (o% te compulsor$ t$pe)& : suc as te one set up b$ petitioner erein# basupon te dama!es alle!edl$ su%%ered b$ im in consequence o% te %ilin! o% said complain&e;ceeds te 9urisdictional amount .! );oore (ederal $ractice, :nd ed. M1/?, Vol. <, p. 1Ginsur* vs. $acific ;utual Bife &ns. Co. of California, 6/ (ed. M:d /F 9o'e Bife &ns. Co.

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%ipp., 11 (ed. M:dF A'erican %heet S Tin $late Co. vs. ineler M".C., :: (ed. <:1, <:FEri8 vs. $eopleDs ;utual Bife &ns. Co., 1 $. :d. <, : Cal. :d. 6F ='er# vs. $acific='plo#ees &ns. Co., 6 $. :d. 106, ? Cal. :d. 66<+.

Needless to sa#, havin* not onl# failed to uestion the 3urisdiction of the trial court L either inthat court or in this Court, efore the rendition of the latterDs decision, and even suseuentl#thereto, # filin* the afore'entioned 'otion for reconsideration and see4in* the reliefs thereinpra#ed for L ut, also, ur!ed bot courts to e;ercise 9urisdiction over te merits o% te case,defendant is now estopped fro' i'pu*nin* said 3urisdiction. /

Eefore ta4in* up the specific uestions raised in defendantDs 'otion for reconsideration, itshould e noted that the sa'e is 'ainl# predicated upon the pre'ise that plaintiffsD version is

inherentl# incredile, and that this Court should accept the theor# of the defense to the effectthat petitioner was off-loaded ecause of a o'-scare alle*edl# arisin* f ro' his dela# inoardin* the aircraft and suseuent refusal to open his a*s for inspection. e need notrepeat here the reasons *iven in >ur decision for re3ectin* defendantDs contention and notdisturin* the findin*s of fact of 9is 9onor, the Trial @ud*e, who had the decided advanta*e Ldenied to 2s L of oservin* the ehaviour of the witnesses in the course of the trial and foundthose of the plaintiffs worth# of credence, not the evidence for the defense.

&t 'a# not e a'iss however, to stress the fact that, in his written report, made in transit %rom<a+e to Manila L or immediatel$ after the occurrence and efore the le*al i'plications orconseuences thereof could have een the o3ect of 'ature delieration, so that it could, in awa#, e considered as part of the res !estae L Capt. Kentner stated that Kulueta had een off-loaded !due to drin4in*! and !belli!erent attitude,! there# el#in* the stor# of the defenseaout said alle*ed o'-scare, and confir'in* the view that said a*ent of the defendant hadacted out of resent'ent ecause his e*o had een hurt # ;r. KuluetaDs ada'ant refusal to e

ullied # hi'. &ndeed, had there een an iota of truth in said stor# of the defense, Capt.Kentner would have caused ever# one of the passen*ers to e fris4ed or searched and thelu**a*e of all of the' e8a'ined L as it is done now L efore resu'in* the fli*ht fro' a4e&sland. 9is failure to do so 'erel# 'a4es the artificious nature of defendantDs version 'ore'anifest. &ndeed, the fact that ;rs. Kulueta and ;iss Kulueta were on oard the plane showse#ond dout that ;r. Kulueta could not possil# have intended to low it up.

The defense tries to e8plain its failure to introduce an# evidence to contradict the testi'on# of;r. Kulueta as to wh# he had *one to the each and what he did there, alle*in* that, in thever# nature of thin*s, nood# else could have witnessed it. ;oreover, the defense insists, interalia, that the testi'on# of ;r. Kulueta is inherentl# incredile ecause he had no idea as to how'an# toilets the plane hadF it could not have ta4en hi' an hour to relieve hi'self in the eachFthere were ei*ht )?+ co''odes at the ter'inal toilet for 'en F if he felt the need of relievin*hi'self, he would have seen to it that the soldiers did not eat hi' to the ter'inal toiletsF he didnot tell an#od# aout the reason for *oin* to the each, until after the plane had ta4en off

fro' a4e.e find this pretense devoid of 'erit. Althou*h ;r. Kulueta had to loo4 for a secluded place inthe each to relieve hi'self, e#ond the view of others, defendantDs airport 'ana*er, who' ;r.Kulueta infor'ed aout it, soon a%ter the departure of the plane, could ave %ortitcec+ed the veracit# of ;r. KuluetaDs state'ent # as4in* hi' to indicate the specific placewhere he had een in the each and then proceedin* thereto for purposes of verification.

Then, a*ain, the passen*er of a plane seldo' 4nows how 'an# toilets it has. As a *enerarule, his 4nowled*e is li'ited to the toilets %or te class L first class or tourist class L in whe is. Then, too, it ta4es several 'inutes for the passen*ers of i* aircrafts, li4e those fl#infro' the 2.%. to the $hilippines, to deplane. Eesides, the speed with which a *iven passe'a# do so depends, lar*el#, upon the location of his seat in relation to the e8it door. 9e ca*o over the heads of those nearer than he thereto. A*ain, ;r. Kulueta 'a# have sta#ed intoilet ter'inal for so'e ti'e, e8pectin* one of the co''odes therein to e vacated soonenou*h, efore decidin* to *o elsewhere to loo4 for a place suitale to his purpose. Eut hto wal4, first, fro' the plane to the ter'inal uildin* and, then, after vainl# waitin* therein fwhile, cover a distance of aout 00 #ards therefro' to the each, and see4 there a placevisile # the people in the plane and in the ter'inal, inas'uch as the terrain at a4e &slaflat. hat is 'ore, he 'ust have had to ta4eoff part, at least, of his clothin*, ecause, withthe facilities of a toilet, he had to wash hi'self and, then, dr# hi'self up efore he could properl# attired and wal4 ac4 the 00 #ards that separated hi' fro' the ter'inal uildin*andHor the plane. Considerin*, in addition to the fore*oin*, the fact that he was not feelin*at that ti'e, e are not prepared to hold that it could not have ta4en hi' around an hour tperfor' the acts narrated # hi'.

Eut, wh# L as4s the defendant L did he not reveal the sa'e efore the plane too4 offQ Trecord shows that, even efore ;r. Kulueta had reached the ra'p leadin* to the plane, CaKentner was alread# de'onstratin* at hi' in an inte'perate and arro*ant tone and attitud)!hat do #ou thin4 #ou areQ+, there# i'pellin* ;r. Kulueta to answer ac4 in the sa'e v As a conseuence, there i''ediatel# ensued an altercation in the course of which eachapparentl# tried to show that he could not e cowed # the other. Then ca'e the order of Kentner to off-load all of the Kuluetas, includin* ;rs. Kulueta and the 'inor ;iss Kulueta,

well as their lu**a*e, their overcoats and other effects handcarried # the'F ut, ;r. Kulureuested that the ladies e allowed to continue the trip. ;eanwhile, it had ta4en ti'e to lohis four )+ pieces of lu**a*e. As a 'atter of fact, onl# three )<+ of the' were found, and tfourth eventuall# re'ained in the plane. &n short, the issue etween Capt. Kentner and ;rKulueta had een li'ited to deter'inin* whether the latter would allow hi'self to eroweaten # the for'er. &n the heat of the altercation, nood# had inuired aout the caof ;r. KuluetaDs dela# in returnin* to the plane, apart fro' the fact that it was rathere'arrassin* for hi' to e8plain, in the presence and within the hearin* of the passen*ersthe crew, then asse'led around the', wh# he had *one to the each and wh# it had ta4hi' so'e ti'e to answer there a call of nature, instead of doin* so in the ter'inal uildin*

"efendantDs 'otion for reconsideration assails )1+ the a'ount of da'a*es awarded ase8cessiveF ):+ the propriet# of acceptin* as credile plaintiffsD theor#F )<+ plaintiffsD ri*ht torecover either 'oral or e8e'plar# da'a*esF )+ plaintiffsD ri*ht to recover attorne#Ds feesF )+ the non-enforce'ent of the co'pro'ise a*ree'ent etween the defendant and plaint

wife, ;rs. Kulueta. 2pon the other hand, plaintiffsD 'otion for reconsideration contests thedecision of this Court reducin* the a'ount of da'a*es awarded # the trial court toappro8i'atel# one-half thereof, upon the *round, not onl# that, contrar# to the findin*s of tCourt, in said decision, plaintiff had not contriuted to the a**ravation of his altercation orincident with Capt. Kentner # reactin* to his provocation with e8tre'e elli*erenc# thereallowin* hi'self to e dra**ed down to the level on which said a*ent of the defendant had

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placed hi'self, ut, also, ecause the purchasin* power of our local currenc# is now 'uchlower than when the trial court rendered its appealed decision, over five )+ #ears a*o, on @ul#, 1/6, which is an undeniale and undisputed fact. $recisel#, for this reason, defendantDscharacteriation as e8oritant of the a**re*ate award of over $00,000 # wa# of da'a*es,apart fro' attorne#Ds fees in the su' of $,000, is untenale. &ndeed, said award is nowarel# euivalent to around 100,000 2. %. dollars.

&t further support of its contention, defendant cites the da'a*es awarded in previous cases topassen*ers of airlines, as well as in several c ri'inal cases, and so'e cases for liel andslander. None of these cases is, however, in point. %aid cases a*ainst airlines referred topassen*ers who were 'erel# constrained to ta4e a tourist class accommodation, despite thefact that the# had first class tic4ets, and that althou*h, in one of such cases, there was proof

that the airline involved had acted as it did to *ive preference to a !white! passen*er, this'otive was not disclosed until the trial in court. &n the case at ar, plaintiff Rafael Kulueta was!off-loaded! at a4e &sland, for havin* dared to retort to defendantDs a*ent in a tone and'anner 'atchin*, if not efittin* his inte'perate lan*ua*e and arro*ant attitude. As aconseuence, Capt. KentnerDs atte'pt to hu'iliate Rafael Kulueta had oo'eran*ed a*ainsthi' )Kentner+, in the presence of the other passen*ers and the crew. &t was, also, in theirpresence that defendantDs a*ent had referred to the plaintiffs as !'on4e#s,! a racial insult not'ade openl# and pulicl# in the aove'entioned previous cases a*ainst airlines.

&n other words, ;r. Kulueta was off-loaded, not to protect the sa%et$ of the aircraft and itspassen*ers, ut to retaliate and punis hi' for the e'arrass'ent and loss of face thussuffered # defendantDs a*ent. This vindictive 'otive is 'ade 'ore 'anifest # the notedelivered to ;r. Kulueta # defendantDs airport 'ana*er at a4e &sland, ;r. %itton, statin* thatthe for'erDs sta# therein would e !for a minimum of one wee4,! durin* which he would echar*ed 1<.<0 per da#. This reference to a !'ini'u' of one wee4! revealed the intention to

4eep hi' there stranded that lon*, for no other plane, headed for ;anila, was e8pected withinsaid period of ti'e, althou*h ;r. Kulueta 'ana*ed to oard, da#s later, a plane that rou*hthi' to 9awaii, whence he flew ac4 to the $hilippines, via @apan.

Neither 'a# cri'inal cases, nor the cases for liel and slander cited in the defendantDs 'otionfor reconsideration, e euated with the present case. &ndeed, in ordinar# cri'inal cases, theaward for da'a*es is, in actual practice, of purel# acade'ic value, for the convicts *enerall#elon* to the poorest class of societ#. There is, 'oreover, a funda'ental difference etweensaid cases and the one at ar. The Kuluetas had a contract of carria*e with the defendant, as aco''on carrier, pursuant to which the latter was ound, %or a substantial monetar$considerationpaid # the for'er, not 'erel# to transport the' to ;anila, ut, also, to do so with!e8traordinar# dili*ence! or !ut'ost dili*ence.! 9 The responsiilit# of the co''on carrier, under said contract, as re*ards the passen*erDs safet#, is of such a nature, affectin* as it does pulicinterest, that it !cannot e dispensed it! or even !lessened # stipulation, # the postin* ofnotices, # state'ents on tic4ets, or otherwise.! 10 &n the present case, the defendant did notonl# %ail to co'pl# with its oli*ation to transport ;r. Kulueta to ;anila, ut, also, acted in a'anner calculated to hu'iliate hi', to chastise hi', to 'a4e hi' suffer, to cause to hi' the*reatest possile inconvenience, # leavin* hi' in a desolate island, in the e8pectation that hewould e stranded there for a !'ini'u' of one wee4! and, in addition thereto, char*ed therefor 1<.<0 a da#.

&t is ur*ed # the defendant that e8e'plar# da'a*es are not recoverale in uasi-delicts,pursuant to Article ::<1 of our Civil Code, e8cept when the defendant has acted with !*rone*li*ence,! and that there is no specific f indin* that it had so acted. & t is ovious, howevethat in off-loadin* plaintiff at a4e &sland, under the circu'stances heretofore adverted todefendantDs a*ents had acted with 'alice aforethou*ht and evident ad faith. &f !*rossne*li*ence! warrants the award of e8e'plar# da'a*es, with 'ore reason is its i'position 3ustified when the act perfor'ed is delierate, 'alicious and tainted with ad faith. Thus,in 'opez v. 2A*AM , 11 e held

The rationale ehind e8e'plar# or corrective da'a*es is, as the na'e i'plies, to providee8a'ple or correction for pulic *ood. "efendant havin* reached its contracts in ad fait

court, as stated earlier, 'a# award e8e'plar# da'a*es in addition to 'oral da'a*es )Art:::/, ::<:, New Civil Code.+

%i'ilarl#, in *<A v. Cuenca, 12 this Court declared that an award for e8e'plar# da'a*es 3ustified # the fact that the airlineDs !a*ent had acted in a wanton, rec4less and oppressivmanner ! in co'pellin* Cuenca, upon arrival at >4inawa, to transfer, over his o3ection, frothe first class, where he was acco''odated fro' ;anila to >4inawa, to the tourist class, trip to @apan, !under threat of otherwise leavin* hi' in >4inawa,! despite the fact that he paid in full the first class fare and was issued in ;anila a first class tic4et.

"efendant cites Rotea v. 4alili , 1 in support of the proposition that a principal is not liale e8e'plar# da'a*es owin* to acts of his a*ent unless the for'er has participated in said or ratified the sa'e. %aid case involved, however, the susidiar# civil liailit# of an e'plo#arisin* fro' cri'inal acts of his e'plo#ee, and !e8e'plar# da'a*es ... 'a# e i'posed wthe cri'e was co''itted with one or 'ore a**ravatin* circu'stances.! 14 Accordin*l#, theRotea case is not in point, for the case at ar involves a breac o% contract , as well as a qdelict .

Neither 'a# the case of 2alisoc v. 1rillantes, 1 invo4ed # the defendant, e euated withcase at ar. The $alisoc case dealt with the liailit# of school officials for da'a*es arisin*the death of a student )$alisoc+ due to fist lows *iven # another student )"affon+, in thecourse of a uarrel etween the', while in a laorator# roo' of the ;anila Technical &nsti&n an action for da'a*es, the head thereof and the teacher in char*e of said laorator# wheld 3ointl# and severall# liale with the student who caused said death, for failure of the sto provide !adeuate supervision over the activities of the students in the school pre'isesprotect the' !fro' har', whether at the hands of fellow students or other parties.! %uchliailit# was predicated upon Article :1?0 of our Civil Code, the pertinent part of which rea

ART. :1?0. The oli*ation i'posed # Article :16 is de'andale not onl# for oneDs own or o'issions, ut also for those of persons for who' one is responsile.

888 888 888

Bastl#, teachers or heads of estalish'ents of arts and t rades shall e liale for da'a*escaused # their pupils and students or apprentices, so lon* as the# re'ain in their custod

888 888 888

> i l th t f d d d i th $ li i t d t th

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>viousl#, the a'ount of da'a*es warded in the $alisoc case is not and cannot serve as the'easure of the da'a*es recoverale in the present case, the latter havin* eencaused directl$ and intentionall$ # an e'plo#ee or a*ent of the defendant, whereas thestudent who 4illed the #oun* $alisoc was in no wise an a*ent of the school. ;oreover, uponher arrival in the $hilippines, ;rs. Kulueta reported her husandDs predica'ent to defendantDslocal 'ana*er and as4ed hi' to forthwith have hi' );r. Kulueta+ rou*ht to ;anila, whichdefendantDs afore'entioned 'ana*er refused to do, there# i'pliedl# ratif#in* the off-loadin*of ;r. Kulueta at a4e &sland.

&t is ne8t ur*ed that, under the contract of carria*e with the defendant, ;r. Kulueta was oundto e present at the t i'e scheduled for the departure of defendantDs plane and that he had,conseuentl#, violated said contract when he did not show up at such t i'e. This ar*u'ent

'i*ht have had so'e wei*ht had defendantDs plane ta4en off be%ore ;r. Kulueta had shown up.Eut the fact is that he was read#, willin* and ale to oard the plane aout two hours be%ore itactuall# too4 off, and that he was delieratel# and 'aliciousl# off-loaded on account of hisaltercation with Capt. Kentner. &t should, also, e noted that, althou*h ;r. Kulueta was dela#edso'e :0 to <0 'inutes, the arrival or departure of planes is of ten dela#ed for 'uch lon*erperiods of ti'e. (ollowed to its lo*ical conclusion, the ar*u'ent adduced # the defensesu**ests that airlines should e held liale for da'a*es due to the inconvenience and an8iet#,aside fro' actual da'a*es, suffered # 'an# passen*ers either in their haste to arrive at theairport on scheduled ti'e 3ust to f ind that their plane will not ta4e off until later, or # reason ofthe late arrival of the aircraft at its destination.

$ANA; i'pu*ns the award of attorne#Ds fees upon the *round that no penalt# should ei'posed upon the ri*ht to liti*ateF that, # law, it 'a# e awarded onl# in e8ceptional casesFthat the clai' for attorne#Ds fees has not een provenF and that said defendant was 3ustified inresistin* plaintiffDs clai' !ecause it was patentl# e8oritant.!

Nothin*, however, can e farther fro' the truth. &ndeed apart fro' plaintiffDs clai' for actualda'a*es, the a'ount of which is not contested, plaintiffs did not as4 an# specific su' # wa#of e8e'plar# and 'oral da'a*es, as well as attorne#Ds fees, and left the a'ount thereof to the!sound discretion! of the lower court. This, precisel#, is the reason wh# $ANA;, now, alle*esL without 3ustification that the lower court had no 3urisdiction over the su3ect 'atter of thepresent case.

;oreover, Article ::0? of our Civil Code e;pressl$ authories the award of attorne#Ds fees!when e8e'plar# da'a*es are awarded,! L as the# are in this case Las well as !in an# othercase where the court dee's it 3ust and euitale that attorne#Ds fees ... e recovered,! and eso dee' it 3ust and euitale in the present case, considerin* the !e8ceptional! circu'stancesotainin* therein, particularl# the ad faith with which defendantDs a*ent had acted, the placewhere and the conditions under which Rafael Kulueta was left at a4e &sland, the asoluterefusal of defendantDs 'ana*er in ;anila to ta4e an# step whatsoever to alleviate ;r. KuluetaDs

predica'ent at a4e and have hi' rou*ht to ;anila L which, under their contract ofcarria*e, was defendantDs oli*ation to dischar*e with !e8tra-ordinar#! or !ut'ost ! dili*ence Land, the !racial! factor that had, li4ewise, tainted the decision of defendantDs a*ent, Capt.Kentner, to off-load hi' at a4e &sland.

As re*ards the evidence necessar# to 3ustif# the su' of $,000 awarded as attorne#Ds fees inthis case, suffice it to sa# that the uantit# and ualit# of the services rendered # plaintiffsD

counsel appearin* on record, apart fro' the nature of the case and the a'ount involvedtherein, as well as his presti*e as one of the 'ost distin*uished 'e'ers of the le*alprofession in the $hilippines, of which 3udicial co*niance 'a# e ta4en, a'pl# 3ustif# saidaward, which is a little over ,=> of the da'a*es )$00,000+ collectile # plaintiffs herein&ndeed, the attorne#Ds fees in this case is proportionall# 'uch less than that ad3ud*ed in 'v. 2A*AM 18 in which the 3ud*'ent rendered for attorne#Ds fees )$0,000+ was al'ost ?=>the da'a*es )$:,000+ recovered # the plaintiffs therein.

The defense assails the last part of the decision sou*ht to e reconsidered, in which L reupon Article 1: of our Civil Code, which provides that !)t+he wife cannot ind the con3u*apartnership without the husandDs consent, e8cept in cases provided # law,! and it is not

clai'ed that this is one of such cases L e denied a 'otion, f iled # ;rs. Kulueta, for thedis'issal of this case, insofar as she is concerned - she havin* settled all her differences the defendant, which appears to have paid her the su' of $0,000 therefor - !without pre3to this su' ein* deducted fro' the award 'ade in said decision.! "efendant now alle*esthis is tanta'ount to holdin* that said co'pro'ise a!reement is oth effective and ineffec

This, of course, is not t rue. The pa$ment is effective, insofar as it is deductile fro' the awand, ecause it is due )or part of the a'ount due+ fro' the defendant, it or itout itsco'pro'ise a*ree'ent with ;rs. Kulueta. hat is ineffective is the co'pro'ise a!reemeinsofar as the con3u*al partnership is concerned. ;rs. KuluetaDs 'otion was for the dis'isthe case insofar as she was concerned, and the defense cited in support thereof Article 11said Code, pursuant to which !)t+he husand 'ust e 3oined in all suits # or a*ainst the we8cept ... ):+ &f the# have in fact een separated for at least one #ear.! This provision, ehowever, refers to suits in which the wife is the principal or real part# in interest, not to theat ar, !in which the husand is the 'ain part# in interest, oth as the person principall#

a**rieved and as ad'inistrator of the con3u*al partnership ... he havin* acted in this capain enterin* into the contract of carria*e with $ANA; and paid the a'ount due to the latterunder the contract, with funds of the con3u*al partnership,! to which the a'ounts recoverafor reach of said contract, accordin*l#, elon*. The da'a*es suffered # ;rs. Kulueta we'ainl# an in accident of the hu'iliation to which her husand had een su3ected. The Coordered that said su' of $0,00 paid # $ANA; to ;rs. Kulueta e deducted fro' thea**re*ate award in favor of the plaintiffs herein for the si'ple reason that upon liuidationthe con3u*al partnership, as provided # law, said a'ount would have to e rec4oned witheither as part of her share in the partnership, or as part of the support which 'i*ht have or 'a# e due to her as wife of Rafael Kulueta. &t would surel# e inane to sentence thedefendant to pa# the $00,000 due to the plaintiffs and to direct ;rs. Kulueta to return sai$0,000 to the defendant.

&n this connection, it is noteworth# that, for ovious reasons of pulic polic#, she is not allo# law to waive her share in the con3u*al partnership, efore the dissolution thereof. 1/ %h

cannot even acuire an# propert# # *ratuitous title, without the husandDs consent, e8cepfro' her ascendants, descendants, parents-in-law, and collateral relatives within the fourtde*ree. 1

&t is true that the law favors and encoura*es the settle'ent of liti*ations # co'pro'isea*ree'ent etween the contendin* parties, ut, it certainl# does not favor a settle'ent

with one of the spouses oth of who' are plaintiffs or defendants in a co''on cause such as

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with one of the spouses, oth of who' are plaintiffs or defendants in a co''on cause, such asthe defense of the ri*hts of the con3u*al partnership, when the effect, even if indirect, of theco'pro'ise is to 3eopardie !the solidarit# of the fa'il#! L which thelaw 19 see4s to protect L # creatin* an additional cause for the 'isunderstandin* that hadarisen etween such spouses durin* the liti*ation, and thus renderin* 'ore difficult areconciliation etween the'.

&t is ur*ed that there is no proof as to the purpose of the trip of the plaintiffs, that neither isthere an# evidence that the 'one# used to pa# the plane tic4ets ca'e fro' the con3u*al fundsand that the award to ;rs. Kulueta was for her personal sufferin* or in3uries. There was,however, no individual or specific award in favor of ;rs. Kulueta or an# of the plaintiffs. Theaward was 'ade in their favor collectivel#. A*ain, in the asence of said proof, the presu'ption

is that the purpose of the trip was for the co''on enefit of the plaintiffs and that the 'one#had co'e fro' the con3u*al funds, for, unless there is proof to the contrar#, it is presu'ed!)t+hat thin*s have happened accordin* to the ordinar# course of nature and the ordinar# haitsof life.! 20 &n fact ;anresa 'aintains 21that the# are dee'ed con3u*al, when the source of the'one# used therefor is not estalished, even if the purchase had een 'ade # thewife. 22 And this is the rule otainin* in the $hilippines. =ven propert# re*istered, under theTorrens s#ste', in the na'e of one of the spouses, or in that of the wife onl#, if acuired durin*the 'arria*e, is presu'ed to elon* to the con3u*al partnership, unless there is co'petentproof to the contrar#. 2

$ANA; 'aintains that the da'a*es involved in the case at ar are not a'on* those for'in*part of the con3u*al partnership pursuant to Article 1< of the Civil Code, readin*

ART. 1<. The followin* are con3u*al partnership propert#

)1+ That which is acuired # onerous title durin* the 'arria*e at the e8pense of the co''on

fund, whether the acuisition e for the partnership, or for onl# one of the spousesF

):+ That which is otained # the industr#, or wor4, or as salar# of the spouses, or of either ofthe'F

)<+ The fruits, rents or interests received or due durin* the 'arria*e, co'in* fro' the co''onpropert# or fro' the e8clusive propert# of each spouse.

Considerin* that the da'a*es in uestion have arisen fro', inter alia, a reach of plaintiffsDcontract of carria*e with the defendant, for which plaintiffs paid their fare with fundspresu'al# elon*in* to the con3u*al partnership, e hold that said da'a*es fall underpara*raph )1+ of said Article 1<, the ri*ht thereto havin* een !acuired #onerous title durin*the 'arria*e ... .! This conclusion is olstered up # Article 1? of our Civil Code, accordin* towhich

ART. 1?. The followin* shall e the e8clusive propert# of each spouse

)1+ That which is rou*ht to the 'arria*e as his or her ownF):+ That which each acuires, durin* the 'arria*e, # lucrative titleF

)<+ That which is acuired # ri*ht of rede'ption or # e8chan*e with other propert# elon*in*to onl# one of the spousesF

)+ That which is purchased with e8clusive 'one# of the wife or of the husand.

The da'a*es involved in the case at ar do not co'e under an# of these provisions or ofother provisions for'in* part of Chapter <, Title V&, of Eoo4 & of the Civil Code, which chapentitled !$araphernal $ropert#.! hat is 'ore, if !)t+hat which is acuired # ri*ht of rede'or # e8chan*e with other propert# elon*in* to onl# one of the spouses,! and !)t+hat whicpurchased with e8clusive 'one# of the wife or of the husand,! 24elon* e8clusivel# to suwife or husand, it follows necessaril# that that which is acuired with 'one# of the con3upartnership elon*s thereto or for's part thereof. The rulin*s in Maramba v.'ozano 2 and 2erez v. 'antin, 28 cited in defendantDs 'otion for reconsideration, are, in effadverse thereto. &n oth cases, it was 'erel# held that the presu'ption under Article 160 Civil Code L to the effect that all propert# of the 'arria*e belon! to te con9u!al

partnersip L does not appl# unless it is shown that it was acuired durin* 'arria*e. &n thpresent case, the contract of carria*e was concededl# entered into, and the da'a*es clai# the plaintiffs were incurred, durin! 'arria*e. 9ence, the ri*hts accruin* fro' said contincludin* those resultin* fro' reach thereof # the defendant, are presu'ed to elon* tocon3u*al partnership of ;r. and ;rs. Kulueta. The fact that such reach of contract wascoupled, also, with a uasi-delict constitutes an a**ravatin* circu'stance and can not pohave the effect of deprivin* the con3u*al partnership of such propert# ri*hts.

"efendant insists that the use of con3u*al funds to redee' propert# does not 'a4e thepropert# redee'ed con3u*al i% te ri!t o% redemption pertained to te i%e. &n the asenchowever, of proo% that such ri*ht of rede'ption pertains to the wife L and there is no proothe contract of carria*e with $ANA; or the 'one# paid therefor elon*s to ;rs. Kulueta Lpropert# involved, or the ri*hts arisin* therefro', 'ust e presu'ed, therefore, to for' pathe con3u*al partnership.

&t is true that in 'ilius v. Manila Railroad Co., 2/ it was held that the !patri'onial and 'oral

da'a*es! awarded to a #oun* and eautiful wo'an # reason of a scar L in conseuenan in3ur# resultin* fro' an auto'oile accident L which disfi*ured her face and fracturedleft le*, as well as caused a per'anent defor'it#, are her paraphernal propert#. "efendancites, also, in support of its contention the followin* passa*e fro' Colin # Capitant

*o esta resuelta e8presa'ente en la le!islacion espa@ola la cuestion de si lasinde'niaciones deidas por accidentes del trabao tienen la consideracion de *ananciason ienes particulares de los con#u*es.

&nclinan a la solucion de ue estas inde'niaciones deben ser consideradas como!ananciales, el hecho de ue la sociedad pierde la capacidad de traba9ocon el accidente#a ella le pertenece# puesto que de la sociedad son los%rutos de ese traba9oF en ca'io, laconsideracion de ue i*ual 'anera ue losienes ue sustitu#en a los ue cada con#u*eal 'atri'onio co'o propiostienen el caracter de propios, hace pensar ue lasinde'niaciones ue ven*ana suplir la capacidad de traba9o aportada por cada con$u!e sociedad , deenser 3uridica'ente reputadas co'o ienes propios del con$u!e que a$asu%rido elaccidente. Asi se lle!a a la misma solucion aportada por la 9urisprudencia%rancesca. 2

This opinion is, however, undecisive, to sa# the least. &t should e noted that Colin # Capitwere co''entin* on the renc Civil CodeF that their co''ent referred to inde'nities duconseuence of !accidentes del traa3o !resultin* in p$sical in3uries sustained # one of

spouses )which ;rs Kulueta has not suffered+F and that said co''entators ad'it that the

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spouses )which ;rs. Kulueta has not suffered+F and that said co''entators ad'it that theuestion whether or not said da'a*es are paraphernal propert# or elon* to the con3u*alpartnership is not settled under the "panis la . 29 Eesides, the (rench law and 3urisprudenceL to which the co''ents of $laniol and Ripert, li4ewise, refer L are inapposite to theuestion under consideration, ecause te$ di%%er basicall$ fro' the %panish law in thetreat'ent of the propert# relations etween husand and wife. &ndeed, our Civil Code, li4e the%panish Civil Code, favors the s#ste' of con3u*al partnership of *ains. Accordin*l#, the for'erprovides that, !)i+n the asence of 'arria*e settle'ents, or when the sa'e are void, thes#ste' of relative co''unit# or con3u*al partnership of *ains ... shall *overn the propert#relations etween! the spouses. 0 9ence, !)a+ll propert# of the 'arria*e is presu'ed to elon*to the con3u*al partnership, unless it e proved that it pertains e8clusivel# to the husand or to

the wife.!

1

No si'ilar rules are found in the (rench Civil Code. hat is 'ore, under the provisions thereof,the con3u*al partnership e8ists onl# when so stipulated in the !capitulaciones 'atri'oniales! or # wa# of e8ception. &n the lan*ua*e of ;anresa L

$rescindi'os de los preceptos de los Condi*os de (rancia, & talia, 9olanda, $ortu*al, Ale'ania# %uia, porsue solo e;cepcionalmente, o cuando asi se pacta en las capitulaciones, ad'itenel siste'a de *ananciales. 2

A*ain, Colin # Capitant, as well as the Bilius case, refer to da'a*es recoveredfor p$sical in3uries suffered # the wife. &n the case at ar, the part# 'ainl# in3ured, althou*hnot ph#sicall#, is the husand.

Accordin*l#, the other $hilippine cases and those fro' Bouisiana L whose civil law is asedupon the (rench Civil Code L cited # the defendant, which si'ilarl# refer to 'oral da'a*esdue to ph#sical in3uries suffered # the wife, are, li4ewise, inapplicale to the case at ar.

e find, therefore, no plausile reason to distur the views e8pressed in >ur decisionpro'ul*ated on (eruar# :/, 1/:.

9=R=(>R=, the 'otions for reconsideration aove-referred to should e, as the# arehere# denied.

Ma+alintal# 0aldivar# ernando# Ma+asiar# Antonio and Es!uerra# 66.# concur.

G.R. No. 191 Ju& 28, 201

CAT(AY PACI"IC AIRAYS, $etitioner,vs.JUANITA REYES, IL"REDO REYES, +IC(AEL ROY REYES, SI)TA LAPU, a!SA+PAGUITA TRA*EL CORP., Respondents.

" = C & % & > N

PERE, J.:

Assailed in this petition for review are the "ecision1

dated :: >ctoer :00? in CA-G.R. CV?616 and the 6 @anuar# :00/ Resolution: in the sa'e case of the Court of Appeals.

This case started as a co'plaint for da'a*es tiled # respondents a*ainst Catha# $acific Airwa#s )Catha# $acific+ and %a'pa*uita Travel Corp. )%a'pa*uita Travel+, now 3oined arespondent. The factual ac4drop leadin* to the filin* of the co'plaint is as follows

%o'eti'e in ;arch 1//, respondent ilfredo Re#es )ilfredo+ 'ade a travel reservatio%a'pa*uita Travel for his fa'il#Os trip to Adelaide, Australia scheduled fro' 1: April 1//;a# 1//. 2pon oo4in* and confir'ation of their f li*ht schedule, ilfredo paid for the airand was issued four )+ Catha# $acific round-trip airplane tic4ets for ;anila-9on*Jon*- Adelaide-9on*Jon*-;anila with the followin* record locators

,-pi,

Na'e of $assen*er $NR >R R=C>R" B>CAT>R N>%.<

Re#es, ilfredo @6T9

Re#es, @uanita 9"C<

Re#es, ;ichael Ro# 9/VK(

Bapu, %i8ta 9T(;G

>n 1: April 1//, ilfredo, to*ether with his wife @uanita Re#es )@uanita+, son ;ichael RoRe#es );ichael+ and 'other-in-law %i8ta Bapu )%i8ta+, flew to Adelaide, Australia withouhitch.

>ne wee4 efore the# were scheduled to fl# ac4 ho'e, ilfredo reconfir'ed his fa'il#Osreturn fli*ht with the Catha# $acific office in Adelaide. The# were advised that the reservatwas !still o4a# as scheduled.!

>n the da# of their scheduled departure fro' Adelaide, ilfredo and his fa'il# arrived at t

airport on ti'e. hen the airport chec4-in counter opened, ilfredo was infor'ed # a stafro' Catha# $acific that the Re#eses did not have confir'ed reservations, and onl# %i8tafli*ht oo4in* was confir'ed. Nevertheless, the# were allowed to oard the fli*ht to 9on*Jdue to ada'ant pleas fro' ilfredo. hen the# arrived in 9on*Jon*, the# were a*aininfor'ed of the sa'e prole'. 2nfortunatel# this ti'e, the Re#eses were not allowed to ecause the fli*ht to ;anila was full# oo4ed. >nl# %i8ta was allowed to proceed to ;anil

fro' 9on*Jon* >n the followin* da# the Re#eses were finall# allowed to oard the ne8t fli*ht

http://www.lawphil.net/judjuris/juri2013/jun2013/gr_185891_2013.html#fnt1









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fro' 9on*Jon*. >n the followin* da#, the Re#eses were finall# allowed to oard the ne8t fli*htound for ;anila.

2pon arrivin* in the $hilippines, ilfredo went to %a'pa*uita Travel to report the incident. 9ewas infor'ed # %a'pa*uita Travel that it was actuall# Catha# $acific which cancelled theiroo4in*s.

>n 16 @une 1//, respondents as passen*ers, throu*h counsel, sent a letter to Catha# $acificadvisin* the latter of the incident and de'andin* pa#'ent of da'a*es.

After a series of e8chan*es and with no resolution in si*ht, respondents filed a Co'plaint forda'a*es a*ainst Catha# $acific and %a'pa*uita Travel and pra#ed for the followin* reliefa+ $1,000,000.00 as 'oral da'a*esF +$<00,000.00 as actual da'a*esF c+ $100,000.00 ase8e'plar# da'a*esF and d+ $100,000.00 as attorne#Os fees.

&n its Answer, Catha# $acific alle*ed that ased on its co'puteried oo4in* s#ste', severaland confusin* oo4in*s were purportedl# 'ade under the na'es of respondents throu*h two):+ travel a*encies, na'el# %a'pa*uita Travel and Ra3ah Travel Corporation. Catha# $acifice8plained that onl# the followin* $assen*er Na'e Records )$NRs+ appeared on its s#ste'$NR No. 9/V1, $NR No. 9T(;G, $NR No. @/R6=, $NR No. @6T9, and $NR No. 9/V%=.Catha# $acific went on to detail each and ever# oo4in*, to wit

1. PNR No. (9*1

A*ent %a'pa*uita Travel Corp.

$art# ;s. @ Re#es, ;r. ; R Re#es, ;r. Re#es

&tinerar# C/0:HC10 ;NBH9JGHA"B 1: A$R.

The itinerar# listed aove was confir'ed oo4in*. 9owever, the itinerar# did not includeoo4in* for the return fli*hts. (ro' infor'ation retrieved fro' AEAC2% )the oo4in* s#ste'

used # a*ents+, the a*ent has, on 10 April, added se*'ents C10HC/0 A"BH9JGH;NB 0;AI on ;J status, which was not a confir'ed oo4in*. ;J function is used for s#nchroniin*records or for tic4etin* purposes onl#. &t does not purport to e a real oo4in*. As a result, nooo4in* was trans'itted into C$AOs s#ste'.

2. PNR No. (T"+G


$art# ;rs. %i8ta Bapu

&tinerar# C/0:HC10 ;NBH9JGHA"B 1: A$R, C10HC/0 A"BH9JGH;NB 0H0 ;AI.

The aove itinerar# is the actual itinerar# that the passen*er has flown. 9owever, for the returnsector, 9JGH;NB, the ori*inal oo4in* was on C/0 of 0 ;a#. This ori*inal oo4in* wasconfir'ed on :1 ;ar. and tic4eted on 11 Apr.

This oo4in* was cancelled on 0 ;a# at /0< p.'. when C/0 was al'ost scheduled toleave at the ehest of the passen*er and she was re-oo4ed on C/0 of 0 ;a# at the sa'e

ti'e.. PNR No. J9R8E

A*ent Ra3ah Travel Corp.

$art# ;rs. @ulieta Gaspar, ;rs. %i8ta Bapu, ;rs. @uanita Re#es,

;r. ;ichael Ro# Re#es, ;r. ilfredo Re#es.

&tinerar# C/00 S C/0: ;NBH9JG 1: A$R, C10 9JGHA"B 1: A$R, C10HC/0 A"BH9JGH;NB 0 ;AI S 0 ;AI

The part# was confir'ed initiall# on C/00H1: Apr, C10H1: Apr, C10HC/0/ 0 ;a#on waitin* list for C/0:H1: Apr, C10HC/0 0 ;a#.

9owever, on <1 ;ar., the oo4in* was cancelled # the a*ent.

4. PNR No. J/8T(


$art# ;r. Re#es

&tinerar# C10HC/0 A"BH9JGH;NB 0 ;AI.

The oo4in* on the aove itinerar# was confir'ed initiall#. hen the a*ent was as4ed for tic4et nu'er as the fli*ht C/0 0 ;a# was ver# critical, the a*ent has inputted the tic4nu'er on 10 Apr. ut has re'oved the record on 11 April. %ince the oo4in* was reflectenot tic4eted, the oo4in* was cancelled on 1? Apr. accordin*l#.

This $NR was split fro' another $NR record, 9/V%=.

. PNR No. (9*SE


$art# ;s. R Bapu, ;r. R Bapu, ;r. A %a'son, ori*inall# ;r. Re#es was included in tpart# as well

&tinerar# C10HC/0 A"BH9JGH;NB 0 ;AI.

The oo4in* was confir'ed initiall# ut were not tic4eted # 11 Apr. and was cancelledaccordin*l#. 9owever, the $NR of ;r. Re#es who was ori*inall# included in this part# wsplit to a separate record of @6T9.6

Catha# $acific asserted that in the case of ilfredo with $NR No. @6T9, no valid tic4etnu'er was inputted within a prescried period which 'eans that no tic4et was sold. ThuCatha# $acific had the ri*ht to cancel the oo4in*. Catha# $acific found that %a'pa*uitaTravel initiall# inputted a tic4et nu'er for $NR No. @6T9 and had it cancelled the followda#, while the $NR Nos. 9"C< and 9T(;G of @uanita and ;ichael do not e8ist.

The Answer also contained a cross-clai' a*ainst %a'pa*uita Travel and la'ed the sa'the cancellation of respondentsO return fli*hts. Catha# $acific li4ewise counterclai'ed forpa#'ent of attorne#Os fees.

>n the other hand, %a'pa*uita Travel, in its Answer, denied Catha# $acificOs clai' that it the cause of the cancellation of the oo4in*s. %a'pa*uita Travel 'aintained that it 'ade necessar# reservation with Catha# $acific for respondentsO trip to Adelaide. After *ettin*confir'ed oo4in*s with Catha# $acific, %a'pa*uita Travel issued the correspondin* tic4respondents. Their confir'ed oo4in*s were covered with the followin* $NRs

PASSENGER NA+E PNR No.

Bapu, %i8ta 9/V1H @6T9

Re#es, ilfredo 9/V1H9"C<

Re#es ;ichael Ro# 9/V1H9/VK(





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Re#es, ;ichael Ro# 9/V1H9/VK(

Re#es, @uanita 9T(;G

%a'pa*uita Travel e8plained that the Re#eses had two ):+ $NRs each ecause confir'ationfro' Catha# $acific was 'ade one fli*ht se*'ent at a ti'e. %a'pa*uita Travel asserted that itonl# issued the tic4ets after Catha# $acific confir'ed the oo4in*s. (urther'ore, %a'pa*uitaTravel e8onerated itself fro' liailit# for da'a*es ecause respondents were clai'in* forda'a*es arisin* fro' a reach of contract of carria*e. %a'pa*uita Travel li4ewise filed across-clai' a*ainst Catha# $acific and a counterclai' for da'a*es.

"urin* the pre-trial, the parties a*reed on the followin* stipulation of facts

1. That the plaintiffs did not deal directl# with Catha# $acific Airwa#sF:. That the plaintiffs did not 'a4e their oo4in*s directl# with Catha# $acific Airwa#sF

<. That the plaintiffs did not purchase and did not *et their tic4ets fro' Catha# $acific Airwa#sF

. That Catha# $acific Airwa#s has pro'ptl# replied to all co''unications sent # the plaintiffsthrou*h their counselF

. That the plane tic4ets issued to plaintiffs were valid, which is wh# the# were ale to departfro' ;anila to Adelaide, Australia and that the reason wh# the# were not ale to oard theirreturn fli*ht fro' Adelaide was ecause of the alle*ed cancellation of their oo4in* # Catha#$acific Airwa#s at Adelaide, save for that of %i8ta Bapu whose oo4in* was confir'ed #Catha# $acific Airwa#sF

6. That several reservations and oo4in*s for the plaintiffs were done # defendant%a'pa*uita Travel Corporation throu*h the co'puter reservation s#ste' and each of suchreuest was issued a $NRF

. That, as a travel a*ent, defendant %a'pa*uita Travel Corporation 'erel# acts as aoo4in*HsalesHtic4etin* ar' for airline co'panies and it has nothin* to do with the airlineoperationsF

?. That in the travel industr#, the practice of reconfir'ation of return fli*hts # passen*ers iscoursed or done directl# with the airline co'pan# and not with the travel a*ent, which has noparticipation, control or authorit# in 'a4in* such reconfir'ations.

/. That in the travel industr#, the practice of cancellation of fli*hts is within the control of theairline and not of the travel a*ent, unless the travel a*ent is reuested # the passen*ers to'a4e such cancellationsF and,

10. That defendant Catha# $acific Airwa#s has advertised that !there is no need to confir'#our fli*ht when travellin* with us!, althou*h Catha# $acific Airwa#s ualifies the sa'e to theeffect that in so'e cases there is a need for reconfir'ations.?

After trial on the 'erits, the Re*ional Trial Court )RTC+ rendered a "ecision,/ the dispositive

part of which reads9=R=(>R=, pre'ises considered, 3ud*'ent is here# rendered in favor of the defendantsand a*ainst the herein plaintiff. Accordin*l#, plaintiffsO co'plaint is here# ordered "&%;&%%="for lac4 of 'erit. "efendantsO counterclai's and cross-clai's are si'ilarl# ordered dis'issedfor lac4 of 'erit. No pronounce'ent as to cost.10

The trial court found that respondents were in possession of valid tic4ets ut did not haveconfir'ed reservations for their return trip to ;anila. Additionall#, the trial court oserved tthe several $NRs opened # %a'pa*uita Travel created confusion in the oo4in*s. The trcourt however did not find an# asis to estalish liailit# on the part of either Catha# $acif%a'pa*uita Travel considerin* that the cancellation was not without an# 3ustified reason.(inall#, the trial court denied the clai's for da'a*es for ein* unsustantiated.

Respondents appealed to the Court of Appeals. >n :: >ctoer :00?, the Court of Appealordered Catha# $acific to pa# $:,000.00 each to respondents as no'inal da'a*es.

2pon denial of their 'otion for reconsideration, Catha# $acific filed the instant petition forreview assi*nin* the followin* as errors co''itted # the Court of Appeals

A.9=T9=R >R N>T T9= C>2RT >( A$$=AB% C>;;&TT=" A CB=AR AN" R=V=R%&=RR>R &N 9>B"&NG T9AT CAT9AI $AC&(&C A&RAI% &% B&AEB= (>R N>;&NAB"A;AG=% (>R &T% ABB=G=" &N&T&AB ER=AC9 >( C>NTRACT &T9 T9= $A%%=NG=V=N T9>2G9 CAT9AI $AC&(&C A&RAI% A% AEB= T> $R>V= E=I>N"R=A%>NAEB= ">2ET T9AT &T A% N>T AT (A2BT (>R T9= $R="&CA;=NT >( T9R=%$>N"=NT $A%%=NG=R%.

E.

9=T9=R >R N>T T9= C>2RT >( A$$=AB% C>;;&TT=" A CB=AR AN" R=V=R%&=RR>R &N R=BI&NG >N ;ATT=R% N>T $R>V=" "2R&NG T9= TR&AB AN" N>T%2$$>RT=" EI T9= =V&"=NC= A% EA%&% (>R 9>B"&NG CAT9AI $AC&(&C A&RAIB&AEB= (>R N>;&NAB "A;AG=%.

C.

9=T9=R >R N>T T9= C>2RT >( A$$=AB% C>;;&TT=" A CB=AR AN" R=V=R%&=RR>R &N 9>B"&NG CAT9AI $AC&(&C A&RAI% B&AEB= (>R N>;&NAB "A;AG=% TR=%$>N"=NT %&TA BA$2K.

".

9=T9=R >R N>T T9= C>2RT >( A$$=AB% C>;;&TT=" A CB=AR AN" R=V=R%&=RR>R &N N>T 9>B"&NG %A;$AG2&TA TRAV=B C>R$. B&AEB= T> CAT9AI $AC&(&C A&RAI% (>R 9AT=V=R "A;AG=% T9AT T9= A&RB&N= C>;$ANI >2B" E= A"@2"G=" T9= R=%$>N"=NT $A%%=NG=R%.

=.

ABT=RNAT&V=BI, 9=T9=R >R N>T T9= C>2RT >( A$$=AB% C>;;&TT=" A CB= AN" R=V=R%&EB= =RR>R 9=N &T (A&B=" T> A$$BI T9= ">CTR&N= >( %TAR="=C&%&% &N (&&NG T9= A;>2NT >( N>;&NAB "A;AG=% T> E= AAR"=".11

Catha# $acific assails the award of no'inal da'a*es in favor of respondents on the *rou

that its action of cancellin* the f li*ht oo4in*s was 3ustifiale. Catha# $acific reveals that uinvesti*ation, the respondents had no confir'ed oo4in*s for their return fli*hts. 9ence, itnot oli*ated to transport the respondents. &n fact, Catha# $acific adds, it e8hiited *ood fin acco''odatin* the respondents despite holdin* unconfir'ed oo4in*s.

Catha# $acific also scores the Court of Appeals in asin* the award of no'inal da'a*es on

f f C












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# pp * *the alle*ed asth'atic condition of passen*er ;ichael and old a*e of %i8ta. Catha# $acificpoints out that the records, includin* the testi'onies of the witnesses, did not 'a4e an#'ention of ;ichaelOs asth'a. And %i8ta was in fact holdin* a confir'ed oo4in* ut sherefused to ta4e her confir'ed seat and instead sta#ed in 9on*Jon* with the otherrespondents.

Catha# $acific la'es %a'pa*uita Travel for ne*li*ence in not ensurin* that respondents hadconfir'ed oo4in*s for their return trips.

Bastl#, assu'in* ar*uendo that the award of no'inal da'a*es is proper, Catha# $acificcontends that the a'ount should e reduced to $,000.00 for each passen*er.

At the outset, it ears pointin* out that respondent %i8ta had no cause of action a*ainst Catha#

$acific or %a'pa*uita Travel. The ele'ents of a cause of action consist of )1+ a ri*ht e8istin*in favor of the plaintiff, ):+ a dut# on the part of the defendant to respect the plaintiffOs ri*ht, and)<+ an act or o'ission of the defendant in violation of such ri*ht. 1: As culled fro' the records,there has een no violation of an# ri*ht or reach of an# dut# on the part of Catha# $acific and%a'pa*uita Travel. As a holder of a valid oo4in*, %i8ta had the ri*ht to e8pect that she wouldfl# on the fli*ht and on the date specified on her airplane tic4et. Catha# $acific 'et here8pectations and %i8ta was indeed ale to co'plete her fli*ht without an# troule. Theasence of an# violation to %i8taOs ri*ht as passen*er effectivel# deprived her of an# reliefa*ainst either Catha# $acific or %a'pa*uita Travel.

ith respect to the three re'ainin* respondents, we rule as follows

The deter'ination of whether or not the award of da'a*es is correct depends on the nature ofthe respondentsO contractual relations with Catha# $acific and %a'pa*uita Travel. &t is e#onddispute that respondents were holders of Catha# $acific airplane tic4ets and the# 'ade theoo4in* throu*h %a'pa*uita Travel.

RespondentsO cause of action a*ainst Catha# $acific ste''ed fro' a reach of contract ofcarria*e. A contract of carria*e is defined as one where# a certain person or association ofpersons oli*ate the'selves to transport persons, thin*s, or news fro' one place to anotherfor a fi8ed price.1< 2nder Article 1<: of the Civil Code, this !persons, corporations, fir's, orassociations en*a*ed in the usiness of carr#in* or t ransportin* passen*ers or *oods or oth,# land, water, or air, for co'pensation, offerin* their services to the pulic! is called a co''oncarrier.

Respondents entered into a contract of carria*e with Catha# $acific. As far as respondents areconcerned, the# were holdin* valid and confir'ed airplane tic4ets. The tic4et in itself is a validwritten contract of carria*e where# for a consideration, Catha# $acific undertoo4 to carr#respondents in its airplane for a round-trip f li*ht fro' ;anila to Adelaide, Australia and thenac4 to ;anila. &n fact, ilfredo called the Catha# $acific office in Adelaide one wee4 eforehis return fli*ht to re-confir' his oo4in*. 9e was even assured # a staff of Catha# $acific that

he does not need to reconfir' his oo4in*.&n its defense, Catha# $acific posits that ilfredoOs oo4in* was cancelled ecause a tic4etnu'er was not inputted # %a'pa*uita Travel, while oo4in*s of @uanita and ;ichael werenot honored for ein* fictitious. Catha# $acific clearl# la'es %a'pa*uita Travel for notfinaliin* the oo4in*s for the respondentsO return fli*hts. Respondents are not priv# towhatever 'isunderstandin* and confusion that 'a# have transpired in their oo4in*s. >n its

face, the airplane tic4et is a valid written contract of carria*e. This Court has held that wheairline issues a tic4et to a passen*er confir'ed on a particular fli*ht, on a certain date, acontract of carria*e arises, and the passen*er has ever# ri*ht to e8pect that he would fl# othat fli*ht and on that date. &f he does not, then the carrier opens itself to a suit for reach contract of carria*e.1

As further elucidated # the Court of Appeals

Now, Article 1<0 of the Civil Code 'andates that !if the ter's of a contract are clear andleave no dout upon the intention of the contractin* parties, the literal 'eanin* of itsstipulations shall control.! 2nder %ection /, Rule 1<0 of the Rules of Court, once the ter'an a*ree'ent have een reduced to writin*, it is dee'ed to contain all the ter's a*reed u

# the parties and no evidence of such ter's other than the contents of the written a*ree'shall e ad'issile. The ter's of the a*ree'ent of appellants and appellee Catha# $acifie'odied in the tic4ets issued # the latter to the for'er are plain appellee Catha# $aciwill transport appellants to Adelaide, Australia fro' ;anila via 9on*4on* on 1: April 1//1ac4 to ;anila fro' Adelaide, Australia also via 9on*4on* on ;a# 1//. &n addition, thetic4ets reveal that all appellants have confir'ed oo4in*s for their fli*ht to Adelaide, Austrand ac4 to ;anila as 'anifested # the words !>4! indicated therein. Arlene Ansa#, appCatha# $acificOs Reservation %upervisor, validated this fact in her testi'on# sa#in* that threturn fli*hts of all appellants to the $hilippines on ;a# 1// were confir'ed as appearithe tic4ets. &nduital#, when appellee Catha# $acific initiall# refused to transport appellanthe $hilippines on ;a# 1// due to the latterOs lac4 of reservation, it has, in effect, reactheir contract of carria*e. Appellants, however, were eventuall# acco''odated andtransported # appellee Catha# $acific to ;anila.1

Catha# $acific reached its contract of carria*e with respondents when it disallowed the'

oard the plane in 9on* Jon* *oin* to ;anila on the date reflected on their tic4ets. Thus,Catha# $acific opened itself to clai's for co'pensator#, actual, 'oral and e8e'plar#da'a*es, attorne#Os fees and costs of suit.

&n contrast, the contractual relation etween %a'pa*uita Travel and respondents is a contfor services. The o3ect of the contract is arran*in* and facilitatin* the latterOs oo4in* andtic4etin*. &t was even %a'pa*uita Travel which issued the tic4ets.

%ince the contract etween the parties is an ordinar# one for services, the standard of carreuired of respondent is that of a *ood father of a fa'il# under Article 11< of the Civil CoThis connotes reasonale care consistent with that which an ordinaril# prudent person wohave oserved when confronted with a si'ilar situation. The test to deter'ine whetherne*li*ence attended the perfor'ance of an oli*ation is did the defendant in doin* the alne*li*ent act use that reasonale care and caution which an ordinaril# prudent person wohave used in the sa'e situationQ &f not, then he is *uilt# of ne*li*ence.16

There was indeed failure on the part of %a'pa*uita Travel to e8ercise due dili*ence in

perfor'in* its oli*ations under the contract of services. &t was estalished # Catha# $acthrou*h the *eneration of the $NRs, that %a'pa*uita Travel failed to input the correct tic4nu'er for ilfredoOs tic4et. Catha# $acific even asserted that %a'pa*uita Travel 'ade tfictitious oo4in*s for @uanita and ;ichael.

The ne*li*ence of %a'pa*uita Travel renders it also liale for da'a*es.

(or one to e entitled to actual da'a*es, it is necessar# to prove the actual a'ount of loss

f ith 2 d th i t d t t titl d t l d l











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with a reasonale de*ree of certaint#, pre'ised upon co'petent proof and the est evidenceotainale # the in3ured part#. To 3ustif# an award of actual da'a*es, there 'ust eco'petent proof of the actual a'ount of loss. Credence can e *iven onl# to clai's which aredul# supported # receipts.1

e echo the findin*s of the trial court that respondents failed to show proof of actual da'a*es.ilfredo initiall# testified that he personall# incurred losses a'ountin* to $<00,000.00 whichrepresents the a'ount of the contract that he was supposedl# scheduled to si*n had his returntrip not een cancelled. "urin* the cross-e8a'ination however, it appears that the supposedcontract-si*nin* was a 'ere for'alit# and that an a*ree'ent had alread# een hatchedeforehand. 9ence, we cannot fatho' how said contract did not 'aterialie ecause of

ilfredoOs asence, and how ilfredo incurred such losses when he hi'self ad'itted that heentered into said contract on ehalf of $arsons =n*ineerin* Consultin* (ir', where he wor4edas construction 'ana*er. Thus, if indeed there were losses, these were losses suffered # theco'pan# and not # ilfredo. ;oreover, he did not present an# docu'entar# evidence, suchas the actual contract or affidavits fro' an# of the parties to said contract, to sustantiate hisclai' of losses. ith respect to the re'ainin* passen*ers, the# li4ewise failed to present proofof the actual losses the# suffered.

2nder Article :::0 of the Civil Code of the $hilippines, an award of 'oral da'a*es, inreaches of contract, is in order upon a showin* that the defendant acted fraudulentl# or in adfaith.1? hat the law considers as ad faith which 'a# furnish the *round for an award of 'oralda'a*es would e ad faith in securin* the contract and in the e8ecution thereof, as well as inthe enforce'ent of its ter's, or an# other 4ind of deceit. &n the sa'e vein, to warrant the awardof e8e'plar# da'a*es, defendant 'ust have acted in wanton, fraudulent, rec4less,oppressive, or 'alevolent 'anner.1/

&n the instant case, it was proven # Catha# $acific that first, it e8tended all possileacco''odations to respondents.1âwphi1 The# were pro'ptl# infor'ed of the prole' in theiroo4in*s while the# were still at the Adelaide airport. "espite the non-confir'ation of theiroo4in*s, respondents were still allowed to oard the Adelaide to 9on* Jon* fli*ht. 2ponarrivin* in 9on* Jon*, the# were a*ain infor'ed that the# could not e acco''odated on thene8t fli*ht ecause it was alread# full# oo4ed. The# were however allowed to oard the ne8tavailale fli*ht on the followin* da#. %econd, upon receivin* the co'plaint letter ofrespondents, Catha# $acific i''ediatel# addressed the co'plaint and *ave an e8planation onthe cancellation of their fli*ht oo4in*s.

The Court of Appeals is correct in statin* that !what 'a# e attriuted to 8 8 8 Catha# $acific isne*li*ence concernin* the lapses in their process of confir'in* passen*er oo4in*s andreservations, done throu*h travel a*encies. Eut this ne*li*ence is not so *ross so as to a'ountto ad faith.!:0 Catha# $acific was not 'otivated # 'alice or ad faith in not allowin*respondents to oard on their return fli*ht to ;anila. &t is evident and was in fact proven #

Catha# $acific that its refusal to honor the return fli*ht oo4in*s of respondents was due to thecancellation of one oo4in* and the two other oo4in*s were not reflected on its co'puteriedoo4in* s#ste'.

Bi4ewise, %a'pa*uita Travel cannot e held liale for 'oral da'a*es. True, %a'pa*uitaTravel was ne*li*ent in the conduct of its oo4in* and tic4etin* which resulted in thecancellation of fli*hts. Eut its act ions were not proven to have een tainted with 'alice or ad

faith. 2nder these circu'stances, respondents are not entitled to 'oral and e8e'plar#da'a*es.1âwphi1 ith respect to attorne#Os fees, we uphold the appellate courtOs findin* olac4 of factual and le*al 3ustification to award attorne#Os fees.

e however sustain the award of no'inal da'a*es in the a'ount of $:,000.00 to onl# tof the four respondents who were a**rieved # the last-'inute cancellation of their fli*htsNo'inal da'a*es are recoverale where a le*al ri*ht is technicall# violated and 'ust evindicated a*ainst an invasion that has produced no actual present loss of an# 4ind or whthere has een a reach of contract and no sustantial in3ur# or actual da'a*es whatsoevhave een or can e shown.:1 2nder Article :::1 of the Civil Code, no'inal da'a*es 'aawarded to a plaintiff whose ri*ht has een violated or invaded # the defendant, for thepurpose of vindicatin* or reco*niin* that ri*ht, not for inde'nif#in* the plaintiff for an# lossuffered.

Considerin* that the three respondents were denied oardin* their return fli*ht fro' 9on*to ;anila and that the# had to wait in the airport overni*ht for their return fli*ht, the# aredee'ed to have technicall# suffered in3ur#. Nonetheless, the# failed to present proof of acda'a*es. Conseuentl#, the# should e co'pensated in the for' of no'inal da'a*es.

The a'ount to e awarded as no'inal da'a*es shall e eual or at least co''ensuratethe in3ur# sustained # respondents considerin* the concept and purpose of such da'a*eThe a'ount of no'inal da'a*es to e awarded 'a# also depend on certain special rease8tant in the case.::

The a'ount of such da'a*es is addressed to the sound discretion of the court and ta4in*account the relevant circu'stances,:< such as the failure of so'e respondents to oard thfli*ht on schedule and the sli*ht reach in the le*al oli*ations of the airline co'pan# toco'pl# with the ter's of the contract, i.e., the airplane tic4et and of the travel a*enc# to '

the correct oo4in*s. e find the award of $:,000.00 to the Re#eses correct and properCatha# $acific and %a'pa*uita Travel acted to*ether in creatin* the confusion in the oowhich led to the erroneous cancellation of respondentsO oo4in*s. Their ne*li*ence is thepro8i'ate cause of the technical in3ur# sustained # respondents. Therefore, the# haveeco'e 3oint tortfeasors, whose responsiilit# for uasi-delict, under Article :1/ of the CCode, is solidar#.

Eased on the fore*oin*, Catha# $acific and %a'pa*uita Travel are 3ointl# and solidaril# liafor no'inal da'a*es awarded to respondents ilfredo, @uanita and ;ichael Ro#.

9=R=(>R=, the $etition is "=N&=". The :: >ctoer :00? "ecision of the Court of Appis A((&R;=" with ;>"&(&CAT&>N that %a'pa*uita Travel is held to e solidaril# liale wCatha# $acific in the pa#'ent of no'inal da'a*es of :,000.00 each for ilfredo Re#es@uanita Re#es, and ;ichael Ro8 Re#es. The co'plaint of respondent % i8ta

Bapu is "&%;&%%=" for lac4 of cause of action.

%> >R"=R=".

the latter undertoo4 to uild the for'erDs : roo' condo'iniu'Hhotel )Condotel Euildin* :

















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G.R. No. 19980 Ju& 28, 201

J PLUS ASIA DE*ELOP+ENT CORPORATION, $etitioner,vs.UTILITY ASSURANCE CORPORATION, Respondent.

" = C & % & > N

*ILLARA+A, JR., J.:

Eefore the Court is a petition for review on certiorari under Rule of the 1// Rules of Civil$rocedure, as a'ended, assailin* the "ecision1 dated @anuar# :,:011 and Resolution: dated"ece'er ?, :011 of the Court of Appeals )CA+ in CA-G.R. %$ No. 11:?0?.

The (acts

>n "ece'er :, :00, petitioner @ $lus Asia "evelop'ent Corporation represented # itsChair'an, @oo 9an Bee, and ;artin =. ;auna#, doin* usiness under the na'e and st#le of%even %hades of Elue Tradin* and %ervices, entered into a Construction A*ree'ent< where#

the latter undertoo4 to uild the for'er s :-roo' condo'iniu'Hhotel )Condotel Euildin* :located at the (airwa#s S Eluewaters Golf S Resort in Eoraca# &sland, ;ala#, A4lan. Thepro3ect, costin* $:,000,000.00, was to e co'pleted within one #ear or <6 da#s rec4onfro' the first calendar da# af ter si*nin* of the Notice of Award and Notice to $roceed andreceipt of down pa#'ent ):07 of contract price+. The $?,00,000.00 down pa#'ent was paid on @anuar# 1, :00?. $a#'ent of the alance of the contract price will e ased onactual wor4 finished within 1 da#s fro' receipt of the 'onthl# pro*ress illin*s. $er thea*reed wor4 schedule, the co'pletion date of the pro3ect was "ece'er :00?.;auha# su'itted the reuired $erfor'ance Eond6 issued # respondent 2tilit# Assurance Corpo)2TA%%C>+ in the a'ount euivalent to :07 down pa#'ent or $?. 'illion.

;auna# co''enced wor4 at the pro3ect site on @anuar# , :00?. $etitioner paid up to th'onthl# pro*ress illin* sent # ;auna#. As of %epte'er 16, :00?, petitioner had paid total a'ount of $1,//,:.0< inclusive of the :07 down pa#'ent. 9owever, as of said ;auna# had acco'plished onl# :.7 of the pro3ect.

&n the @oint Construction =valuation Result and %tatus Report? si*ned # ;auna# assiste Arch. =lwin >lavario, and @oo 9an Bee assisted # Ro# V. ;ovido, the followin* findin*s waccepted as true, accurate and correct

&&& %TAT2% >( $R>@=CT A% >( 1 N>V=;E=R :00?

1+ After conductin* a 3oint inspection and evaluation of the pro3ect to deter'ine the actualpercenta*e of acco'plish'ent, the contractin* parties, assisted # their respective techn*roups, %%E assisted # Arch. =lwin >lavario and @$B2% assisted # =n*rs. @oe# Ro3as a%hiela Eotardo, concluded and a*reed that as of 1 Nove'er :00?, the pro3ect is onl# T>ne point Thirt# Nine $ercent )<1.</7+ co'plete.

:+ (urther'ore, the value of construction 'aterials allocated for the co'pletion of the pro3

and currentl# on site has een deter'ined and a*reed to e >N= ;&BB&>N (>RTI N&N=T9>2%AN" T9R== 92N"R=" %&TI (>2R $=%>% AN" (>RTI (&V= C=NTAV>%)$1,0/,<6.+

<+ The additional acco'plish'ent of %%E, reflected in its reconciled and consolidated ?th/th illin*s, is Three point =i*ht# (ive $ercent )<.?7+ with a *ross value of $1,6<,<.<a'ount creditale to %%E after deductin* the withholdin* ta8 is $1,<?,:.?

+ The unrecouped a'ount of the down pa#'ent is $:,</,1.< after deductin* the cos'aterials on site and the net illale a'ount reflected in the reconciled and consolidated ?and /th illin*s. The unco'pleted portion of the pro3ect is 6?.617 with an esti'ated valueconstruction a*ree'ent si*ned is$:,??0,1/.:./ )='phasis supplied.+

>n Nove'er 1/, :00?, petitioner ter'inated the contract and sent de'and letters to ;aand respondent suret#. As its de'ands went unheeded, petitioner filed a Reuest for Aritration10 efore the Construction &ndustr# Aritration Co''ission )C&AC+. $etitioner pr

that ;auna# and respondent e ordered to pa# the su's of $?,/?0,.?/ as liuidatedda'a*es and $:,</,1.< correspondin* to the unrecouped down pa#'ent or overpa#petitioner 'ade to ;auna#.11

&n his Answer ,1: ;auna# clai'ed that the dela# was caused # retrofittin* and other reviswor4s ordered # @oo 9an Bee. 9e asserted that he actuall# had until April <0, :00/ to f inthe pro3ect since the <6 da#s period of co'pletion started onl# on ;a# :, :00? after clea

the retrofitted old structure. 9ence, the ter'ination of the contract # petitioner was pre'atureand the filin* of the co'plaint a*ainst hi' as aseless 'alicio s and in ad faith

&n the assailed decision the CA a*reed with the C&AC that the specific condition in the




























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and the filin* of the co'plaint a*ainst hi' was aseless, 'alicious and in ad faith.

Respondent, on the other hand, filed a 'otion to dis'iss on the *round that petitioner has nocause of action and the co'plaint states no cause of action a*ainst it. The C&AC denied the'otion to dis'iss. RespondentOs 'otion for reconsideration was li4ewise denied.1<

&n its Answer =8 Aundante Ad Cautela' ith Co'pulsor# Counterclai's and Cross-clai's,1 respondent ar*ued that the perfor'ance ond 'erel# *uaranteed the :07 downpa#'ent and not the entire oli*ation of ;auna# under the Construction A*ree'ent. %incethe value of the pro3ectOs acco'plish'ent alread# e8ceeded the said a'ount, respondentOsoli*ation under the perfor'ance ond had een full# e8tin*uished. As to the clai' for alle*edoverpa#'ent to ;auna#, respondent contended that it should not e credited a*ainst the :07

down pa#'ent which was alread# e8hausted and such application # petitioner is tanta'ountto revivin* an oli*ation that had een le*all# e8tin*uished # pa#'ent. Respondent also setup a cross-clai' a*ainst ;auna# who e8ecuted in its favor an &nde'nit# A*ree'ent where#;auna# undertoo4 to inde'nif# respondent for whatever a'ounts it 'a# e ad3ud*ed lialeto pa# petitioner under the suret# ond.

Eoth petitioner and respondent su'itted their respective docu'entar# and testi'onialevidence. ;auna# failed to appear in the scheduled hearin*s and to present his evidencedespite due notice to his counsel of record. The C&AC thus declared that ;auna# is dee'edto have waived his ri*ht to present evidence.1

>n (eruar# :, :010, the C&AC rendered its "ecision16 and 'ade the followin* award

Accordin*l#, in view of our fore*oin* discussions and dispositions, the Triunal here#ad3ud*es, orders and directs

1. Respondents ;auna# and 2tassco to 3ointl# and severall# pa# clai'ant the followin*

a+ $,6/,/6/./0, as liuidated da'a*es, plus le*al interest thereon at the rate of 67 perannu' co'puted fro' the date of this decision up to the ti'e this decision eco'es final, and1:7 per annu' co'puted fro' the date this decision eco'es final until full# paid, and

+ $:,</,1.< as unrecouped down pa#'ent plus interest thereon at the rate of 67 perannu' co'puted fro' the date of this decision up to the ti'e this decision eco'es final, and1:7 per annu' co'puted fro' the date this decision eco'es final until full# paid.

&t ein* understood that respondent 2tasscoOs liailit# shall in no case e8ceed $?. 'illion.

:. Respondent ;auna# to pa# to clai'ant the a'ount of $/?,<.?/, which is respondent;auna#Os share in the aritration cost clai'ant had advanced, with le*al interest thereon fro'@anuar# ?, :010 until full# paid.

<. Respondent ;auna# to inde'nif# respondent 2tassco of the a'ounts respondent 2tasscowill have paid to clai'ant under this decision, plus interest thereon at the rate of 1:7 perannu' co'puted fro' the date he is notified of such pa#'ent 'ade # respondent 2tassco to

clai'ant until full# paid, and to pa# 2tassco $100,000.00 as attorne#Os fees.%> >R"=R=".1

"issatisfied, respondent filed in the CA a petition for review under Rule < of the 1// Rules of Civil $rocedure, as a'ended.

&n the assailed decision, the CA a*reed with the C&AC that the specific condition in the$erfor'ance Eond did not clearl# state the li'itation of the suret#Os liailit#. $ursuant to A1<1? of the Civil Code, the CA said that the provision should e construed in favor ofpetitioner considerin* that the oscurel# phrased provision was drawn up # respondent a;auna#. (urther, the appellate court stated that respondent could not possil# *uaranteedown pa#'ent ecause it is not ;auna# who owed the down pa#'ent to petitioner ut thother wa# around. Conseuentl#, the co'pletion # ;auna# of <1.</7 of the constructiowould not lead to the e8tin*uish'ent of respondentOs liailit#. The $?. 'illion was a li'it the a'ount of respondentOs liailit# and not a li'itation as to the oli*ation or underta4in* *uaranteed.

9owever, the CA reversed the C&ACOs rulin* that ;auna# had incurred dela# which entitlpetitioner to the stipulated liuidated da'a*es and unrecouped down pa#'ent. Citin* Aerospace Che'ical &ndustries, &nc. v. Court of Appeals,1/ the appellate court said that noreuisites in order to consider the oli*or or detor in default were present in this case. &t that it is onl# fro' "ece'er :, :00? )co'pletion date+ that we should rec4on defaultecause the Construction A*ree'ent provided onl# for dela# in the co'pletion of the pro3and not dela# on a 'onthl# asis usin* the wor4 schedule approved # petitioner as thereference point. 9ence, petitionerOs ter'ination of the contract was pre'ature since the dein this case was 'erel# speculativeF the oli*ation was not #et de'andale.

The dispositive portion of the CA "ecision reads

9=R=(>R=, pre'ises considered, the instant petition for review is GRANT=". The as"ecision dated 1< @anuar# :010 rendered # the C&AC Aritral Triunal in C&AC Case No:00/ is here# R=V=R%=" and %=T A%&"=. Accordin*l#, the rit of =8ecution dated :Nove'er :010 issued # the sa'e triunal is here# ANN2BB=" and %=T A%&"=.

%> >R"=R=".:0

$etitioner 'oved for reconsideration of the CA decision while respondent filed a 'otion fopartial reconsideration. Eoth 'otions were denied.

The &ssues

Eefore this Court petitioner see4s to reverse the CA insofar as it denied petitionerOs clai'sunder the $erfor'ance Eond and to reinstate in its entiret# the (eruar# :, :010 C&AC"ecision. %pecificall#, petitioner alle*ed that

A. T9= C>2RT >( A$$=AB% %=R&>2%BI =RR=" &N N>T 9>B"&NG T9AT T9= ABT=RNAT&V= "&%$2T= R=%>B2T&>N ACT AN" T9= %$=C&AB R2B=% >N ABT=RNA"&%$2T= R=%>B2T&>N 9AV= %TR&$$=" T9= C>2RT >( A$$=AB% >( @2R&%"&CT&>T> R=V&= ARE&TRAB AAR"%.

E. T9= C>2RT >( A$$=AB% %=R&>2%BI =RR=" &N R=V=R%&NG T9= ARE&TRAB A>N AN &%%2= T9AT A% N>T RA&%=" &N T9= AN%=R. N>T &"=NT&(&=" &N T9= T=

>( R=(=R=NC=, N>T A%%&GN=" A% AN=RR>R, AN" N>T ARG2=" &N ANI >( T9=$B=A"&NG% (&B=" E=(>R= T9= C>2RT.

C. T9= C>2RT >( A$$=AB% %=R&>2%BI =RR=" &N R=BI&NG >N T9= CA%= >( A=R>%$AC= C9=;&CAB &N"2%TR&=%, &NC. v. C>2RT >( A$$=AB%, <1 %CRA /,9&C9 9A% N>T9&NG T> "> &T9 C>N%TR2CT&>N AGR==;=NT%.:1

>ur Rulin*

> th d l i i d fi d it i titi O t ti th t ith thissue stipulated in the Ter's of Reference:6)T>R+ which is distinct fro' the issue of the e

























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>n the procedural issues raised, we find no 'erit in petitionerOs contention that with theinstitutionaliation of alternative dispute resolution under Repulic Act )R.A.+ No./:?,:: otherwise 4nown as the Alternative "ispute Resolution Act of :00, the CA wasdivested of 3urisdiction to review the decisions or awards of the C&AC. $etitioner erroneousl#relied on the provision in said law allowin* an# part# to a do'estic aritration to file in theRe*ional Trial Court )RTC+ a petition either to confir', correct or vacate a do'estic aritralaward.

e hold that R.A. No. /:? did not confer on re*ional trial courts 3urisdiction to review awardsor decisions of the C&AC in construction disputes. >n the contrar#, %ection 0 thereof e8pressl#declares that confir'ation # the RTC is not reuired, thus

%=C. 0. Confir'ation of Award. The confir'ation of a do'estic aritral award shall e*overned # %ection :< of R.A. ?6.

A do'estic aritral award when confir'ed shall e enforced in the sa'e 'anner as final ande8ecutor# decisions of the Re*ional Trial Court.

The confir'ation of a do'estic award shall e 'ade # the re*ional trial court in accordancewith the Rules of $rocedure to e pro'ul*ated # the %upre'e Court.

A C&AC aritral award need not e confir'ed # the re*ional trial court to e e8ecutor# asprovided under =.>. No. 100?. )='phasis supplied.+

=8ecutive >rder )=>+ No. 100? vests upon the C&AC ori*inal and e8clusive 3urisdiction overdisputes arisin* fro', or connected with, contracts entered into # parties involved inconstruction in the $hilippines, whether the dispute arises efore or after the co'pletion of thecontract, or after the aandon'ent or reach thereof. E# e8press provision of %ection 1/thereof, the aritral award of the C&AC is final and unappealale, e8cept on uestions of law,

which are appealale to the %upre'e Court. ith the a'end'ents introduced # R.A. No./0: and pro'ul*ation of the 1// Rules of Civil $rocedure, as a'ended, the C&AC wasincluded in the enu'eration of uasi3udicial a*encies whose decisions or awards 'a# eappealed to the CA in a petition for review under Rule <. %uch review of the C&AC award 'a#involve either uestions of fact, of law, or of fact and law.:<

$etitioner 'isread the provisions of A.;. No. 0-11-0?-%C )%pecial A"R Rules+ pro'ul*ated# this Court and which too4 effect on >ctoer <0, :00/. %ince R.A. No. /:? e8plicitl#e8cluded C&AC awards fro' do'estic aritration awards that need to e confir'ed to ee8ecutor#, said awards are therefore not covered # Rule 11 of the %pecial A"R Rules,: asthe# continue to e *overned # => No. 100?, as a'ended and the rules of procedure of theC&AC. The C&AC Revised Rules of $rocedure Governin* Construction Aritration: provide forthe 'anner and 'ode of appeal fro' C&AC decisions or awards in %ection 1? thereof, whichreads

%=CT&>N 1?.: $etition for review. A petition for review fro' a final award 'a# e ta4en #

an# of the parties within fifteen )1+ da#s fro' receipt thereof in accordance with the provisionsof Rule < of the Rules of Court.

As to the alle*ed error co''itted # the CA in decidin* the case upon an issue not raised orliti*ated efore the C&AC, this assertion has no asis. hether or not ;auna# had incurreddela# in the perfor'ance of his oli*ations under the Construction A*ree'ent was the ver# first

issue stipulated in the Ter's of Reference )T>R+, which is distinct fro' the issue of the eof respondentOs liailit# under the $erfor'ance Eond.

&ndeed, resolution of the issue of dela# was crucial upon which depends petitionerOs ri*ht tliuidated da'a*es pursuant to the Construction A*ree'ent. Contrar# to the C&ACOs f indithe CA opined that dela# should e rec4oned onl# after the lapse of the one-#ear contractperiod, and conseuentl# ;auna#Os liailit# for liuidated da'a*es arises onl# upon thehappenin* of such condition.

e reverse the CA.

"efault or 'ora on the part of the detor is the dela# in the fulfill'ent of the prestation #reason of a cause i'putale to the for'er. &t is the non-fulfill'ent of an oli*ation with res

to ti'e.:

Article 116/ of the Civil Code provides

ART. 116/. Those oli*ed to deliver or to do so'ethin* incur in dela# fro' the ti'e the o 3udiciall# or e8tra3udiciall# de'ands fro' the' the fulfill'ent of their oli*ation.

8 8 8 8

&t is a *eneral rule that one who contracts to co'plete certain wor4 within a certain ti'e isliale for the da'a*e for not co'pletin* it within such ti'e, unless the dela# is e8cused owaived.:?

The Construction A*ree'ent provides in Article 10 thereof the followin* conditions as toco'pletion ti'e for the pro3ect

1. The C>NTRACT>R shall co'plete the wor4s called for under this A*ree'ent within >)1+ I=AR or <6 "a#s rec4oned fro' the 1st calendar da# after si*nin* of the Notice of Aand Notice to $roceed and receipt of down pa#'ent.

:. &n this re*ard the C>NTRACT>R shall su'it a detailed wor4 schedule for approval #>N=R within %even )+ da#s after si*nin* of this A*ree'ent and full pa#'ent of :07 ofa*reed contract price. %aid detailed wor4 schedule shall follow the *eneral schedule ofactivities and shall serve as asis for the evaluation of the pro*ress of wor4 #C>NTRACT>R.:/

&n this 3urisdiction, the followin* reuisites 'ust e present in order that the detor 'a# edefault )1+ that the oli*ation e de'andale and alread# liuidatedF ):+ that the detor dperfor'anceF and )<+ that the creditor reuires the perfor'ance 3udiciall# or e8tra3udiciall#

&n holdin* that ;auna# has not at all incurred dela#, the CA pointed out that the oli*atioperfor' or co'plete the pro3ect was not #et de'andale as of Nove'er 1/, :00? whenpetitioner ter'inated the contract, ecause the a*reed co'pletion date was still 'ore than'onth awa# )"ece'er :, :00?+. %ince the parties conte'plated dela# in the co'pletiothe entire pro3ect, the CA concluded that the failure of the contractor to catch up with sche

of wor4 activities did not constitute dela# *ivin* rise to the contractorOs liailit# for da'a*ee cannot sustain the appellate courtOs interpretation as it is inconsistent with the ter's oConstruction A*ree'ent. Article 1< of the Civil Code reuires that the various stipulationa contract shall e interpreted to*ether, attriutin* to the doutful ones that sense which 'result fro' all of the' ta4en 3ointl#. 9ere, the wor4 schedule approved # petitioner wasintended, not onl# to serve as its asis for the pa#'ent of 'onthl# pro*ress illin*s, ut a

evaluation of the pro*ress of wor4 # the contractor. Article 1<.01 )*+ )iii+ of the ConstructionA*ree'ent provides that the contractor shall e dee'ed in default if a'on* others it had that are in pro*ress and the dela#s in schedule that #ou have alread# incurred. &n this re*




















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A*ree'ent provides that the contractor shall e dee'ed in default if, a'on* others, it haddela#ed without 3ustifiale cause the co'pletion of the pro3ect !# 'ore than thirt# )<0+calendar da#s ased on official wor4 schedule dul# approved # the >N=R.!<1

Records showed that as earl# as April :00?, or within four 'onths after ;auna# co''encedwor4 activities, the pro3ect was alread# ehind schedule for reasons not attriutale topetitioner. &n the succeedin* 'onths, ;auna# was still unale to catch up with hisacco'plish'ent even as petitioner constantl# advised hi' of the dela#s, as can e *leanedfro' the followin* notices of dela# sent # petitionerOs en*ineer and construction 'ana*er,=n*r. %heila N. Eotardo

April <0, :00?

%even %hades of ElueEoraca# &sland;ala#, A4lan

,-pi,

Attention ;r. ;artin ;auna#

General ;ana*er

Thru =n*r. Re#naldo Gapasin

$ro3ect Villa Eeat ri

%u3ec t Notice of "ela#

"ear ;r. ;auna#

This is to for'alie our discussion with #our =n*ineers durin* our 'eetin* last April :<, :00?re*ardin* the dela# in the i'ple'entation of 'a3or activities ased on #our su'ittedconstruction schedule. %ustantial dela# was noted in concretin* wor4s that affects #our rooffra'in* that should have een 07 co'pleted as of this date. This dela# will create 'a3ori'pact on #our over-all schedule as the f inishin* wor4s will all e dependent on the enclosureof the uildin*.

&n this re*ard, we reco''end that #ou prepare a catch-up schedule and e8pedite the deliver#of critical 'aterials on site. e would hi*hl# appreciate if #ou could attend our ne8t re*ular'eetin* so we could i''ediatel# address this 'atter. Than4 #ou.

Ver# trul# #ours,

=n*r. %heila N. EotardoConstruction ;ana*er B;&H(=$&<:

>ctoer 1, :00?

8 8 8 8"ear ;r. ;auna#,

e have noticed continuous asence of all the =n*ineers that #ou have assi*ned on-site toad'inister and supervise #our contracted wor4. (or the past two ):+ wee4s, #our co'pan#does not have a Technical Representative 'annin* the 3osite considerin* the critical activities

p * # # # *we would hi*hl# reco''end the i''ediate replace'ent of #our $ro3ect =n*ineer within twee4.

e would hi*hl# appreciate #our usual attention on this 'atter.

8 8 8 8<<

Nove'er , :00?

8 8 8 8

"ear ;r. ;auna#,

This is in reference to #our discussion durin* the 'eetin* with ;r. @oohan Bee last >ctoe

:00? re*ardin* the construction of the (ield >ffice and %toc4 Roo' for ;aterials intendedVilla Eeatri use onl#. e understand that #ou have co''itted to co'plete it Nove'er :00? ut as of this date there is no i'prove'ent or an# on*oin* construction activit# on thsaid field office and stoc4roo'.

e are e8pectin* deliveries of >wner %upplied ;aterials ver# soon, therefore, this stoc4rois adl# needed. e will hi*hl# appreciate if this 'atter will e *iven #our i''ediate atten

Than4 #ou.

8 8 8 8<

Nove'er 6, :00?

8 8 8 8

"ear ;r. ;auna#,

e would li4e to call #our attention re*ardin* the decrease in #our 'anpower assi*ned one have oserved that for the past three )<+ wee4s instead of increasin* #our 'anpower

catch up with the dela# it was reduced to onl# ? wor4ers toda# fro' an avera*e of < worin the previous 'onths.

$lease note that ased on #our su'itted revised schedule #ou are alread# dela#ed #appro8i'atel# 7 and this will worsen should #ou not address this 'atter properl#.

e are loo4in* forward for Msic #our cooperation and continuous co''it'ent in deliverin*pro3ect as per contract a*ree'ent.

8 8 8 8<

%useuentl#, a 3oint inspection and evaluation was conducted with the assistance of thearchitects and en*ineers of petitioner and ;auna# and it was found that as of Nove'er:00?, the pro3ect was onl# <1.</7 co'plete and that the unco'pleted portion was 6?.617with an esti'ated value per Construction A*ree'ent as$:,??0,1/.:. &nstead of doulihis efforts as the scheduled co'pletion date approached, ;auna# did nothin* to re'ed#dela#s and even reduced the deplo#'ent of wor4ers at the pro3ect site. Neither did ;aun

at an#ti'e, as4 for an e8tension to co'plete the pro3ect. Thus, on Nove'er 1/, :00?,petitioner advised ;auna# of its decision to ter'inate the contract on account of thetre'endous dela# the latter incurred. This was followed # the clai' a*ainst the $erfor'aEond upon the respondent on "ece'er 1?, :00?.

$etitionerOs clai' a*ainst the $erfor'ance Eond included the liuidated da'a*es provided inthe Construction A*ree'ent, as follows e8ecutin* the scheduled wor4 activities and repeated failure to provide sufficient 'anpow











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the Construction A*ree'ent, as follows

ART&CB= 1: B&2&"AT=" "A;AG=%

1:.01 Ti'e is of the essence in this A*ree'ent. %hould the C>NTRACT>R fail to co'plete the$R>@=CT within the period stipulated herein or within the period of e8tension *ranted # the>N=R, plus >ne )1+ ee4 *race period, without an# 3ustifiale reason, the C>NTRACT>Rhere# a*rees

a. The C>NTRACT>R shall pa# the >N=R liuidated da'a*es euivalent to >ne Tenth of>ne $ercent )1H10 of 17+ of the Contract A'ount for each da# of dela# after an# and alle8tensions and the >ne )1+ wee4 Grace $eriod until co'pleted # the C>NTRACT>R.

. The C>NTRACT>R, even after pa#in* for the liuidated da'a*es due to une8ecuted wor4s

andHor dela#s shall not relieve it of the oli*ation to co'plete and finish the construction.

An# su' which 'a#e pa#ale to the >N=R for such loss 'a# e deducted fro' thea'ounts retained under Article / or retained # the >N=R when the wor4s called for underthis A*ree'ent have een finished and co'pleted.

Biuidated "a'a*eMs pa#ale to the >N=R shall e auto'aticall# deducted fro' thecontractors collectiles without prior consent and concurrence # the C>NTRACT>R.

1:.0: To *ive full force and effect to the fore*oin*, the C>NTRACT>R here#, withoutnecessit# of an# further act and deed, authories the >N=R to deduct an# a'ount that 'a#e due under &te' )a+ aove, fro' an# and all 'one# or a'ounts due or which will eco'edue to the C>NTRACT>R # virtue of this A*ree'ent andHor to collect such a'ounts fro' the$erfor'ance Eond filed # the C>NTRACT>R in this A*ree'ent.<6 )='phasis supplied.+

Biailit# for liuidated da'a*es is *overned # Articles :::6 to :::? of the Civil Code, whichprovide

ART. :::6. Biuidated da'a*es are those a*reed upon # the parties to a contract, to e paidin case of reach thereof.

ART. :::. Biuidated da'a*es, whether intended as an inde'nit# or a penalt#, shall eeuital# reduced if the# are iniuitous or unconscionale.

ART. :::?. hen the reach of the contract co''itted # the defendant is not the oneconte'plated # the parties in a*reein* upon the liuidated da'a*es, the law shall deter'inethe 'easure of da'a*es, and not the stipulation.

A stipulation for liuidated da'a*es is attached to an oli*ation in order to ensure perfor'anceand has a doule function )1+ to provide for liuidated da'a*es, and ):+ to stren*then thecoercive force of the oli*ation # the threat of *reater responsiilit# in the event ofreach.< The a'ount a*reed upon answers for da'a*es suffered # the owner due to dela#sin the co'pletion of the pro3ect.<? As a precondition to such award, however, there 'ust eproof of the fact of dela# in the perfor'ance of the oli*ation.</

Concededl#, Article 1:.01 of the Construction A*ree'ent 'entioned onl# the failure of thecontractor to co'plete the pro3ect within the stipulated period or the e8tension *ranted # theowner. 9owever, this will not defeat petitionerOs clai' for da'a*es nor respondentOs liailit#under the $erfor'ance Eond. ;auna# was clearl# in default considerin* the dis'alpercenta*e of his acco'plish'ent )<:.<?7+ of the wor4 he contracted on account of dela#s in

*e8pedite construction wor4s. The events of default and re'edies of the >wner are set fort Article 1<, which reads

ART&CB= 1< "=(A2BT >( C>NTRACT>R

1<.01 An# of the followin* shall constitute an =vent of "efault on the part of theC>NTRACT>R.

8 8 8 8

*. &n case the C>NTRACT>R has done an# of the followin*

)i.+ has aandoned the $ro3ect

)ii.+ without reasonale cause, has failed to co''ence the construction or has suspendedpro*ress of the $ro3ect for twent#-ei*ht da#s

)iii.+ without 3ustifiale cause, has dela#ed the co'pletion of the $ro3ect # 'ore than thirtcalendar da#s ased on official wor4 schedule dul# approved # the >N=R

)iv.+ despite previous written warnin* # the >N=R, is not e8ecutin* the construction woaccordance with the A*ree'ent or is persistentl# or fla*rantl# ne*lectin* to carr# out itsoli*ations under the A*ree'ent.

)v.+ has, to the detri'ent of *ood wor4'anship or in defiance of the >wnerOs instructions tcontrar#, sulet an# part of the A*ree'ent.

1<.0: &f the C>NTRACT>R has co''itted an# of the aove reasons cited in &te' 1<.01, >N=R 'a# after *ivin* fourteen )1+ calendar da#s notice in writin* to the C>NTRACTenter upon the site and e8pel the C>NTRACT>R therefro' without voidin* this A*ree'ereleasin* the C>NTRACT>R fro' an# of its oli*ations, and liailities under this A*ree'e Also without di'inishin* or affectin* the ri*hts and powers conferred on the >N=R # th

A*ree'ent and the >N=R 'a# hi'self co'plete the wor4 or 'a# e'plo# an# othercontractor to co'plete the wor4. & f the >N=R shall enter and e8pel the C>NTRACT>Runder this clause, the >N=R shall e entitled to confiscate the perfor'ance ond of theC>NTRACT>R to co'pensate for all 4inds of da'a*es the >N=R 'a# suffer. All e8peincurred to finish the $ro3ect shall e char*ed to the C>NTRACT>R andHor his ond. (urtthe >N=R shall not e liale to pa# the C>NTRACT>R until the cost of e8ecution, da'for the dela# in the co'pletion, if an#, and allF other e8penses incurred # the >N=R haeen ascertained which a'ount shall e deducted fro' an# 'one# due to the C>NTRACon account of this A*ree'ent. The C>NTRACT>R will not e co'pensated for an# loss oprofit, loss of *oodwill, loss of use of an# euip'ent or propert#, loss of usiness opportunadditional financin* cost or overhead or opportunit# losses related to the unacco'plishedportions of the wor4.0 )='phasis supplied.+

As alread# de'onstrated, the contractorOs default in this case pertains to his failure tosustantiall# perfor' the wor4 on account of tre'endous dela#s in e8ecutin* the schedule

wor4 activities. here a part# to a uildin* construction contract fails to co'pl# with the di'posed # the ter's of the contract, a reach results for which an action 'a# e 'aintaito recover the da'a*es sustained there#, and of course, a reach occurs where thecontractor ine8cusal# fails to perfor' sustantiall# in accordance with the ter's of thecontract.1

The plain and una'i*uous ter's of the Construction A*ree'ent authorie petitioner toconfiscate the $erfor'ance Eond to answer for all 4inds of da'a*es it 'a# suffer as a result of

of the ond is a'i*uous or uncertain, it will e construed 'ost stron*l# a*ainst a
















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* #the contractorOs failure to co'plete the uildin*. 9avin* elected to ter'inate the contract ande8pel the contractor fro' the pro3ect site under Article 1< of the said A*ree'ent, petitioner isclearl# entitled to the proceeds of the ond as inde'nification for da'a*es it sustained due tothe reach co''itted # ;auna#. %uch stipulation allowin* the confiscation of thecontractorOs perfor'ance ond parta4es of the nature of a penalt# clause. A penalt# clause,e8pressl# reco*nied # law, is an accessor# underta4in* to assu'e *reater liailit# on the partof the oli*or in case of reach of an oli*ation. &t functions to stren*then the coercive force ofoli*ation and to provide, in effect, for what could e the liuidated da'a*es resultin* fro'such a reach. The oli*or would then e ound to pa# the stipulated inde'nit# without thenecessit# of proof on the e8istence and on the 'easure of da'a*es caused # the reach. &t is

well-settled that so lon* as such st ipulation does not contravene law, 'orals, or pulic order, itis strictl# indin* upon the oli*or.:

Respondent, however, insists that it is not liale for the reach co''itted # ;auna#ecause # the ter's of the suret# ond it issued, its liailit# is li'ited to the perfor'ance #said contractor to the e8tent euivalent to :07 of the down pa#'ent. &t stresses that with the<:.<?7 co'pletion of the pro3ect # ;auna#, its liailit# was e8tin*uished ecause the valueof such acco'plish'ent alread# e8ceeded the su' euivalent to :07 down pa#'ent )$?.'illion+.

The appellate court correctl# re3ected this theor# of respondent when it ruled that the$erfor'ance Eond *uaranteed the full and faithful co'pliance of ;auna#Os oli*ations underthe Construction A*ree'ent, and that nowhere in law or 3urisprudence does it state that theoli*ation or underta4in* # a suret# 'a# e apportioned.

The pertinent portions of the $erfor'ance Eond provide

The conditions of this oli*ation are as followshereas the @$B2% A%&A, reuires the principal %=V=N %9A"=% >( EB2=C>N%TR2CT&>N AN" "=V=B>$;=NT, &NC. to post a ond of the aovestated su' to*uarantee :07 down pa#'ent for the construction of Euildin* : )Villa Eeatri+ :-Roo'Condotel, The Bod*in*s inside (airwa#s and Eluewater, Eoraca# &sland, ;ala#, A4lan.

hereas, said contract reuired said $rincipal to *ive a *ood and sufficient ond in the aove-stated su' to secure the full and faithful perfor'ance on his part of said contract.

&t is a special provision of this underta4in* that the liailit# of the suret# under this ond shall inno case e8ceed the su' of $?,00,000.00 $hilippine Currenc#.

Now, Therefore, if the $rincipal shall well and trul# perfor' and fulfill all the underta4in*s,covenants, ter's, conditions and a*ree'ents stipulated in said contract, then this oli*ationshall e null and voidF otherwise to re'ain in full force and effect.< )='phasis supplied.+

hile the aove condition or specific *uarantee is unclear, the rest of the recitals in the ond

uneuivocall# declare that it secures the full and faithful perfor'ance of ;auna#Os oli*ationsunder the Construction A*ree'ent with petitioner. E# its nature, a perfor'ance ond*uarantees that the contractor will perfor' the contract, and usuall# provides that if thecontractor defaults and fails to co'plete the contract, the suret# can itself co'plete thecontract or pa# da'a*es up to the li'it of the ond. ;oreover, the rule is that if the lan*ua*e

co'pensated suret# and in favor of the oli*ees or eneficiaries under the ond, in this capetitioner as the $ro3ect >wner, for whose enefit it was ostensil# e8ecuted.

The i'position of interest on the clai's of petitioner is li4ewise in order. As we held inCo''onwealth &nsurance Corporation v. Court of Appeals6

$etitioner ar*ues that it should not e 'ade to pa# interest ecause its issuance of the suonds was 'ade on the condition that its liailit# shall in no case e8ceed the a'ount of thsaid onds.

e are not persuaded. $etitionerOs ar*u'ent is 'isplaced.

@urisprudence is clear on this 'atter. As earl# as Ta*awa vs. Aldanese and 2nion Gurante

Co. and reiterated in $laridel %uret# S &nsurance Co., &nc. vs. $.B. Galan* ;achiner# Co.,and 'ore recentl#, in Repulic vs. Court of Appeals and R S E %uret# and &nsurance Co'&nc., we have sustained the principle that if a suret# upon de'and fails to pa#, he can e hliale for interest, even if in thus pa#in*, its liailit# eco'es 'ore than the principal oli*aThe increased liailit# is not ecause of the contract ut ecause of the default and thenecessit# of 3udicial collection.

$etitionerOs liailit# under the suret#ship contract is different fro' its liailit# under thelaw.1âwphi1 There is no uestion that as a suret#, petitioner should not e 'ade to pa# 'than its assu'ed oli*ation under the suret# onds. 9owever, it is clear fro' the aove-ci 3urisprudence that petitionerOs liailit# for the pa#'ent of interest is not # reason of thesuret#ship a*ree'ent itself ut ecause of the dela# in the pa#'ent of its oli*ation undesaid a*ree'ent. )='phasis suppliedF citations o'itted.+

9=R=(>R=, the petition for review on certiorari is GRANT=". The "ecision dated @anu:, :011 and Resolution dated "ece'er ?, :011 of the Court of Appeals in CA-G.R. %$

11:?0? are here# R=V=R%=" and %=T A%&"=.

The Award 'ade in the "ecision dated (eruar# :, :010 of the Construction &ndustr# Aritration Co''ission &s here# R=&N%TAT=" with the followin* ;>"&(&CAT&>N%

!Accordin*l#, in view of our fore*oin* discussions and dispositions, the Triunal here#ad3ud*es, orders and directs

1+ Respondent 2tassco to pa# to petitioner @ $lus Asia "evelop'ent Corporation the fulla'ount of the $erfor'ance Eond, $?,00,000.00, pursuant to Art. 1< of the Construction A*ree'ent dated "ece'er :, :00, with interest at the rate of 67 per annu' co'putefro' the date of the filin* of the co'plaint until the f inalit# of this decision, and 1:7 per anco'puted fro' the date this decision eco'es final until full# paidF and

:+ Respondent ;auna# to inde'nif# respondent 2tassco of the a'ounts respondent 2tawill have paid to clai'ant under this decision, plus interest thereon at the rate of 1:7 perannu' co'puted fro' the date he is notified of such pa#'ent 'ade # respondent 2tass

clai'ant until full# paid, and to pa# 2tassco $100,000.00 as attorne#Ds fees.%> >R"=R=".

ith the aove 'odifications, the rit of =8ecution dated Nove'er :, :010 issued # tC&AC Aritral Triunal in C&AC Case No. 0<-:00/ is here# R=&N%TAT=" and 2$9=B".

No pronounce'ent as to costs.

%> >R"=R=".















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