Republic of the Philippines Supreme Court

Manila FIRST DIVISION

Leonides C. Dio, Petitioner, G.R. No. 145871

Present: PANGANIBAN, C.J. (Chairperson) YNARES-SANTIAGO, AUSTRIA-MARTINEZ, CALLEJO, SR., and CHICO-NAZARIO, JJ.

- versus -

Lina Jardines,

Promulgated: Respondent. January 31, 2006 x----------------------------------------------x

DECISION
AUSTRIA-MARTINEZ, J.:

This resolves the petition for review on certiorari seeking to set aside the Decision[1] of the Court of Appeals (CA) dated June 9, 2000 dismissing the appeal in CAG.R. CV No. 56118 and the Resolution dated October 25, 2000 denying the motion for reconsideration. The antecedent facts are as follows.

On December 14, 1992, Leonides C. Dio (petitioner) filed a Petition for Consolidation of Ownership with the Regional Trial Court of Baguio City, Branch 7 (RTC). She alleged that: on January 31, 1987, Lina Jardines (respondent) executed in her favor a Deed of Sale with Pacto de Retro over a parcel of land with improvements thereon covered by Tax Declaration No. 44250, the consideration for which amounted to P165,000.00; it was stipulated in the deed that the period for redemption would expire in six months or on July 29, 1987; such period expired but neither respondent nor any of her legal representatives were able to redeem or repurchase the subject property; as a consequence, absolute ownership over the property has been consolidated in favor of petitioner.[2] Respondent countered in her Answer that: the Deed of Sale with Pacto de Retro did not embody the real intention of the parties; the transaction actually entered into by the parties was one of simple loan and the Deed of Sale with Pacto de Retro was executed just as a security for the loan; the amount borrowed by respondent during the first week of January 1987 was only P50,000.00 with monthly interest of 9% to be paid within a period of six months, but since said amount was insufficient to buy construction materials for the house she was then building, she again borrowed an additional amount of P30,000.00; it was never the intention of respondent to sell her property to petitioner; the value of respondents residential house alone is over a million pesos and if the value of the lot is added, it would be around one and a half million pesos; it is unthinkable that respondent would sell her property worth one and a half million pesos for only P165,000.00; respondent has even paid a total of P55,000.00 out of the amount borrowed and she is willing to settle the unpaid amount, but petitioner insisted on appropriating the property of respondent which she put up as collateral for the loan; respondent has been the one paying for the realty taxes on the subject property; and due to the malicious suit filed by petitioner, respondent suffered moral damages. On September 14, 1993, petitioner filed an Amended Complaint adding allegations that she suffered actual and moral damages. Thus, she prayed that she be declared the absolute owner of the property and/or that respondent be ordered to pay her P165,000.00 plus the agreed monthly interest of 10%; moral and exemplary damages, attorneys fees and expenses of litigation. Respondent then filed her Answer to the Amended Complaint reiterating the allegations in her Answer but increasing the alleged valuation of the subject property to more than two million pesos.

After trial, the RTC rendered its Decision dated November 20, 1996, the dispositive portion of which reads as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered as follows: a) Declaring the contract (Exh. A) entered into by the contending parties as one of deed of sale with right to repurchase or pacto de retro sale; b) Declaring the plaintiff Dio to have acquired whatever rights Jardines has over the parcel of land involved it being that Jardines has no torrens title yet over said land; c) Declaring the plaintiff Dio the owner of the residential house and other improvements standing on the parcel of land in question; d) Ordering the consolidation of ownership of Dio over the residential house and other improvements, and over the rights, she (Dio) acquired over the parcel of land in question; and ordering the corresponding government official (The City Assessor) of Baguio City to undertake the consolidation by putting in the name of plaintiff Dio the ownership and/or rights which she acquired from the defendantJardines in the corresponding document (Tax Declarations) on file in his/her office; after the plaintiff has complied with all the requirements and has paid the fees necessary or incident to the issuance of a new tax declaration as required by law; e) Ordering the cancellation of Tax Declaration 44250;

f) Ordering defendant Jardines to pay actual and/or compensatory damages to the plaintiff as follows: 1) P3,000.00 representing expenses in going to and from Jardines place to collect the redemption money; P1,000.00 times the number of times Dio came to Baguio to attend the hearing of the case as evidenced by the signatures of Dio appearing on the minutes of the proceedings found in the Rollo of the case; P10,000.00 attorneys fee.

2)

3)

Costs against defendant Jardines. SO ORDERED.[3]

Respondent then appealed to the CA which reversed the RTC judgment. The CA held that the true nature of the contract between herein parties is one of equitable mortgage, as shown by the fact that (a) respondent is still in actual physical possession of the property; (b) respondent is the one paying the real property taxes on the property; and (c) the amount of the supposed sale price, P165,000.00, earns monthly interest. The dispositive portion of the CA Decision promulgated on June 9, 2000 reads:
WHEREFORE, foregoing premises considered, we find that the Regional Trial Court, First Judicial Region, Branch 07, Baguio City, committed reversible errors in rendering its decision dated 20 November 1996 in Civil Case No. 2669-R, entitled Leonides G. Dio, etc. vs. Lina Jardines. The appeal at bar is herby GRANTED and the assailed decision is hereby REVERSED and SET ASIDE. Let a new judgment be entered as follows: 1. Declaring that the true nature of the contract entered into by the contending parties as one of equitable mortgage and not a pacto de retro sale; 2. Ordering the defendant-appellant to pay plaintiff-appellee legal interest on the amount of P165,000.00 from July 29, 1987, the time the said interest fell due, until fully paid; 3. No pronouncement as to cost.

SO ORDERED.[4]

Petitioner moved for reconsideration of said decision, but the same was denied per Resolution dated October 25, 2000. Hence, herein petition for review on certiorari alleging that:
1. THE LOWER COURT COMMITTED AN ERROR IN DECLARING THAT THE TRUE NATURE OF THE CONTRACT ENTERED INTO BY THE PARTIES AS ONE EQUITABLE MORTGAGE AND NOT A PACTO DE RETRO SALE; 2. THE LOWER COURT COMMITTED AN ERROR IN ORDERING THE RESPONDENT TO PAY PETITIONER LEGAL INTEREST DESPITE THE CONFLICTING ADMISSIONS OF THE PARTIES THAT THE AGREED INTERESTS WAS EITHER 9% OR 10%; 3. THE FINDINGS OF FACTS OF THE LOWER COURT ARE CONTRARY TO EVIDENCE AND THE ADMISSIONS OF THE PARTIES;

4. THE LOWER COURT COMMITTED AN ERROR IN GOING BEYOND THE ISSUES OF THE CASE BY DELETING THE AWARD FOR DAMAGES DESPITE THE FACT THAT THE SAME WAS NOT RAISED AS AN ISSUE IN THE APPEAL; [5]

The petition lacks merit.

The Court finds the allegations of petitioner that the findings of fact of the CA are contrary to evidence and admissions of the parties and that it erred in declaring the contract between the parties as an equitable mortgage to be absolutely unfounded. A close examination of the records of this case reveals that the findings of fact of the CA are all based on documentary evidence and on admissions and stipulation of facts made by the parties. The CAs finding that there was no gross inadequacy of the price of respondents residential house as stated in the contract, was based on respondents own evidence, Tax Declaration No. 44250, which stated that the actual market value of subject residential house in 1986 was only P93,080.00. The fact that respondent has remained in actual physical possession of the property in question, and that respondent has been the one paying the real property taxes on the subject property was established by the admission made by petitioner during the pre-trial conference and embodied in the PreTrial Order[6] dated May 25, 1994. The finding that the purchase price in the amount of P165,000.00 earns monthly interest was based on petitioners own testimony and admission in her appellees brief that the amount of P165,000.00, if not paid on July 29, 1987, shall bear an interest of 10% per month. The Court sees no reversible error with the foregoing findings of fact made by the CA. The CA correctly ruled that the true nature of the contract entered into by herein parties was one of equitable mortgage.

Article 1602 of the Civil Code enumerates the instances when a purported pacto de retro sale may be considered an equitable mortgage, to wit:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) (2) (3) When the price of a sale with right to repurchase is unusually inadequate; When the vendor remains in possession as lessee or otherwise; When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; When the purchaser retains for himself a part of the purchase price; When the vendor binds himself to pay the taxes on the thing sold; In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

(4) (5) (6)

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (Emphasis supplied)

In Legaspi vs. Ong,[7] the Court further explained that:

The presence of even one of the above-mentioned circumstances as enumerated in Article 1602 is sufficient basis to declare a contract of sale with right to repurchase as one of equitable mortgage. As stated by the Code Commission which drafted the new Civil Code, in practically all of the so-called contracts of sale with right of repurchase, the real intention of the parties is that the pretended purchase price is money loaned and in order to secure the payment of the loan, a contract purporting to be a sale with pacto de retro is drawn up.[8]

In the same case, the Court cited Article 1603 of the Civil Code, which provides that in case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.[9]

In the instant case, the presence of the circumstances provided for under paragraphs (2) and (5) of Article 1602 of the Civil Code, and the fact that petitioner herself demands payment of interests on the purported purchase price of the subject property, clearly show that the intention of the parties was merely for the property to stand as security for a loan. The transaction between herein parties was then correctly construed by the CA as an equitable mortgage.

The allegation that the appellate court should not have deleted the award for actual and/or compensatory damages is likewise unmeritorious.

Section 8, Rule 51 of the Rules of Court provides as follows:

Sec. 8. Questions that may be decided. No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

Clearly, the appellate court may pass upon plain errors even if they are not stated in the assignment of errors. In Villegas vs. Court of Appeals,[10] the Court held:
[T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.[11]

In the present case, the RTCs award for actual damages is a plain error because a reading of said trial courts Decision readily discloses that there is no sufficient evidence on record to prove that petitioner is entitled to the same. Petitioners only evidence to prove her claim for actual damages is her testimony that she has spent P3,000.00 in going to and from respondents place to try to collect payment and that she spent P1,000.00 every time she travels from Bulacan, where she resides, to Baguio in order to attend the hearings.

In People vs. Sara,[12] the Court held that a witness testimony cannot be considered as competent proof and cannot replace the probative value of official receipts to justify the award of actual damages, for jurisprudence instructs that the same must be duly substantiated by receipts.[13] Hence, there being no official receipts whatsoever to support petitioners claim for actual or compensatory damages, said claim must be denied. The appellate court was also correct in ordering respondent to pay legal interest on the amount of P165,000.00.

Both parties admit that they came to an agreement whereby respondent shall pay petitioner interest, at 9% (according to respondent) or 10% (according to petitioner) per month, if she is unable to pay the principal amount of P165,000.00 on July 29, 1987. In the Pre-Trial Order[14] dated May 25, 1994, one of the issues for resolution of the trial court was whether or not the interest to be paid under the agreement is 10% or 9% or whether or not this amount of interest shall be reduced equitably pursuant to law. [15] The factual milieu of Carpo vs. Chua[16] is closely analogous to the present case. In the Carpo case, petitioners therein contracted a loan in the amount of P175,000.00 from respondents therein, payable within six months with an interest rate of 6% per month. The loan was not paid upon demand. Therein petitioners claimed that following the Courts ruling in Medel vs. Court of Appeals,[17] the rate of interest of 6% per month or 72% per annum as stipulated in the principal loan agreement is null and void for being excessive, iniquitous, unconscionable and exorbitant. The Court then held thus:
In a long line of cases, this Court has invalidated similar stipulations on interest rates for being excessive, iniquitous, unconscionable and exorbitant. In Solangon v. Salazar, we annulled the stipulation of 6% per month or 72% per annum interest on a P60,000.00 loan. In Imperial v. Jaucian, we reduced the interest rate from 16% to 1.167% per month or 14% per annum. In Ruiz v. Court of Appeals, we equitably reduced the agreed 3% per month or 36% per annum interest to 1% per month or 12% per annum

interest. The 10% and 8% interest rates per month on a P1,000,000.00 loan were reduced to 12% per annum inCuaton v. Salud. Recently, this Court, in Arrofo v. Quino, reduced the 7% interest per month on a P15,000.00 loan amounting to 84% interest per annum to 18% per annum. There is no need to unsettle the principle affirmed in Medel and like cases. From that perspective, it is apparent that the stipulated interest in the subject loan is excessive, iniquitous, unconscionable and exorbitant. Pursuant to the freedom of contract principle embodied in Article 1306 of the Civil Code, contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. In the ordinary course, the codal provision may be invoked to annul the excessive stipulated interest. In the case at bar, the stipulated interest rate is 6% per month, or 72% per annum. By the standards set in the above-cited cases, this stipulation is similarly invalid. x x x.[18]

Applying the afore-cited rulings to the instant case, the inescapable conclusion is that the agreed interest rate of 9% per month or 108% per annum, as claimed by respondent; or 10% per month or 120% per annum, as claimed by petitioner, is clearly excessive, iniquitous, unconscionable and exorbitant. Although respondent admitted that she agreed to the interest rate of 9%, which she believed was exorbitant, she explained that she was constrained to do so as she was badly in need of money at that time. As declared in the Medelcase[19] and Imperial vs. Jaucian,[20] [i]niquitous and unconscionable stipulations on interest rates, penalties and attorneys fees are contrary to morals. Thus, in the present case, the rate of interest being charged on the principal loan of P165,000.00, be it 9% or 10% per month, is void. The CA correctly reduced the exhorbitant rate to legal interest.

In Trade & Investment Development Corporation of the vs. Roblett Industrial Construction Corporation,[21] the Court held that:
In Eastern Shipping Lines, Inc. v. Court of Appeals, this Court laid down the following rules with respect to the manner of computing legal interest: I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on 'Damages' of the Civil Code govern in determining the measure of recoverable damages.

Philippines

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. [22](Underscoring supplied)

Applied to the present case, since the agreed interest rate is void, the parties are considered to have no stipulation regarding the interest rate. Thus, the rate of interest should be 12% per annum to be computed from judicial or extrajudicial demand, subject to the provisions of Article 1169 of the Civil Code, to wit:
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of the obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declares; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. xxxx

The records do not show any of the circumstances enumerated above. Consequently, the 12% interest should be reckoned from the date of extrajudicial demand. Petitioner testified that she went to respondents place several times to try to collect payment, but she (petitioner) failed to specify the dates on which she made such oral demand. The only evidence which clearly shows the date when petitioner made a demand on respondent is the demand letter dated March 19, 1989 (Exh. C), which was received by respondent or her agent on March 29, 1989 per the Registry Return Receipt (Exh. C-1). Hence, the interest of 12% per annum should only begin to run from March 29, 1989, the date respondent received the demand letter from petitioner.

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated June 9, 2000 is AFFIRMED with the MODIFICATION that the legal interest rate to be paid by respondent on the principal amount of P165,000.00 is twelve (12%) percent per annum from March 29, 1989 until fully paid.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN Chief Justice Chairperson

CONSUELO YNARES-SANTIAGO

Associate Justice

ROMEO J. CALLEJO, SR. Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN Chief Justice

[1]

[2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22]

Penned by Associate Justice Bernardo P. Abesamis, Justices Eugenio S. Labitoria and Wenceslao I. Agnir, Jr. concurring. Records, pp. 1-2. Records, pp. 241-242. CA Decision, CA rollo, pp. 103-104. Rollo, p. 6. Records, pp. 77-80. G.R. No. 141311, May 26, 2005, 459 SCRA 122. Id., p. 139. Id. G.R. No. 129977, February 1, 2001, 351 SCRA 69. Id., p. 74. G.R. No. 140618, December 10, 2003, 417 SCRA 431. Id., p. 446. Records, pp. 77-80. Id., p. 78. G.R. Nos. 150773 & 153599, September 30, 2005. 359 Phil. 820 (1998). Carpo v. Chua, supra. Supra, note 17. G.R. No. 149004, April 14, 2004, 427 SCRA 517, 519. G.R. No. 139290, November 11, 2005. Id.

with

Associate

Dino vs. Jardines G.R. No. 145871January 31, 2006 FACTS:Petitioner Leonides filed a petition for Consolidation of Ownership with the RTC of Baguio City alleging that on January31, 1987, respondent Jardines executed in her favor a Deed of Sale with Pacto de retro over a parcel of land withimprovements which amounted to P165,000.00. It was stipulated that the period for redemption would expire in sixmonths or on July 29 1987 however none among Dino and his heirs were able to redeem the property. Jardinescountered that the true contract of the parties was that of a loan and the deed with pacto de retro sale was a meresecurity to such loan. The amount of the property was around half a million and respondent averred that it wasunthinkable for her to sell the property for only P165,000.00 In fact, the loan was even covered by interest at the rate of 9% to be paid monthly. The court rendered its decision declaring the contract as one of deed of sale with right torepurchase or pacto de retro and that petitioner acquired whatever rights Jardines had over the parcel of land, and shenow became owner of the same. However, upon appeal to the Court of Appeals, the judgment was reversed with thefinding that the contract was one of Equitable Mortgage and not one of Pacto de Retro.Issue:Whether or not the contract was one of Pacto de Retro or an Equitable MortgageHeld:The Supreme Court upheld the ruling of the Court of Appeals. The findings of said court are based on documentaryevidence and on admissions and stipulation of facts made by the parties. It was strengthened by the fact that a)respondent is still in actual physical possession of the property; b) respondent is the one paying the real property taxeson the property; and c) the amount of the supposed sale price, P165,000.00 earns monthly interest.Under Article 1602 of the Civil Code: The Contract shall be presumed to be an equitable mortgage, in any of thefollowing cases:1. When the price of a sale with right to repurchase is unusually inadequate; 2. When the vendor remains in possession as lessee or otherwise; 3. When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;4. When the purchases retains for himself a part of the purchase price; 5. In any other case where it may be fairly inferred that the real intention of the parties is that the transactionshall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwiseshall be considered as interest which shall be subject to usury laws.It was held in the case of Legaspi vs. Ong that the presence of even one of the above-mentioned circumstances asenumerated in Article 1602 is enough basis to declare a contract of sale with pacto de retro as an equitablemortgage. Further, under Article 1603, in case f doubt, a contract purporting to be a sale with right to repurchaseshall be construed as an equitable mortgage. The circumstances under paragraphs 2 and 5 are present in the case atbar. The property is still in the hands of petitioner and it is clearly shown that intention of the parties was merely forthe property to stand as security for the loan

FIRST DIVISION G.Q. GARMENTS, INC., Petitioner, G.R. No. 161722 Present:

PANGANIBAN, C.J., Chairperson, YNARES-SANTIAGO, - versus AUSTRIA-MARTINEZ, CALLEJO, SR., and CHICO-NAZARIO, JJ. ANGEL MIRANDA, FLORENDA MIRANDA and EXECUTIVE MACHINERIES And EQUIPMENT CORPORATION, Respondents. July 20, 2006 Promulgated:

x-----------------------------------------------------------------------------------------x

DECISION CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari for the reversal of the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 45567, as well as its Resolution[2] denying the motion for reconsideration thereof. Angel Miranda is the registered owner of a 9,646 square meters parcel of land located at Niog, Bacoor, Cavite (Property). The property was covered by Transfer Certificate of Title (TCT) No. T-60679[3] of the Registry of Deeds of Cavite. In 1984, Angelito Miranda, the son of Angel Miranda, established the Executive Machineries and Equipment Corporation (EMECO), a domestic corporation engaged primarily in the manufacture and fabrication of rubber rollers. Angelito owned 80% of the stocks of the corporation, while his wife Florenda owned 10%. That year, Angel entered into a verbal contract of lease over the Property with EMECO, and allowed it to build a factory thereon. The agreement was on a month-to-month basis, at the rate of P8,000 per month. EMECO constructed its factory on the property. At the outset, EMECO paid the monthly rentals. However, after Angelito died on June 21, 1988, EMECO failed to pay the rentals but still continued possessing the leased premises. On November 19, 1989, the factory of EMECO was totally razed by fire. In a letter to EMECO dated June 3, 1991, Angel demanded the payment of accrued rentals in the amount of P280,000.00 as of May 1991. EMECO was also informed that the oral contract of lease would be terminated effective June 30, 1991. However, EMECO failed to pay the accrued rentals and to vacate the property. Another demand letter dated September 27, 1991 was sent to EMECO. It vacated the leased premises, but the accrued rentals remained unpaid. Sometime in November 1991, Florenda arrived at the office of petitioner and offered to sublease the property to Wilson Kho, the Officer-in Charge of the corporation. Florenda showed Kho a purported copy of a contract of lease [4] over

the said property allegedly executed by Angel in favor of EMECO. After visiting and viewing the property, Kho agreed to rent the area upon the condition that its true and registered owner would personally sign the lease contract in his presence. When Florenda failed to present Angel for said purpose, Kho turned down her proposal. Later, Kho was able to locate Angel at Noveleta, Cavite and offered, in behalf of petitioner, to lease the property, as to which Angel agreed. On December 23, 1991, Angel and the corporation, represented by its Executive Vice-President, Davy John Barlin, executed a contract of lease[5] over the subject property. The lease was for a period of 15 years, commencing on February 1, 1992 until January 31, 2007 for a monthly rental of P30,000.00. Petitioner paid P90,000.00 representing two months deposit and advance rental for one month. As lessee, it was authorized to introduce improvements, structures, and buildings on the property as it may deem necessary and for the purpose for which it was leased. Consequently, petitioner secured the following documents: mayors permit, sanitary permit, business sticker, and an application for municipal license. Thereafter, it moved into the property with its equipment, machinery, appliances, supplies, and other construction materials. The construction of a building and factory in the leased premises commenced. However, on January 27, 1992, Florenda, together with several armed men who identified themselves as policemen, forcibly evicted petitioner from the leased premises, claiming that she was the owner and that the place was already covered by another existing contract of lease. During the encounter, Florenda and her men took some equipment, machinery and other properties belonging to petitioner, thereby causing loss and damage to said properties. In the meantime, Angel secured a copy of the purported contract of lease he allegedly executed in favor of EMECO. On March 12, 1992, he forthwith filed a complaint for declaration of nullity of the contract of lease before the Regional

Trial Court (RTC) of Makati, Branch 66, docketed as Civil Case No. 92-699. Angel alleged therein that his signature as lessor in the purported contract was a forgery. He prayed that judgment be rendered in his favor declaring the said contract null and void. Meanwhile, petitioner sought the help of the Philippine National Police (PNP). General Gerardo N. Flores, Deputy Director General and Chief Directorial Staff, issued a Memorandum[6] to Superintendent Wenceslao A. Soberano, Provincial Director of the Cavite PNP Provincial Command, ordering the latter to prevent his men from interfering with the pending civil case. Petitioner subsequently regained possession over the leased premises. However, Florenda and her group were undaunted. They went back to the place and ousted the guards and other personnel manning the corporations office, and even removed their equipment, and ransacked anew their raw materials, electric wire and other valuables inside.

On April 20, 1992, petitioner instituted an action for damages and recovery of possession of the property before the RTC of Cavite City, Branch 17, with Angel, EMECO and Florenda, as alternative defendants. The case was docketed as Civil Case No. N-5573. The corporation alleged the following in its complaint:

VI That on December 23, 1991, Plaintiff leased from Alternative Defendant ANGEL MIRANDA the premises just adverted to, for a period of FIFTEEN (15) years, commencing on February 1, 1992 and to expire on January 31, 2007, as evidenced by the Contract of Lease x x x ;

VII That by the terms of said lease agreement, Plaintiff was to pay to Alternative ANGEL MIRANDA rentals in the sum of THIRTY THOUSAND PESOS (P30,000) per month, with SIXTY THOUSAND PESOS (P60,000) as deposit, and THIRTY THOUSAND PESOS (P30,000) as advance rental, all of which were complied with by Plaintiff;

VIII That in accordance with the same agreement, Plaintiff was authorized to introduce into the premises such improvements as it may find necessary;

IX That Plaintiff took possession of the leased premises and moved thereto its equipments (sic), machineries, appliances, supplies and kindred items, as well as certain construction materials necessary for the repairs and improvement of the facilities therein; that, as a matter of fact, Plaintiff had already commenced the construction of roofs over the concrete structures in the leased premises;

X That, furthermore, Plaintiff secured from the proper authorities all the needful licenses and permits for its construction and business activities;

XI That on January 27, 1992, Alternative Defendant FLORENDA MIRANDA, in her behalf and in representation of Alternative Defendant EMECO, and in the company of armed men, forcibly evicted Plaintiff from the premises, not only stopping the construction works being performed in the premises, but also physically bringing out Plaintiffs equipment, machineries, and other personalities (sic) of the leased realty;

XII That the Alternative Defendants just named did the acts just described under the claim that the premises are either owned by Alternative Defendant FLORENDA MIRANDA or that the same are covered by [a] still existing lease agreement by and between Alternative Defendants, the latter claim being evidenced by the Contract of Lease x x x;

XIII That regardless of the validity of either claim on the part of Alternative Defendants FLORENDA MIRANDA and EMECO, the same cannot be pleaded in derogation of Plaintiffs possessory rights over the premises, for the reason that the realty in question is covered by a torrens certificate in the name of Alternative Defendant ANGEL MIRANDA on which document third parties have a legally-authorized right to rely (in the first instance), and that in order to evict Plaintiff from the premises, proper ejectment proceedings would have to be instituted (in the second instance);

XIV That under the law, Alternative Defendant ANGEL MIRANDA has the obligation to keep and maintain Plaintiff in peaceful possession of the leased premises, which obligation said defendant failed to observe and discharge;

XV That as a result of the forcible eviction of Plaintiff from the leased property, it suffered damages not only in terms of destruction and/or impairment of its machineries, equipments (sic), appliances, personalities, supplies and materials, but also in terms of lost profits and business opportunities, besmirched reputation, administrative cost overruns, tarnished goodwill and impairment of credit facilities, the total pecuniary value of which amounts to not less than TWO MILLION PESOS (P2,000,000);[7]

It prayed that, after due proceedings, judgment be rendered in its favor, as follows:

1. That upon due notice and hearing, a writ of preliminary mandatory injunction issue, restoring Plaintiff to the possession of the premises in question;

2. That after trial, judgment issue directing Alternative Defendants, singly or collectively, and any person or persons claiming right under them to surrender possession of the leased premises to Plaintiff;

3. That either Defendant, or all of them, be condemned to pay to Plaintiff the sum of TWO MILLION PESOS (P2,000,000) by way of actual, compensatory, and moral damages;

4. That either Defendant, or all of them, be condemned to pay attorneys fees and litigation expenses in the sum earlier set forth; and

5, That either Defendant, or all of them, be condemned to pay the costs of this suit;

6. OTHER RELIEFS and remedies as are just and equitable under the premises are likewise prayed for.[8]

On June 25, 1992, Angel and petitioner, as plaintiffs, filed a separate complaint for ejectment against Florenda before the Municipal Trial Court (MTC) of Bacoor, Cavite, docketed as Civil Case No. 1265. After due proceedings, the court rendered judgment on July 2, 1993, ordering the eviction of Florenda and all those claiming the property in her behalf. The decision was appealed to the RTC. However, for failure to pay a supersedeas bond, the decision was executed and Florenda was evicted from the property. On November 26, 1993, the RTC rendered judgment in Civil Case No. N5573, dismissing the complaint against all the alternative defendants without prejudice. It declared that plaintiff was entitled to damages, but it had to dismiss the complaint because of the pendency of Civil Case Nos. 92-699 and 92-1265.[9]

However, the RTC resolved to deny the motion of petitioner prompting it to appeal to the Court of Appeals. Angel Miranda also appealed the decision, which was docketed as CA-G.R. CV No. 45567.

Meantime, on September 22, 1994, the RTC rendered judgment in Civil Case No. 92-699 in favor of Angel and declared the contract of lease purportedly executed by him and EMECO void.

In its Brief as appellant in CA-G.R. CV No. 45567, petitioner alleged that:

THE LOWER COURT GRIEVOUSLY ERRED IN FAILING TO AWARD DAMAGES IN FAVOR OF PLAINTIFF BY DISMISSING THE CASE DESPITE ITS CLEAR FACTUAL FINDINGS THAT THE LATTER IS ENTITLED TO DAMAGES PRAYED FOR IN THE COMPLAINT. I THE DISMISSAL OF THE COMPLAINT ON THE GROUND OF LITIS PENDENTIA IS DEVOID OF ANY FACTUAL AND LEGAL BASIS. II IN THE SAME VEIN, THE AWARD OF DAMAGES IN THE PRESENT CASE WOULD NOT PRE-EMPT ANY DECISION THAT MIGHT BE RENDERED IN THE PENDING CASES.[10]

It maintained that the trial court erred in dismissing its complaint on the ground of litis pendentia and in not ordering Angel Miranda to reimburse the P360,000.00 it had paid as rentals for the property. For his part, Angel averred that the trial court should have dismissed the complaint against him with prejudice for the reason that there is no allegation in the complaint that he participated, directly or indirectly, in the forcible ejectment

of petitioner from the property, and in the looting and taking of its properties.[11] He insisted that it was Florenda who forcibly evicted the corporation and took its properties. Thus, he cannot be held responsible for the tortious and wrongful acts of third persons, as there is no law to that effect. Under Article 1664 of the New Civil Code, he is not obliged to answer for a mere act of trespass, and the lessee has a direct action against the intruder. He pointed out that the law unconditionally and unequivocally absolves the lessor from any liability arising from an act of trespass by a third person. The duty to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract is merely a warranty by the lessor that the lessee shall not be disturbed in his legal, not physical, possession.

On October 29, 2002, the CA rendered judgment reversing the decision of the RTC. The fallo reads:

WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered dismissing the complaint with prejudice against Angel Miranda and ordering Florenda Miranda to pay G.Q. Garments, Inc. the amount of:

1. P300,000.00 as and for nominal damages; 2. P200,000.00 as and for attorneys fees; and 3. To pay the costs of suit.

SO ORDERED.[12]

The appellate court absolved Angel of any liability due to the absence of evidence showing that he had participated, directly or indirectly, in the looting of GQ Garments properties and in forcibly ejecting the latter from the premises in question. While under Article 1654, paragraph 3, of the New Civil Code, a lessor is obliged to maintain the lessee in peaceful and adequate enjoyment of the lease

for the entire duration of the contract, the law, however, does not apply to him since the unlawful acts were caused by a third person or an intruder. Under Article 1664, he is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased, but the lessee shall have a direct action against the intruder.

Moreover, the appellate court declared that the warranty of a lessor under Article 1654 of the New Civil Code extends only to non-disturbance of legal possession and not of physical possession. As ruled in the case of Bohol, Sr. v. Torres,[13] the duty to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract is merely a warranty that the lessee shall not be disturbed in his legal, not physical possession. According to the CA, the evidence on record clearly showed that Florenda disturbed only the physical possession of the leased premises, and not legal possession. Thus, the complaint with respect to Angel Miranda should be dismissed with prejudice for lack of cause of action.[14]

Petitioner moved to have the decision reconsidered on the following grounds:

I

THE HONORABLE COURT ERRONEOUSLY HELD THAT THE LOSS OF THE ARTICLES VALUED AT P9,960,000.00 WAS NOT PROVED BY EVIDENCE.

II

THE HONORABLE COURT ERRED IN NOT FINDING DEFENDANT-APPELLANT ANGEL MIRANDA LIABLE TO HEREIN PLAINTIFF-APPELLANT.[15]

Petitioner filed a motion for the reconsideration of the decision,[16] claiming that it adduced proof that it sustained actual damages. It claimed that Angel was liable for damages against it for disturbance in law. It was not just a mere act of trespass, since Florenda claimed to have a prior contract of lease with Angel and by virtue of a supposedly legal judicial order, Florenda questioned its (GQ Garments) right to enjoy the property and deprived it of possession thereof. Besides, Angel filed an ejectment suit and an action for the nullity of the contract of lease against Florenda only after it was dispossessed of the subject property.[17]

Petitioner averred that Angel was liable for damages under Article 1654(3) of the New Civil Code, under which, as lessor, he was obliged to maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract. It likewise cited De la Cruz vs. Seminary of Manila[18] where it was ruled that in case of legal disturbance, the lessor is liable for whatever the lessee has lost by virtue of the breach of the contract and that it is the duty of the lessor to place the lessee in legal possession of the premises and to maintain him in the peaceful possession of the property during the lifetime of the lease. It insisted that the lessor who fails in the performance of such obligation must indemnify the lessee for the damages occasioned thereby, the true measure of damages being the actual loss to the lessee arising from the breach of the contract on the part of the lessor.

Petitioner averred that it complied fully with its contract of lease and had paid Angel two (2) months deposit in the amount of P60,000.00; one (1) month advance rental ofP30,000.00 and nine (9) months advance deposit in the amount of P270,000.00 or the total sum of P360,000.00.

On cross-examination, Angel admitted that he received P360,000.00 from petitioner. The plaintiff asserted that, in the interest of justice and fairness, the trial court should order the defendant to reimburse the actual damages it suffered and return the amounts of rentals and deposits received, considering that it failed to enjoy the leased premises. To rule otherwise, according to GQ

Garments, would be to sanction the unjust enrichment of one at the expense of another.[19]

The CA denied the motion.

Petitioner filed the instant petition for review on certiorari on the following issues:
I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A MANIFEST ERROR IN AWARDING DAMAGES TO THE PETITIONER WAY BELOW THAT PRAYED FOR IN THE COMPLAINT, THUS, TOTALLY DISREGARDING THE EVIDENCE ON RECORD. II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT RESPONDENT ANGEL MIRANDA SHOULD LIKEWISE BE HELD LIABLE FOR DAMAGES TO THE PETITIONER.[20]

Petitioner asserts that it adduced preponderant evidence that it sustained actual damages when its equipment and machineries were destroyed, and that such damaged property is valued at P10,000,000.00. It points out that aside from respondent Florenda Mirandas testimony, it also adduced in evidence photographs of the damaged property. Respondent Angel Miranda failed to adduce any evidence to rebut the same. Petitioner also avers that the damages it suffered was not merely an act of trespass but a disturbance in law for which respondent Angel Miranda is liable. He violated its right, as lessee; hence, he is liable for damages under Article 1654(3) of the New Civil Code. To buttress its claim, petitioner cites the ruling of this Court in De la Cruz vs. Seminary of Manila.[21] It insists that respondent Angel Miranda should pay actual damages

of P10,000,000.00 and P360,000.00 it had paid to him by way of reimbursement, and prays that the Court render judgment as follows:

1. Respondents Florenda Miranda and Angel Miranda to pay petitioner, jointly and severally, actual damages in the sum of P10,000,000.00;

2. Respondent Florenda Miranda to pay petitioner exemplary damages in the amount to be determined by the Honorable Court;

3. Respondent Angel Miranda to reimburse petitioner the amount of P360,000.00 plus interest at 12% per annum from the time the complaint was filed until the same is fully paid;

4. Respondent Angel Miranda to pay petitioner moral, exemplary, temperate and nominal damages for breach of his warranty in the Contract of Lease;

5. Respondents to pay attorneys fees and the costs of suit.

Other reliefs just and equitable under the premises are likewise prayed for.[22]

Respondents did not file any comment on the petition, and were thus considered to have waived their right to do so.

The issues are the following: (1) whether respondents are liable to petitioner for the amount of P10,000,000.00 by way of actual damages; (2) whether respondent Angel Miranda is liable to reimburse to petitioner the P360,000.00 paid as rentals.

Petitioner asserts that the P10,000,000.00 in actual damages was specifically alleged in its complaint and that evidence was adduced to prove the same, consisting of the testimonies of respondent Florenda Miranda and her witnesses to determine the extent of petitioners damages. We agree with the ruling of the appellate court that petitioners claim for actual damages was not properly substantiated by evidence. The CA correctly ruled as follows:
Considering the above provisions of the law, there is no question that defendant-appellee Florenda Miranda and/or EMECO should be held accountable for the damage sustained by plaintiff-appellant due to their willful and wanton disregard of the lease rights of plaintiff-appellant over the property in question. However, we find that the alleged loss of articles, machinery and equipment in the total sum of P9,960,000.00 was not proven by clear and convincing evidence. Other than the bare testimony of Mr. Wilson Kho and the witnesses he presented, there was no poof as to the existence of these items prior to the taking over of Florenda over the property in question. The listing of lost items contained in plaintiff-appellants Exhibits I and I-1 is self-serving considering that no inventory was made on the said items prior to its delivery to the premises in question and that no receipt or proof of acquisition of these listed items were presented during the trial of the case.[23]

Under Article 2199 of the New Civil Code, actual damages include all the natural and probable consequences of the act or omission complained of, classified as one (1) for the loss of what a person already possesses ( dao emergente) and the other, for the failure to receive, as a benefit, that which would have pertained to him (lucro cesante). As expostulated by the Court:
Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of. There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses, (dao emergente), and the other is the failure to receive as a

benefit that which would have pertained to him (lucro cesante) (citations omitted).[24]

The burden of proof is on the party who will be defeated if no evidence is presented on either side. His burden is to establish his case by preponderance of evidence which means that the evidence, as whole, adduced by one side, is superior to that of the other. Actual damages are not presumed. The claimant must prove the actual amount of loss with a reasonable degree of certainty premised upon competent proof and on the best evidence obtainable. He must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne. Actual damages cannot be anchored on mere surmises, speculations or conjectures. As the Court declared:
As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available. The burden of proof is on the party who would be defeated if no evidence would be presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other. In other words, damages cannot be presumed and courts, in making an award must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne.[25]

The claimants are not, however, mandated to prove damages in any specific or certain amount in order to recover damages for a substantial amount.[26] When the existence of a loss is established, absolute certainty as to its amount is not required.[27] The amount of the damages should be determined with reasonable certainty. The law does not require that the amount fixed be absolute or beyond conjectural possibilities. The ascertainment of the amount of damages should be by the plainest, easiest and most accurate measure which will do justice in the premises.[28]

The Court further declared that where goods are destroyed by the wrongful acts of the defendant, the plaintiff is entitled to their value at the time of the destruction, that is normally, the sum of money which he would have to pay in the market for identical or essentially similar good plus, in a proper case, damages for the loss of the use during the period before replacement.[29] To be entitled to an award of actual damages, it is necessary to prove the precise amount of the loss with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party to justify such award.[30] The award of actual damages cannot be simply based on the mere allegation of a witness without any tangible claim, such as receipts or other documentary proofs to support such claim.[31] Failing to satisfy the court that petitioner certainly suffered actual damages, its claim must now fail. In this case, there is no question that, indeed, petitioner sustained damages because its equipment, machineries, and other valuables were taken, and its building was destroyed by respondent Florenda Miranda and

her cohorts. Respondent Angel Miranda did not cause the damages sustained by petitioners property. However, the only evidence adduced by the petitioner to prove the value of said property is the testimony of Kho, viz.:
ATTY. QUIJANO: Q You said defendant Miranda looted all your items, machinery and other valuables inside the premises, do you have a list of those which you claimed to [have] been lost and stolen from the premises?

MR. KHO: A We have a partial list of the equipment and materials lost. ATTY. QUIJANO: May we request that the list be marked as Exhibits I and I-1, respectively. WITNESS: The first page represents the items lost on January 27 and the second page, items lost in the middle of March up the (sic) of June. COURT: Mark it. x x x . xxx Q A Q A xxx xxx

Considering that you have been forcibly evicted from the premises, what did you do? We seek (sic) the services of M .R. Pamaran Law Office. And do you have any arrangement with said office? The agreement is P200,000.00 plus P2,000.00 per appearance, damaged equipment and loss is P10,000,000.00 and the actual items lost is more than P10,000,000.00 plus construction materials, P11,000,000.00.

COURT: Q The actual damage is P10,000,000.00? A P10,000,000.00, including the building x x x. (TSN dated 10 July 1992, pp. 26-28, bold ours)[32]

No other proof was adduced to establish the value or price of the equipment, machineries and valuables taken by respondent Florenda Miranda, as well as the damage to petitioners building. The bare claim of Kho that the petitioner

sustained

actual

damages

in

the

amount

of

P10,000,000.00 is utterly insufficient on which to anchor a judgment for actual damages in the amount of P10,000,000.00; it is speculative and merely a surmise. The Court notes that respondent Florenda Miranda admitted, when she testified, that she and her cohorts caused the damages to the property of the petitioner:
ATTY. QUIJANO: Q When you went to the premises in question, you found out that there were already some construction on? MS. MIRANDA: A Construction? Not construction but there [were] some machineries inside but not installed. xxx Q A xxx xxx

going

There [were] purlins and trusses already in the ? No, in the latter part only. xxx xxx xxx

You said that you did not throw their equipment but just pulled it out and transferred it to another lot. How long did it take you to transfer that? The first one it took us one day to be able to pull out or get outside, I think six or nine machineries and then it was stopped. How did you bring it out? By means of forklift. So, you hired a forklift? Yes, Sir. xxx xxx

Q A Q A

xxx

Q A

Are all the machineries pulled out? On the first time, it wasnt because it was stopped x x x so it took us another, I think a month or weeks also before we could hire another trucking firm. You mean this truck was hired by Mr. Kho and not by you? No, by me.

Q A

xxx

xxx

xxx

Q So, you hired this truck to pull all these machineries out? A Yes. x x x (TSN dated 11 June 1993, pp. 20-23 before the RTC, Cavite, emphasis ours)[33]

With this admission, Florenda Miranda is clearly liable for damages to the equipment, machineries and building of petitioner. We agree with the ruling of the CA that respondent Angel Miranda is not liable for damages caused to petitioners property. Article 1654 of the New Civil Code reads:
Art. 1654. The lessor is obliged: (1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended; (2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary; (3) To maintain the less in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.

Under the provision, a lessor is obliged to maintain petitioners peaceful and adequate enjoyment of the premises for the entire duration of the lease. In case of noncompliance with these obligations, the lessee may ask for the rescission of the lease contract and indemnification for damages or only the latter, allowing the contract to remain in force.[34] The trespass referred to in Article 1654, paragraph 3, of the New Civil Code, is legal trespass or perturbacion de mero derecho. The lessor is not liable for the mere fact of a trespass or trespass in fact (perturbacion de mero hecho) made by a third person of the leased property. The lessee shall have a direct action against the trespasser and not against the lessor. As explained by the Court, if the act of

trespass is not accompanied or preceded by anything which reveals a really juridic intention on the part of the trespasser, in such wise that the lessee can only distinguish the material fact, such a trespass is merely a trespass in fact.[35] The duty of the lessor to maintain the lessee in the peaceful and adequate enjoyment of the leased property for the entire duration of the contract is merely a warranty that the lessee shall not be disturbed in having legal and not physical possession of the property.[36] In this case, the trespass perpetrated by respondent Florenda Miranda and her confederates was merely trespass in fact. They forcibly entered the property and caused damage to the equipment and building of petitioner, because the latter refused to enter into a contract of lease with EMECO over the property upon respondent Florenda Mirandas failure to present respondent Angel Miranda to sign the contract of lease. It turned out that respondent Florenda Miranda attempted to hoodwink petitioner and forged respondent Angel Mirandas signature on the contract of lease she showed to petitioner. It appears that respondent Florenda Miranda tried to coerce the petitioner into executing a contract of lease with EMECO over the property, only to be rebuffed by the petitioner. Petitioner cannot rely on the ruling of this Court in De la Cruz v. Seminary of Manila,[37] because, in this case, respondent Angel Miranda had the legal power to place petitioner in the peaceful possession of the property upon the execution of the contract of lease between him and petitioner; in fact, actual possession of the property was placed in the hands of petitioner, enabling it to start the construction of its factory. It bears stressing that respondent Angel Miranda was not content in adopting a mere passive stance in the face of respondent Florenda Mirandas act of trespass. He and the petitioner filed a case for forcible entry against Florenda Miranda; he also succeeded in having the RTC, in Civil Case No. 92-699, declare the contract

of lease which respondent Florenda Miranda showed petitioner as null and void, with the courts ruling that his signature on the contract was a forgery. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. Cost against the petitioner. ORDERED.

ROMEO J. CALLEJO, SR. Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN Chief Justice Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN Chief Justice

[1]

Penned by Associate Justice Elvi John S. Asuncion, with Associate Justices Conrado M. Vasquez, Jr., (Chairman, 8th Division) and Sergio L. Pestao concurring; rollo, pp. 38-49. [2] Id. at 51. [3] Id. at 52. [4] Id. at 69-70. [5] Id. at 53-55. [6] Id. at 56. [7] Id. at 58-62. [8] Id. at 63-64. [9] Id. at 85-96. [10] Id. at 112-113. [11] Id. at 136. [12] Id. at 48. [13] G.R. No. L-26861, July 31, 1978, 84 SCRA 302.

[14] [15]

Rollo, pp. 47-48. Id. at 156. [16] Id. at 97-102. [17] Id. [18] 18 Phil. 330 (1911). [19] Rollo, pp. 163-164. [20] Id. at 21. [21] Supra note 11. [22] Rollo, p. 33. [23] Id. at 46. (Underscoring supplied) [24] PNOC Shipping and Transport Corporation v. Court of Appeals, et al., 358 Phil. 38, 52-53 (1998). [25] Id. at 53-54. [26] 15 American Jurisprudence, p. 795, Sec. 356, cited in Pedret v. Ponce Enrile, 53 Official Gazette 2809, 2820 (1957). [27] Cerrano v. Tan Chuco, 38 Phil. 392, 398 (1918). [28] Hicks v. Manila Hotel, Co., 28 Phil. 325, 340 (1914). [29] PNOC Shipping and Transport Corporation v. Court of Appeals, et al., supra at 53. [30] People v. Abes, G.R. No. 138937, January 20, 2004, 420 SCRA 259, 278, citing People v. Abrazaldo, 445 Phil. 109, 125-126. [31] Bank of the Philippine Islands v. ALS Management and Development Corporation , G.R. No. 151821, April 14, 2004, 427 SCRA 564, 579. [32] Rollo, p. 25. [33] Id. at 22-23. [34] Article 1659, NEW CIVIL CODE. [35] Goldstein v. Roces, 34 Phil. 562, 566-567 (1916). [36] Chua Tee Dee v. Court of Appeals, G.R. No. 135721, May 27, 2004, 429 SCRA 418, 435. [37] Supra note 11.

SUPREME COURT Manila FIRST DIVISION G.R. No. 152040 March 31, 2006

MARIKINA AUTO LINE TRANSPORT CORPORATION and FREDDIE L. SUELTO, Petitioners, vs. PEOPLE OF THE PHILIPPINES and ERLINDA V. VALDELLON, Respondents. DECISION CALLEJO, SR., J.: Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CR No. 16739 affirming the Joint Decision of the Regional Trial Court (RTC) in Criminal Case No. Q-93-42629 and Civil Case No. Q-93-16051, where Freddie Suelto was convicted of reckless imprudence resulting in damages to property. Erlinda V. Valdellon is the owner of a two-door commercial apartment located at No. 31 Kamias Road, Quezon City. The Marikina Auto Line Transport Corporation (MALTC) is the owner-operator of a passenger bus with Plate Number NCV-849. Suelto, its employee, was assigned as the regular driver of the bus.2

At around 2:00 p.m. on October 3, 1992, Suelto was driving the aforementioned passenger bus along Kamias Road, Kamuning, Quezon City, going towards Epifanio de los Santos Avenue (EDSA). The bus suddenly swerved to the right and struck the terrace of the commercial apartment owned by Valdellon located along Kamuning Road.3 Upon Valdellons request, the court ordered Sergio Pontiveros, the Senior Building Inspection Officer of the City Engineers Office, to inspect the damaged terrace. Pontiveros submitted a report enumerating and describing the damages: (1) The front exterior and the right side concrete columns of the covered terrace were vertically displaced from its original position causing exposure of the vertical reinforcement. (2) The beams supporting the roof and parapet walls are found with cracks on top of the displaced columns. (3) The 6 CHB walls at [the] right side of the covered terrace were found with cracks caused by this accident. (4) The front iron grills and concrete balusters were found totally damaged and the later [sic] beyond repair.4 He recommended that since the structural members made of concrete had been displaced, the terrace would have to be demolished "to keep its monolithicness, and to insure the safety and stability of the building."5 Photographs6 of the damaged terrace were taken. Valdellon commissioned Engr. Jesus R. Regal, Jr. to estimate the cost of repairs, inclusive of labor and painting, and the latter pegged the cost at P171,088.46.7 In a letter dated October 19, 1992 addressed to the bus company and Suelto, Valdellon demanded payment ofP148,440.00, within 10 days from receipt thereof, to cover the cost of the damage to the terrace.8 The bus company and Suelto offered a P30,000.00 settlement which Valdellon refused.9 Valdellon filed a criminal complaint for reckless imprudence resulting in damage to property against Suelto. After the requisite preliminary investigation, an Information was filed with the RTC of Quezon City. The accusatory portion of the Information reads: That on or about the 3rd day of October 1992, in Quezon City, Philippines, the said accused, being then the driver and/or person in charge of a Marikina Auto Line bus bearing Plate No. NVC-849, did then and there unlawfully, and feloniously drive, manage, and operate the same along Kamias Road, in said City, in a careless, reckless, negligent, and imprudent manner, by then and there making the said vehicle run at a speed greater than was reasonable and proper without taking the necessary precaution to avoid accident to person/s and damage to property, and considering the condition of the traffic at said place at the time, causing as a consequence of his said carelessness, negligence, imprudence and lack of precaution, the said vehicle so driven, managed and operated by him to hit and bump, as in fact it hit and bump a commercial apartment belonging to ERLINDA V. VALDELLON located at No. 31 Kamias Road, this City, thereby causing damages to said apartment in the total amount of P171,088.46, Philippine Currency, to her damage and prejudice in the total amount aforementioned. CONTRARY TO LAW.10

Valdellon also filed a separate civil complaint against Suelto and the bus company for damages. She prayed that after due proceedings, judgment be rendered in her favor, thus: WHEREFORE, it is respectfully prayed of this Honorable Court to issue a writ of preliminary attachment against the defendants upon approval of plaintiffs bond, and after trial on the merits, to render a decision in favor of the plaintiff, ordering the defendants, jointly and severally, to pay a) the total sum of P171,088.46 constituting the expenses for the repair of the damaged apartment of plaintiff, with interests to be charged thereon at the legal rate from the date of the formal demand until the whole obligation is fully paid; b) the sum of not less than P20,000.00 each as compensatory and exemplary damages; c) the sum of P20,000.00 as attorneys fees and the sum of P1,000.00 for each appearance of plaintiffs counsel; and costs of suit; PLAINTIFF further prays for such other reliefs as may be just and equitable in the premises.11 A joint trial of the two cases was ordered by the trial court.12 The trial court conducted an ocular inspection of the damaged terrace, where defendants offered to have it repaired and restored to its original state. Valdellon, however, disagreed because she wanted the building demolished to give way for the construction of a new one.13 During the trial, Valdellon testified on the damage caused to the terrace of her apartment, and, in support thereof, adduced in evidence a receipt for P35,000.00, dated October 20, 1993, issued by the BB Construction and Steel Fabricator for "carpentry, masonry, welding job and electrical [work]."14 Pontiveros of the Office of the City Engineer testified that there was a need to change the column of the terrace, but that the building should also be demolished because "if concrete is destroyed, [one] cannot have it restored to its original position."15 Engr. Jesus Regal, Jr., the proprietor of the SSP Construction, declared that he inspected the terrace and estimated the cost of repairs, including labor, at P171,088.46. Suelto testified that at 2:00 p.m. on October 3, 1992, he was driving the bus on its way to Ayala Avenue, Makati, Metro Manila. When he reached the corner of K-H Street at Kamias Road, Quezon City, a passenger jeepney suddenly crossed from EDSA going to V. Luna and swerved to the lane occupied by the bus. Suelto had to swerve the bus to the right upon which it hit the side front of the terrace of Valdellons two-door apartment.16 Based on his estimate, the cost to the damage on the terrace of the apartment amounted to P40,000.00.17 On cross-examination, Suelto declared that he saw the passenger jeepney when it was a meter away from the bus. Before then, he had seen some passenger jeepneys on the right trying to overtake one another.18 Architect Arnulfo Galapate testified that the cost of the repair of the damaged terrace amounted to P55,000.00.19 On April 28, 1994, the trial court rendered judgment finding Suelto guilty beyond reasonable doubt of reckless imprudence resulting in damage to property, and ordered MALTC and Suelto to pay, jointly

and severally,P150,000.00 to Valdellon, by way of actual and compensatory damages, as well as attorneys fees and costs of suit. The fallo of the decision reads: WHEREFORE, finding the accused FREDDIE SUELTO Y LIWAG guilty beyond reasonable doubt of the crime of Reckless Imprudence Resulting in Damage to Property, said accused is hereby sentenced to suffer imprisonment of ONE (1) YEAR. With respect to the civil liability, judgment is hereby rendered in favor of plaintiff Erlinda Valdellon and against defendant Marikina Auto Line Transport Corporation and accused Freddie Suelto, where both are ordered, jointly and severally, to pay plaintiff: a. the sum of P150,000.00, as reasonable compensation sustained by plaintiff for her damaged apartment; b. the sum of P20,000.00, as compensatory and exemplary damages; c. the sum of P20,000.00, as attorneys fees; and, d. the costs of suit. SO ORDERED.20 MALTC and Suelto, now appellants, appealed the decision to the CA, alleging that the prosecution failed to prove Sueltos guilt beyond reasonable doubt. They averred that the prosecution merely relied on Valdellon, who testified only on the damage caused to the terrace of her apartment which appellants also alleged was excessive. Appellant Suelto further alleged that he should be acquitted in the criminal case for the prosecutions failure to prove his guilt beyond reasonable doubt. He maintained that, in an emergency case, he was not, in law, negligent. Even if the appellate court affirmed his conviction, the penalty of imprisonment imposed on him by the trial court is contrary to law. In its Brief for the People of the Philippines, the Office of the Solicitor General (OSG) submitted that the appealed decision should be affirmed with modification. On Sueltos claim that the prosecution failed to prove his guilt for the crime of reckless imprudence resulting in damage to property, the OSG contended that, applying the principle of res ipsa loquitur, the prosecution was able to prove that he drove the bus with negligence and recklessness. The OSG averred that the prosecution was able to prove that Sueltos act of swerving the bus to the right was the cause of damage to the terrace of Valdellons apartment, and in the absence of an explanation to the contrary, the accident was evidently due to appellants want of care. Consequently, the OSG posited, the burden was on the appellant to prove that, in swerving the bus to the right, he acted on an emergency, and failed to discharge this burden. However, the OSG averred that the trial court erred in sentencing appellant to a straight penalty of one year, and recommended a penalty of fine. On June 20, 2000, the CA rendered judgment affirming the decision of the trial court, but the award for actual damages was reduced to P100,000.00. The fallo of the decision reads: WHEREFORE, premises considered, the decision dated April 28, 1994, rendered by the court a quo is AFFIRMED with the modification that the sum of P150,000.00 as compensation sustained by the plaintiff-appellee for her damaged apartment be reduced to P100,000.00 without pronouncement as to costs.

SO ORDERED.21 Appellants filed a Motion for Reconsideration, but the CA denied the same.22 MALTC and Suelto, now petitioners, filed the instant petition reiterating its submissions in the CA: (a) the prosecution failed to prove the crime charged against petitioner Suelto; (b) the prosecution failed to adduce evidence to prove that respondent suffered actual damages in the amount of P100,000.00; and (c) the trial court erred in sentencing petitioner Suelto to one (1) year prison term. On the first issue, petitioners aver that the prosecution was mandated to prove that petitioner Suelto acted with recklessness in swerving the bus to the right thereby hitting the terrace of private respondents apartment. However, the prosecution failed to discharge its burden. On the other hand, petitioner Suelto was able to prove that he acted in an emergency when a passenger jeepney coming from EDSA towards the direction of the bus overtook another vehicle and, in the process, intruded into the lane of the bus. On the second issue, petitioners insist that private respondent was able to prove only the amount of P35,000.00 by way of actual damages; hence, the award of P100,000.00 is barren of factual basis. On the third issue, petitioner Suelto posits that the straight penalty of imprisonment recommended by the trial court, and affirmed by the CA, is contrary to Article 365 of the Revised Penal Code. The petition is partially granted. On the first issue, we find and so resolve that respondent People of the Philippines was able to prove beyond reasonable doubt that petitioner Suelto swerved the bus to the right with recklessness, thereby causing damage to the terrace of private respondents apartment. Although she did not testify to seeing the incident as it happened, petitioner Suelto himself admitted this in his answer to the complaint in Civil Case No. Q-93-16051, and when he testified in the trial court. Suelto narrated that he suddenly swerved the bus to the right of the road causing it to hit the column of the terrace of private respondent. Petitioners were burdened to prove that the damage to the terrace of private respondent was not the fault of petitioner Suelto. We have reviewed the evidence on record and find that, as ruled by the trial court and the appellate court, petitioners failed to prove that petitioner acted on an emergency caused by the sudden intrusion of a passenger jeepney into the lane of the bus he was driving. It was the burden of petitioners herein to prove petitioner Sueltos defense that he acted on an emergency, that is, he had to swerve the bus to the right to avoid colliding with a passenger jeep coming from EDSA that had overtaken another vehicle and intruded into the lane of the bus. The sudden emergency rule was enunciated by this Court in Gan v. Court of Appeals,23 thus: [O]ne who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to adopt what subsequently and upon reflection may appear to have been a better method unless the emergency in which he finds himself is brought about by his own negligence.

Under Section 37 of Republic Act No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code, motorists are mandated to drive and operate vehicles on the right side of the road or highway: SEC. 37. Driving on right side of highway. Unless a different course of action is required in the interest of the safety and the security of life, person or property, or because of unreasonable difficulty of operation in compliance herewith, every person operating a motor vehicle or an animaldrawn vehicle on a highway shall pass to the right when meeting persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction, and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the center of the intersection of the highway. Section 35 of the law provides, thus: Sec. 35. Restriction as to speed.(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a stop within the assured clear distance ahead (emphasis supplied). In relation thereto, Article 2185 of the New Civil Code provides that "unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent, if at the time of mishap, he was violating any traffic regulation." By his own admission, petitioner Suelto violated the Land Transportation and Traffic Code when he suddenly swerved the bus to the right, thereby causing damage to the property of private respondent. However, the trial court correctly rejected petitioner Sueltos defense, in light of his contradictory testimony vis--vis his Counter-Affidavit submitted during the preliminary investigation: It is clear from the photographs submitted by the prosecution (Exhs. C, D, G, H & I) that the commercial apartment of Dr. Valdellon sustained heavy damage caused by the bus being driven by Suelto. "It seems highly improbable that the said damages were not caused by a strong impact. And, it is quite reasonable to conclude that, at the time of the impact, the bus was traveling at a high speed when Suelto tried to avoid the passenger jeepney." Such a conclusion finds support in the decision of the Supreme Court in People vs. Ison, 173 SCRA 118, where the Court stated that "physical evidence is of the highest order. It speaks more eloquently than a hundred witnesses." The pictures submitted do not lie, having been taken immediately after the incident. The damages could not have been caused except by a speeding bus. Had the accused not been speeding, he could have easily reduced his speed and come to a full stop when he noticed the jeep. Were he more prudent in driving, he could have avoided the incident or even if he could not avoid the incident, the damages would have been less severe. In addition to this, the accused has made conflicting statements in his counter-affidavit and his testimony in court. In the former, he stated that the reason why he swerved to the right was because he wanted to avoid the passenger jeepney in front of him that made a sudden stop. But, in his testimony in court, he said that it was to avoid a passenger jeepney coming from EDSA that was overtaking by occupying his lane. Such glaring inconsistencies on material points render the testimony of the witness doubtful and shatter his credibility. Furthermore, the variance between testimony and prior statements renders the witness unreliable. Such inconsistency results in the loss in the credibility of the witness and his testimony as to his prudence and diligence.

As already maintained and concluded, the severe damages sustained could not have resulted had the accused acted as a reasonable and prudent man would. The accused was not diligent as he claims to be. What is more probable is that the accused had to swerve to the right and hit the commercial apartment of the plaintiff because he could not make a full stop as he was driving too fast in a usually crowded street.24 Moreover, if the claim of petitioners were true, they should have filed a third-party complaint against the driver of the offending passenger jeepney and the owner/operator thereof. Petitioner Sueltos reliance on the sudden emergency rule to escape conviction for the crime charged and his civil liabilities based thereon is, thus, futile. On the second issue, we agree with the contention of petitioners that respondents failed to prove that the damages to the terrace caused by the incident amounted to P100,000.00. The only evidence adduced by respondents to prove actual damages claimed by private respondent were the summary computation of damage made by Engr. Jesus R. Regal, Jr. amounting to P171,088.46 and the receipt issued by the BB Construction and Steel Fabricator to private respondent for P35,000.00 representing cost for carpentry works, masonry, welding, and electrical works. Respondents failed to present Regal to testify on his estimation. In its five-page decision, the trial court awarded P150,000.00 as actual damages to private respondent but failed to state the factual basis for such award. Indeed, the trial court merely declared in the decretal portion of its decision that the "sum ofP150,000.00 as reasonable compensation sustained by plaintiff for her damaged apartment." The appellate court, for its part, failed to explain how it arrived at the amount of P100,000.00 in its three-page decision. Thus, the appellate court merely declared: With respect to the civil liability of the appellants, they contend that there was no urgent necessity to completely demolish the apartment in question considering the nature of the damages sustained as a result of the accident. Consequently, appellants continue, the award of P150,000.00 as compensation sustained by the plaintiff-appellee for her damaged apartment is an unconscionable amount. The damaged portions of the apartment in question are not disputed. Considering the aforesaid damages which are the direct result of the accident, the reasonable, and adequate compensation due is hereby fixed at P100,000.00.25 Under Article 2199 of the New Civil Code, actual damages include all the natural and probable consequences of the act or omission complained of, classified as one for the loss of what a person already possesses (dao emergente) and the other, for the failure to receive, as a benefit, that which would have pertained to him (lucro cesante). As expostulated by the Court in PNOC Shipping and Transport Corporation v. Court of Appeals:26 Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of. There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses (dao emergente), and the other is the failure to receive as a benefit that which would have pertained to him (lucro cesante).27

The burden of proof is on the party who would be defeated if no evidence would be presented on either side. The burden is to establish ones case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side, is superior to that of the other. Actual damages are not presumed. The claimant must prove the actual amount of loss with a reasonable degree of certainty premised upon competent proof and on the best evidence obtainable. Specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne must be pointed out. Actual damages cannot be anchored on mere surmises, speculations or conjectures. As the Court declared: As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available. The burden of proof is on the party who would be defeated if no evidence would be presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other. In other words, damages cannot be presumed and courts, in making an award, must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne.28 The Court further declared that "where goods are destroyed by the wrongful act of defendant, the plaintiff is entitled to their value at the time of the destruction, that is, normally, the sum of money which he would have to pay in the market for identical or essentially similar goods, plus in a proper case, damages for the loss of the use during the period before replacement.29 While claimants bare testimonial assertions in support of their claims for damages should not be discarded altogether, however, the same should be admitted with extreme caution. Their testimonies should be viewed in light of claimants self-interest, hence, should not be taken as gospel truth. Such assertion should be buttressed by independent evidence. In the language of the Court: For this reason, Del Rosarios claim that private respondent incurred losses in the total amount of P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it should be supported by independent evidence. Moreover, because he was the owner of private respondent corporation whatever testimony he would give with regard to the value of the lost vessel, its equipment and cargoes should be viewed in the light of his self-interest therein. We agree with the Court of Appeals that his testimony as to the equipment installed and the cargoes loaded on the vessel should be given credence considering his familiarity thereto. However, we do not subscribe to the conclusion that his valuation of such equipment, cargo, and the vessel itself should be accepted as gospel truth. We must, therefore, examine the documentary evidence presented to support Del Rosarios claim as regards the amount of losses.30 An estimate of the damage cost will not suffice: Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually incurred. It is not enough that the damage be capable of proof but must be actually proved with a reasonable degree of certainty, pointing out specific facts that afford a basis for measuring whatever compensatory damages are borne. Private respondents merely sustained an estimated amount needed for the repair of the roof of their subject building. What is more, whether the necessary repairs were caused only by petitioners alleged negligence in the maintenance of its school building, or included the ordinary wear and tear of the house itself, is an essential question that remains indeterminable.31

We note, however, that petitioners adduced evidence that, in their view, the cost of the damage to the terrace of private respondent would amount to P55,000.00.32 Accordingly, private respondent is entitled to P55,000.00 actual damages. We also agree with petitioner Sueltos contention that the trial court erred in sentencing him to suffer a straight penalty of one (1) year. This is so because under the third paragraph of Article 365 of the Revised Penal Code, the offender must be sentenced to pay a fine when the execution of the act shall have only resulted in damage to property. The said provision reads in full: ART. 365. Imprudence and negligence. Any person who, by reckless imprudence, shall commit any act which, had it been intentional, would constitute a grave felony, shall suffer the penalty of arresto mayor in its maximum period, to prision correccional in its medium period; if it would have constituted a less grave felony, the penalty of arresto mayor in its minimum and medium periods shall be imposed; if it would have constituted a light felony, the penalty of arresto menor in its maximum period shall be imposed. Any person who, by simple imprudence or negligence, shall commit an act which would, otherwise, constitute a grave felony, shall suffer the penalty of arresto mayor in its medium and maximum periods; if it would have constituted a less serious felony, the penalty of arresto mayor in its minimum period shall be imposed. When the execution of the act covered by this article shall have only resulted in damage to the property of another, the offender shall be punished by a fine ranging from an amount equal to the value of said damages to three times such value, but which shall in no case be less than 25 pesos. A fine not exceeding two hundred pesos and censure shall be imposed upon any person who, by simple imprudence or negligence, shall cause some wrong which, if done maliciously, would have constituted a light felony. In the imposition of these penalties, the courts shall exercise their sound discretion, without regard to the rules prescribed in Article 64 (Emphasis supplied). In the present case, the only damage caused by petitioner Sueltos act was to the terrace of private respondents apartment, costing P55,000.00. Consequently, petitioners contention that the CA erred in awarding P100,000.00 by way of actual damages to private respondent is correct. We agree that private respondent is entitled to exemplary damages, and find that the award given by the trial court, as affirmed by the CA, is reasonable. Considering the attendant circumstances, we rule that private respondent Valdellon is entitled to only P20,000.00 by way of exemplary damages. IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The joint decision of the Regional Trial Court of Quezon City is AFFIRMED WITH THE MODIFICATION that petitioner Suelto is sentenced to pay a fine ofP55,000.00 with subsidiary imprisonment in case of insolvency. Petitioners are ORDERED to pay to Erlinda V. Valdellon, jointly and severally, the total amount of P55,000.00 by way of actual damages, and P20,000.00 by way of exemplary damages. No pronouncement as to costs. SO ORDERED. ROMEO J. CALLEJO, SR. Associate Justice

WE CONCUR: ARTEMIO V. PANGANIBAN Chief Justice Chairperson CONSUELO YNARES-SANTIAGO Associate Justice MA. ALICIA AUSTRIA-MARTINEZ Asscociate Justice

MINITA V. CHICO-NAZARIO Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ARTEMIO V. PANGANIBAN Chief Justice Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-3678 February 29, 1952

JOSE MENDOZA, plaintiff-appellant, vs. PHILIPPINE AIR LINES, INC., defendant-appellee. Manuel O. Chan, Reyes and Dy-Liaco for appellant. Daniel Me. Gomez and Emigdio Tanjuatco for appellee. MONTEMAYOR, J.: The present appeal by plaintiff Jose Mendoza from the decision of the Court of First Instance of Camarines Sur, has come directly to this Tribunal for the reason that both parties, appellant and appellee, accepted the findings of fact made by the trial court and here raise only questions of law. On our part, we must also accept said findings of fact of the lower court. In the year 1948, appellant Jose Mendoza was the owner of the Cita Theater located in the City of Naga, Camarines Sur, where he used to exhibit movie pictures booked from movie producers or film owners in Manila. The fiesta or town holiday of the City of Naga, held on September 17 and 18, yearly, was usually attended by a great many people, mostly from the Bicol region, especially since the Patron Saint Virgin of Pea Francia was believed by many to be miraculous. As a good businessman, appellant, taking advantage of these circumstances, decided to exhibit a film which would fit the occasion and have a special attraction and significance to the people attending said fiesta. A month before the holiday, that is to say, August 1948, he contracted with the LVN pictures,

Inc., a movie producer in Manila for him to show during the town fiesta the Tagalog film entitled "Himala ng Birhen" or Miracle of the Virgin. He made extensive preparations; he had two thousand posters printed and later distributed not only in the City of Naga but also in the neighboring towns. He also advertised in a weekly of general circulation in the province. The posters and advertisement stated that the film would be shown in the Cita theater on the 17th and 18th of September, corresponding to the eve and day of the fiesta itself. In pursuance of the agreement between the LVN Pictures Inc. and Mendoza, the former on September 17th, 1948, delivered to the defendant Philippine Airlines (PAL) whose planes carried passengers and cargo and made regular trips from Manila to the Pili Air Port near Naga, Camarines Sur, a can containing the film "Himala ng Birhen" consigned to the Cita Theater. For this shipment the defendant issued its Air Way Bill No. 317133 marked Exhibit "1". This can of films was loaded on flight 113 of the defendant, the plane arriving at the Air Port at Pili a little after four o'clock in the afternoon of the same day, September 17th. For reasons not explained by the defendant, but which would appear to be the fault of its employees or agents, this can of film was not unloaded at Pili Air Port and it was brought ba to Manila. Mendoza who had completed all arrangements for the exhibition of the film beginning in the evening of September 17th, to exploit the presence of the big crowd that came to attend the town fiesta, went to the Air Port and inquired from the defendant's station master there about the can of film. Said station master could not explain why the film was not unloaded and sent several radiograms to his principal in Manila making inquiries and asking that the film be sent to Naga immediately. After investigation and search in the Manila office, the film was finally located the following day, September 18th, and then shipped to the Pili Air Port on September 20th. Mendoza received it and exhibited the film but he had missed his opportunity to realize a large profit as he expected for the people after the fiesta had already left for their towns. To recoup his losses, Mendoza brought this action against the PAL. After trial, the lower court found that because of his failure to exhibit the film "Himala ng Birhen" during the town fiesta, Mendoza suffered damages or rather failed to earn profits in the amount of P3,000.00, but finding the PAL not liable for said damages, dismissed the complaint. To avoid liability, defendant-appellee, called the attention of the trial court to the terms and conditions of paragraph 6 of the Way Bill printed on the back thereof which paragraph reads as follows: 6. The Carrier does not obligate itself to carry the Goods by any specified aircraft or on a specified time. Said Carrier being hereby authorized to deviate from the route of the shipment without any liability therefor. It claimed that since there was no obligation on its part to carry the film in question on any specified time, it could not be held accountable for the delay of about three days. The trial court, however, found and held that although the defendant was not obligated to load the film on any specified plane or on any particular day, once said can film was loaded and shipped on one of its planes making trip to Camarines, then it assumed the obligation to unload it at its point of destination and deliver it to the consignee, and its unexplained failure to comply with this duty constituted negligence. If however found that fraud was not involved and that the defendant was a debtor in good faith. The trial court presided over by Judge Jose N. Leuterio in a well-considered decision citing authorities, particularly the case of Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587, held that not because plaintiff failed to realize profits in the sum of P3,000.00 due to the negligence of the defendant, should the latter be made to reimburse him said sum. Applying provisions of Art. 1107 of the Civil Code which provides that losses and those foreseen, or which might have been foreseen, at the time of constituting the obligation, and which are a necessary consequence of the failure to perform it, the trial court held that inasmuch as these damages

suffered by Mendoza were not foreseen or could not have been foreseen at the time that the defendant accepted the can of film for shipment, for the reason that neither the shipper LVN Pictures Inc. nor the consignee Mendoza had called its attention to the special circumstances attending the shipment and the showing of the film during the town fiesta of Naga, plaintiff may not recover the damages sought. Counsel for appellant insists that the articles of the Code of Commerce rather than those of the Civil Code should have been applied in deciding this case for the reason that the shipment of the can of film is an act of commerce; that the contract of transportation in this case should be considered commercial under Art. 349 of the Code of Commerce because it only involves merchandise or an object of commerce but also the transportation company, the defendant herein, was a common carrier, that is to say, customarily engaged in transportation for the public, and that although the contract of transportation was not by land or waterways as defined in said Art. 349, nevertheless, air transportation being analogous to land and water transportation, should be considered as included, especially in view of the second paragraph of Art. 2 of the same Code which says that transactions covered by the Code of Commerce and all others of analogous character shall be deemed acts of commerce. The trial court, however, disagreed to this contention and opined that air transportation not being expressly covered by the Code of Commerce, cannot be governed by its provisions. We believe that whether or not transportation by air should be regarded as a commercial contract under Art. 349, would be immaterial in the present case, as will be explained later. Without making a definite ruling on the civil or commercial nature of transportation by air, it being unnecessary, we are inclined to believe and to hold that a contract of transportation by air may be regarded as commercial. The reason is that at least in the present case the transportation company (PAL) is a common carrier; besides, air transportation is clearly similar or analogous to land and water transportation. The obvious reason for its non-inclusion in the Code of Commerce was that at the time of its promulgation, transportation by air on a commercial basis was not yet known. In the United Sates where air transportation has reached its highest development, an airline company engaged in the transportation business is regarded as a common carrier. The principles which govern carriers by other means, such as by railroad or motor bus, govern carriers by aircraft. 6 Am. Jur., Aviation, Sec. 56, p. 33. When Aircraft Operator is Common Carrier. That aircraft and the industry of carriage by aircraft are new is no reason why one in fact employing aircraft as common-carrier vehicles should not be classified as a common carrier and charged with liability as such. There can be no doubt, under the general law of common carriers, that those air lines and aircraft owners engaged in the passenger service on regular schedules on definite routes, who solicit the patronage of the traveling public, advertise schedules for routes, time of leaving, and rates of fare, and make the usual stipulation as to baggage, are common carriers by air. A flying service company which, according to its printed advertising, will take anyone anywhere at any time, though not operating on regular routes or schedules, and basing its charges not on the number of passengers, but on the operating cost of the plane per mile, has been held to be a common carrier. It is not necessary, in order to make one carrying passengers by aircraft a common carrier of passengers that the passengers can be carried from one point to another; the status and the liability as a common carrier may exist notwithstanding the passenger's ticket issued by an airplane carrier of passengers for hire contains a statement that it is not a common carrier, etc., or a stipulation that it is to be held only for its proven negligence. But an airplane owner cannot be classed as a common carrier of passengers unless he undertakes, for hire, to carry all persons who apply for passage indiscriminately as long as there is room and no legal excuse for refusing. . . . 6 Am. Jur., Aviation, Sec. 58, pp. 34-35.

The rules governing the business of a common carrier by airship or flying machine may be readily assimilated to those applied to other common carriers. 2 C.J.S., 1951, Cumulative Pocket Part, Aerial Navigation, Sec. 38, p. 99. The test of whether one is a common carrier by air is whether he holds out that he will carry for hire, so long as he has room, goods for everyone bringing goods to him for carriage, not whether he is carrying as a public employment or whether he carries to a fixed place. (Ibid., Sec. 39, p. 99.) Appellant contends that Art. 358 of the Code of Commerce should govern the award of the damages in his favor. Said article provides that if there is no period fixed for the delivery of the goods, the carrier shall be bound to forward them in the first shipment of the same or similar merchandise which he may make to the point of delivery, and that upon failure to do so, the damages caused by the delay should be suffered by the carrier. This is a general provision for ordinary damages and is no different from the provisions of the Civil Code, particularly Art. 1101 thereof, providing for the payment of damages caused by the negligence or delay in the fulfillment of one's obligation. Even applying the provisions of the Code of Commerce, as already stated, the pertinent provisions regarding damages only treats of ordinary damages or damages in general, not special damages like those suffered by the plaintiff herein. Article 2 of the Code of Commerce provides that commercial transactions are to be governed by the provisions of the Code of Commerce, but in the absence of applicable provisions, they will be governed by the usages of commerce generally observed in each place; and in default of both, by those of the Civil Law. So that assuming that the present case involved a commercial transaction, still inasmuch as the special damages herein claimed finds no applicable provision in the Code of Commerce, neither has it been shown that there are any commercial usages applicable thereto, then in the last analysis, the rules of the civil law would have to come into play. Under Art. 1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held liable only for damages that were foreseen or might have been foreseen at the time the contract of the transportation was entered into. The trial court correctly found that the defendant company could not have foreseen the damages that would be suffered by Mendoza upon failure to deliver the can of film on the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film during the town fiesta and his preparations, specially the announcement of said exhibition by posters and advertisement in the newspaper, were not called to the defendant's attention. In our research for authorities we have found a case very similar to the one under consideration. In the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered picture films to the defendant Fargo, an express company, consigned and to be delivered to him in Utica. At the time of the shipment the attention of the express company was called to the fact that the shipment involved motion picture films to be exhibited in Utica, and that they should be sent to their destination, rush. There was delay in their delivery and it was found that the plaintiff because of his failure to exhibit the film in Utica due to the delay suffered damages or loss of profits. But the highest court in the State of New York refused to award him special damages. Said appellate court observed: But before defendant could be held to special damages, such as the present alleged loss of profits on account of delay or failure of delivery, it must have appeared that he had notice at the time of delivery to him of the particular circumstances attending the shipment, and which probably would lead to such special loss if he defaulted. Or, as the rule has been stated in another form, in order to impose on the defaulting party further liability than for damages naturally and directly, i.e., in the ordinary course of things, arising from a breach of contract, such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting. Generally,

notice then of any special circumstances which will show that the damages to be anticipated from a breach would be enhanced has been held sufficient for this effect. As may be seen, that New York case is a stronger one than the present case for the reason that the attention of the common carrier in said case was called to the nature of the articles shipped, the purpose of shipment, and the desire to rush the shipment, circumstances and facts absent in the present case. But appellants now contends that he is not suing on a breach of contract but on a tort as provided for in Art. 1902 of the Civil Code. We are a little perplexed as to this new theory of the appellant. First, he insists that the articles of the Code of Commerce should be applied; that he invokes the provisions of said Code governing the obligations of a common carrier to make prompt delivery of goods given to it under a contract of transportation. Later, as already said, he says that he was never a party to the contract of transportation and was a complete stranger to it, and that he is now suing on a tort or violation of his rights as a stranger (culpa aquiliana). If he does not invoke the contract of carriage entered into with the defendant company, then he would hardly have any leg to stand on. His right to prompt delivery of the can of film at the Pili Air Port stems and is derived from the contract of carriage under which contract, the PAL undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore that contract and the obligation to carry and to deliver and the right to prompt delivery disappear. Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right of prompt delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties. In the present case, the findings of the trial court which as already stated, are accepted by the parties and which we must accept are to the effect that the LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on the other, entered into a contract of transportation. (p. 29, Rec. on Appeal). One interpretation of said finding is that the LVN Pictures Inc. through previous agreement with Mendoza acted as the latter's agent. When he negotiated with the LVN Pictures Inc. to rent the film "Himala ng Birhen" and show it during the Naga town fiesta, he most probably authorized and enjoined the Picture Company to ship the film for him on the PAL on September 17th. Another interpretation is that even if the LVN Pictures Inc. as consignor of its own initiative, and acting independently of Mendoza for the time being, made Mendoza as consignee, a stranger to the contract if that is possible, nevertheless when he, Mendoza, appeared at the Pili Air Port armed with the copy of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to him, he thereby made himself a party to the contract of the transportation. The very citation made by appellant in his memorandum supports this view. Speaking of the possibility of a conflict between the order of the shipper on the one hand and the order of the consignee on the other, as when the shipper orders the shipping company to return or retain the goods shipped while the consignee demands their delivery, Malagarriga in his book Codigo de Comercio Comentado, Vol. I, p. 400, citing a decision of Argentina Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled "Commentaries and Jurisprudence on the Commercial Laws of the Philippines" p. 209, says that the right of the shipper to countermand the shipment terminates when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the carrier and makes himself a party to the contract. Prior to that time, he is stranger to the contract. Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil Code which reads thus: Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked.

Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the stipulations of the delivery to Mendoza as consignee. His demand for the delivery of the can of film to him at the Pili Air Port may be regarded as a notice of his acceptance of the stipulation of the delivery in his favor contained in the contract of carriage, such demand being one of the fulfillment of the contract of carriage and delivery. In this case he also made himself a party to the contract, or at least has come to court to enforce it. His cause of action must necessarily be founded on its breach. One can readily sympathize with the appellant herein for his loss of profits which he expected to realize. But he overlooked the legal angle. In situations like the present where failure to exhibit films on a certain day would spell substantial damages or considerable loss of profits, including waste of efforts on preparations and expenses incurred in advertisements, exhibitors, for their security, may either get hold of the films well ahead of the time of exhibition in order to make allowance for any hitch in the delivery, or else enter into a special contract or make a suitable arrangement with the common carrier for the prompt delivery of the films, calling the attention of the carrier to the circumstances surrounding the case and the approximate amount of damages to be suffered in case of delay. Finding no reversible error in the decision appealed from, the same is hereby affirmed. No pronouncement as to costs. So ordered. Paras, C.J., Feria, Bengzon, Padilla, Reyes, Jugo and Bautista Angelo, JJ., concur. Paras, C.J., I certify that Mr. Justice Tuason voted for the affirmance. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 107518 October 8, 1998 PNOC SHIPPING AND TRANSPORT CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS and MARIA EFIGENIA FISHING CORPORATION, respondents.

ROMERO, J.: A party is entitled to adequate compensation only for such pecuniary loss actually suffered and duly proved. 1Indeed, basic is the rule that to recover actual damages, the amount of loss must not only be capable of proof but must actually be proven with a reasonable degree of certainty, premised upon competent proof or best evidence obtainable of the actual amount thereof. 2 The claimant is duty-bound to point out specific facts that afford a basis for measuring whatever compensatory damages are borne. 3 A court cannot merely rely on speculations, conjectures, or guesswork as to the fact and amount of damages 4 as well as hearsay 5 or uncorroborated testimony whose truth is suspect. 6 Such are the jurisprudential precepts that the Court now applies in resolving the instant petition.

The records disclose that in the early morning of September 21, 1977, the M/V Maria Efigenia XV, owned by private respondent Maria Efigenia Fishing Corporation, was navigating the waters near Fortune Island in Nasugbu, Batangas on its way to Navotas, Metro Manila when it collided with the vessel Petroparcel which at the time was owned by the Luzon Stevedoring Corporation (LSC). After investigation was conducted by the Board of Marine Inquiry, Philippine Coast Guard Commandant Simeon N. Alejandro rendered a decision finding the Petroparcel at fault. Based on this finding by the Board and after unsuccessful demands on petitioner, 7 private respondent sued the LSC and the Petroparcel captain, Edgardo Doruelo, before the then Court of First Instance of Caloocan City, paying thereto the docket fee of one thousand two hundred fifty-two pesos (P1,252.00) and the legal research fee of two pesos (P2.00). 8 In particular, private respondent prayed for an award of P692,680.00, allegedly representing the value of the fishing nets, boat equipment and cargoes of M/V Maria Efigenia XV, with interest at the legal rate plus 25% thereof as attorney's fees. Meanwhile, during the pendency of the case, petitioner PNOC Shipping and Transport Corporation sought to be substituted in place of LSC as it had already acquired ownership of the Petroparcel. 9 For its part, private respondent later sought the amendment of its complaint on the ground that the original complaint failed to plead for the recovery of the lost value of the hull of M/V Maria Efigenia XV. 10 Accordingly, in the amended complaint, private respondent averred that M/V Maria Efigenia XV had an actual value of P800,000.00 and that, after deducting the insurance payment of P200,000.00, the amount of P600,000.00 should likewise be claimed. The amended complaint also alleged that inflation resulting from the devaluation of the Philippine peso had affected the replacement value of the hull of the vessel, its equipment and its lost cargoes, such that there should be a reasonable determination thereof. Furthermore, on account of the sinking of the vessel, private respondent supposedly incurred unrealized profits and lost business opportunities that would thereafter be proven. 11 Subsequently, the complaint was further amended to include petitioner as a defendant 12 which the lower court granted in its order of September 16, 1985. 13 After petitioner had filed its answer to the second amended complaint, on February 5, 1987, the lower court issued a pre-trial order 14 containing, among other things, a stipulations of facts, to wit: 1. On 21 September 1977, while the fishing boat "M/V MARIA EFIGENIA" owned by plaintiff was navigating in the vicinity of Fortune Island in Nasugbu, Batangas, on its way to Navotas, Metro Manila, said fishing boat was hit by the LSCO tanker "Petroparcel" causing the former to sink. 2. The Board of Marine Inquiry conducted an investigation of this marine accident and on 21 November 1978, the Commandant of the Philippine Coast Guard, the Honorable Simeon N. Alejandro, rendered a decision finding the cause of the accident to be the reckless and imprudent manner in which Edgardo Doruelo navigated the LSCO "Petroparcel" and declared the latter vessel at fault. 3. On 2 April 1978, defendant Luzon Stevedoring Corporation (LUSTEVECO), executed in favor of PNOC Shipping and Transport Corporation a Deed of Transfer involving several tankers, tugboats, barges and pumping stations, among which was the LSCO Petroparcel. 4. On the same date on 2 April 1979 (sic), defendant PNOC STC again entered into an Agreement of Transfer with co-defendant Lusteveco whereby all the business

properties and other assets appertaining to the tanker and bulk oil departments including the motor tanker LSCO Petroparcel of defendant Lusteveco were sold to PNOC STC. 5. The aforesaid agreement stipulates, among others, that PNOC-STC assumes, without qualifications, all obligations arising from and by virtue of all rights it obtained over the LSCO "Petroparcel". 6. On 6 July 1979, another agreement between defendant LUSTEVECO and PNOCSTC was executed wherein Board of Marine Inquiry Case No. 332 (involving the sea accident of 21 September 1977) was specifically identified and assumed by the latter. 7. On 23 June 1979, the decision of Board of Marine Inquiry was affirmed by the Ministry of National Defense, in its decision dismissing the appeal of Capt. Edgardo Doruelo and Chief mate Anthony Estenzo of LSCO "Petroparcel". 8. LSCO "Petroparcel" is presently owned and operated by PNOC-STC and likewise Capt. Edgardo Doruelo is still in their employ. 9. As a result of the sinking of M/V Maria Efigenia caused by the reckless and imprudent manner in which LSCO Petroparcel was navigated by defendant Doruelo, plaintiff suffered actual damages by the loss of its fishing nets, boat equipments (sic) and cargoes, which went down with the ship when it sank the replacement value of which should be left to the sound discretion of this Honorable Court. After trial, the lower court 15 rendered on November 18, 1989 its decision disposing of Civil Case No. C-9457 as follows: WHEREFORE, and in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant PNOC Shipping & Transport Corporation, to pay the plaintiff: a. The sum of P6,438,048.00 representing the value of the fishing boat with interest from the date of the filing of the complaint at the rate of 6% per annum; b. The sum of P50,000.00 as and for attorney's fees; and c. The costs of suit. The counterclaim is hereby DISMISSED for lack of merit. Likewise, the case against defendant Edgardo Doruelo is hereby DISMISSED, for lack of jurisdiction. SO ORDERED. In arriving at the above disposition, the lower court cited the evidence presented by private respondent consisting of the testimony of its general manager and sole witness, Edilberto del Rosario. Private respondent's witness testified that M/V Maria Efigenia XV was owned by private respondent per Exhibit A, a certificate of ownership issued by the Philippine Coast Guard showing that M/V Maria Efigenia XV was a wooden motor boat constructed in 1965 with 128.23 gross

tonnage. According to him, at the time the vessel sank, it was then carrying 1,060 tubs (baeras) of assorted fish the value of which was never recovered. Also lost with the vessel were two cummins engines (250 horsepower), radar, pathometer and compass. He further added that with the loss of his flagship vessel in his fishing fleet of fourteen (14) vessels, he was constrained to hire the services of counsel whom he paid P10,000 to handle the case at the Board of Marine Inquiry and P50,000.00 for commencing suit for damages in the lower court. As to the award of P6,438,048.00 in actual damages, the lower court took into account the following pieces of documentary evidence that private respondent proffered during trial: (a) Exhibit A certified xerox copy of the certificate of ownership of M/V Maria Efigenia XV; (b) Exhibit B a document titled "Marine Protest" executed by Delfin Villarosa, Jr. on September 22, 1977 stating that as a result of the collision, the M/V Maria Efigenia XVsustained a hole at its left side that caused it to sink with its cargo of 1,050 baerasvalued at P170,000.00; (c) Exhibit C a quotation for the construction of a 95-footer trawler issued by Isidoro A. Magalong of I. A. Magalong Engineering and Construction on January 26, 1987 to Del Rosario showing that construction of such trawler would cost P2,250,000.00; (d) Exhibit D pro forma invoice No. PSPI-05/87-NAV issued by E.D. Daclan of Power Systems, Incorporated on January 20, 1987 to Del Rosario showing that two (2) units of CUMMINS Marine Engine model N855-M, 195 bhp. at 1800 rpm. would cost P1,160,000.00; (e) Exhibit E quotation of prices issued by Scan Marine Inc. on January 20, 1987 to Del Rosario showing that a unit of Furuno Compact Daylight Radar, Model FR-604D, would cost P100,000.00 while a unit of Furuno Color Video Sounder, Model FCV-501 would cost P45,000.00 so that the two units would cost P145,000.00; (f) Exhibit F quotation of prices issued by Seafgear Sales, Inc. on January 21, 1987 to Del Rosario showing that two (2) rolls of nylon rope (5" cir. X 300fl.) would cost P140,000.00; two (2) rolls of nylon rope (3" cir. X 240fl.), P42,750.00; one (1) binocular (7 x 50), P1,400.00, one (1) compass (6"), P4,000.00 and 50 pcs. of floats, P9,000.00 or a total of P197,150.00; (g) Exhibit G retainer agreement between Del Rosario and F. Sumulong Associates Law Offices stipulating an acceptance fee of P5,000.00, per appearance fee of P400.00, monthly retainer of P500.00, contingent fee of 20% of the total amount recovered and that attorney's fee to be awarded by the court should be given to Del Rosario; and (h) Exhibit H price quotation issued by Seafgear Sales, Inc. dated April 10, 1987 to Del Rosario showing the cost of poly nettings as: 50 rolls of 400/18 3kts. 100md x 100mtrs., P70,000.00; 50 rolls of 400/18

5kts. 100md x 100mtrs., P81,500.00; 50 rolls of 400/18 8kts. 100md x 100mtrs., P116,000.00, and 50 rolls of 400/18 10kts. 100md x 100mtrs., P146,500 and baera (tub) at P65.00 per piece or a total of P414,065.00. The lower court held that the prevailing replacement value of P6,438,048.00 of the fishing boat and all its equipment would regularly increase at 30% every year from the date the quotations were given. On the other hand, the lower court noted that petitioner only presented Lorenzo Lazaro, senior estimator at PNOC Dockyard & Engineering Corporation, as sole witness and it did not bother at all to offer any documentary evidence to support its position. Lazaro testified that the price quotations submitted by private respondent were "excessive" and that as an expert witness, he used the quotations of his suppliers in making his estimates. However, he failed to present such quotations of prices from his suppliers, saying that he could not produce a breakdown of the costs of his estimates as it was "a sort of secret scheme." For this reason, the lower court concluded: Evidently, the quotation of prices submitted by the plaintiff relative to the replacement value of the fishing boat and its equipments in the tune of P6,438,048.00 which were lost due to the recklessness and imprudence of the herein defendants were not rebutted by the latter with sufficient evidence. The defendants through their sole witness Lorenzo Lazaro relied heavily on said witness' bare claim that the amount afore-said is excessive or bloated, but they did not bother at all to present any documentary evidence to substantiate such claim. Evidence to be believed must not only proceed from the mouth of the credible witness, but it must be credible in itself. (Vda. de Bonifacio vs. B. L. T. Bus Co., Inc. L-26810, August 31, 1970). Aggrieved, petitioner filed a motion for the reconsideration of the lower court's decision contending that: (1) the lower court erred in holding it liable for damages; that the lower court did not acquire jurisdiction over the case by paying only P1,252.00 as docket fee; (2) assuming that plaintiff was entitled to damages, the lower court erred in awarding an amount greater than that prayed for in the second amended complaint; and (3) the lower court erred when it failed to resolve the issues it had raised in its memorandum. 16 Petitioner likewise filed a supplemental motion for reconsideration expounding on whether the lower court acquired jurisdiction over the subject matter of the case despite therein plaintiff's failure to pay the prescribed docket fee. 17 On January 25, 1990, the lower court declined reconsideration for lack of merit. 18 Apparently not having received the order denying its motion for reconsideration, petitioner still filed a motion for leave to file a reply to private respondent's opposition to said motion. 19 Hence, on February 12, 1990, the lower court denied said motion for leave to file a reply on the ground that by the issuance of the order of January 25, 1990, said motion had become moot and academic. 20 Unsatisfied with the lower court's decision, petitioner elevated the matter to the Court of Appeals which, however, affirmed the same in toto on October 14, 1992. 21 On petitioner's assertion that the award of P6,438,048.00 was not convincingly proved by competent and admissible evidence, the Court of Appeals ruled that it was not necessary to qualify Del Rosario as an expert witness because as the owner of the lost vessel, "it was well within his knowledge and competency to identify and determine the equipment installed and the cargoes loaded" on the vessel. Considering the documentary evidence presented as in the nature of market reports or quotations, trade journals, trade circulars and price lists, the Court of Appeals held, thus:

Consequently, until such time as the Supreme Court categorically rules on the admissibility or inadmissibility of this class of evidence, the reception of these documentary exhibits (price quotations) as evidence rests on the sound discretion of the trial court. In fact, where the lower court is confronted with evidence which appears to be of doubtful admissibility, the judge should declare in favor of admissibility rather than of non-admissibility (The Collector of Palakadhari, 124 [1899], p. 13, cited in Francisco, Revised Rules of Court, Evidence, Volume VII, Part I, 1990 Edition, p. 18). Trial courts are enjoined to observe the strict enforcement of the rules of evidence which crystallized through constant use and practice and are very useful and effective aids in the search for truth and for the effective administration of justice. But in connection with evidence which may appear to be of doubtful relevancy or incompetency or admissibility, it is the safest policy to be liberal, not rejecting them on doubtful or technical grounds, but admitting them unless plainly irrelevant, immaterial or incompetent, for the reason that their rejection places them beyond the consideration of the court. If they are thereafter found relevant or competent, can easily be remedied by completely discarding or ignoring them. (Banaria vs. Banaria, et al., C.A. No. 4142, May 31, 1950; cited in Francisco, Supra). [Emphasis supplied]. Stressing that the alleged inadmissible documentary exhibits were never satisfactorily rebutted by appellant's own sole witness in the person of Lorenzo Lazaro, the appellate court found that petitioner ironically situated itself in an "inconsistent posture by the fact that its own witness, admittedly an expert one, heavily relies on the very same pieces of evidence (price quotations) appellant has so vigorously objected to as inadmissible evidence." Hence, it concluded: . . . The amount of P6,438,048.00 was duly established at the trial on the basis of appellee's documentary exhibits (price quotations) which stood uncontroverted, and which already included the amount by way of adjustment as prayed for in the amended complaint. There was therefore no need for appellee to amend the second amended complaint in so far as to the claim for damages is concerned to conform with the evidence presented at the trial. The amount of P6,438,048.00 awarded is clearly within the relief prayed for in appellee's second amended complaint. On the issue of lack of jurisdiction, the respondent court held that following the ruling in Sun Insurance Ltd. v. Asuncion, 22 the additional docket fee that may later on be declared as still owing the court may be enforced as a lien on the judgment. Hence, the instant recourse. In assailing the Court of Appeals' decision, petitioner posits the view that the award of P6,438,048 as actual damages should have been in light of these considerations, namely: (1) the trial court did not base such award on the actual value of the vessel and its equipment at the time of loss in 1977; (2) there was no evidence on extraordinary inflation that would warrant an adjustment of the replacement cost of the lost vessel, equipment and cargo; (3) the value of the lost cargo and the prices quoted in respondent's documentary evidence only amount to P4,336,215.00; (4) private respondent's failure to adduce evidence to support its claim for unrealized profit and business opportunities; and (5) private respondent's failure to prove the extent and actual value of damages sustained as a result of the 1977 collision of the vessels. 23 Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury

inflicted and not to impose a penalty. 24 In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of. 25 There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses (dao emergente), and the other is the failure to receive as a benefit that which would have pertained to him (lucro cesante). 26 Thus: Where goods are destroyed by the wrongful act of the defendant the plaintiff is entitled to their value at the time of destruction, that is, normally, the sum of money which he would have to pay in the market for identical or essentially similar goods, plus in a proper case damages for the loss of use during the period before replacement. In other words, in the case of profit-earning chattels, what has to be assessed is the value of the chattel to its owner as a going concern at the time and place of the loss, and this means, at least in the case of ships, that regard must be had to existing and pending engagements, . . .
. . . . If the market value of the ship reflects the fact that it is in any case virtually certain of profitable employment, then nothing can be added to that value in respect of charters actually lost, for to do so would bepro tanto to compensate the plaintiff twice over. On the other hand, if the ship is valued without reference to its actual future engagements and only in the light of its profit-earning potentiality, then it may be necessary to add to the value thus assessed the anticipated profit on a charter or other engagement which it was unable to fulfill. What the court has to ascertain in each case is the "capitalised value of the vessel as a profit-earning machine not in the abstract but in view of the actual circumstances," without, of course, taking into account considerations which were too remote at the time of the loss. 27 [Emphasis supplied].

As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available. 28 The burden of proof is on the party who would be defeated if no evidence would be presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other. 29 In other words, damages cannot be presumed and courts, in making an award must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne. 30 In this case, actual damages were proven through the sole testimony of private respondent's general manager and certain pieces of documentary evidence. Except for Exhibit B where the value of the 1,050 baeras of fish were pegged at their September 1977 value when the collision happened, the pieces of documentary evidence proffered by private respondent with respect to items and equipment lost show similar items and equipment with corresponding prices in early 1987 or approximately ten (10) years after the collision. Noticeably, petitioner did not object to the exhibits in terms of the time index for valuation of the lost goods and equipment. In objecting to the same pieces of evidence, petitioner commented that these were not duly authenticated and that the witness (Del Rosario) did not have personal knowledge on the contents of the writings and neither was he an expert on the subjects thereof. 31 Clearly ignoring petitioner's objections to the exhibits, the lower court admitted these pieces of evidence and gave them due weight to arrive at the award of P6,438,048.00 as actual damages. The exhibits were presented ostensibly in the course of Del Rosario's testimony. Private respondent did not present any other witnesses especially those whose signatures appear in the price quotations that became the bases of the award. We hold, however, that the price quotations are ordinary private writings which under the Revised Rules of Court should have been proffered along with the testimony of the authors thereof. Del Rosario could not have testified on the veracity of the

contents of the writings even though he was the seasoned owner of a fishing fleet because he was not the one who issued the price quotations. Section 36, Rule 130 of the Revised Rules of Court provides that a witness can testify only to those facts that he knows of his personal knowledge. For this reason, Del Rosario's claim that private respondent incurred losses in the total amount of P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it should be supported by independent evidence. Moreover, because he was the owner of private respondent corporation 32 whatever testimony he would give with regard to the value of the lost vessel, its equipment and cargoes should be viewed in the light of his self-interest therein. We agree with the Court of Appeals that his testimony as to the equipment installed and the cargoes loaded on the vessel should be given credence 33 considering his familiarity thereto. However, we do not subscribe to the conclusion that his valuation of such equipment, cargo and the vessel itself should be accepted as gospel truth. 34 We must, therefore, examine the documentary evidence presented to support Del Rosario's claim as regards the amount of losses. The price quotations presented as exhibits partake of the nature of hearsay evidence considering that the persons who issued them were not presented as witnesses. 35 Any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of another person who is not on the witness stand. Hearsay evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence rule. 36On this point, we believe that the exhibits do not fall under any of the exceptions provided under Sections 37 to 47 of Rule 130. 37 It is true that one of the exceptions to the hearsay rule pertains to "commercial lists and the like" under Section 45, Rule 130 of the Revised Rules on Evidence. In this respect, the Court of Appeals considered private respondent's exhibits as "commercial lists." It added, however, that these exhibits should be admitted in evidence "until such time as the Supreme Court categorically rules on the admissibility or inadmissibility of this class of evidence" because "the reception of these documentary exhibits (price quotations) as evidence rests on the sound discretion of the trial court." 38 Reference to Section 45, Rule 130, however, would show that the conclusion of the Court of Appeals on the matter was arbitrarily arrived at. This rule states: Commercial lists and the like. Evidence of statements of matters of interest to persons engaged in an occupation contained in a list, register, periodical, or other published compilation is admissible as tending to prove the truth of any relevant matter so stated if that compilation is published for use by persons engaged in that occupation and is generally used and relied upon by them there. Under Section 45 of the aforesaid Rule, a document is a commercial list if: (1) it is a statement of matters of interest to persons engaged in an occupation; (2) such statement is contained in a list, register, periodical or other published compilation; (3) said compilation is published for the use of persons engaged in that occupation, and (4) it is generally used and relied upon by persons in the same occupation. Based on the above requisites, it is our considered view that Exhibits B, C, D, E, F and H 39 are not "commercial lists" for these do not belong to the category of "other published compilations" under Section 45 aforequoted. Under the principle of ejusdem generis, "(w)here general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned." 40The exhibits mentioned are mere price quotations issued personally to Del Rosario who requested for them from dealers of equipment similar to the ones lost at the collision of the two vessels. These are not published in any list,

register, periodical or other compilation on the relevant subject matter. Neither are these "market reports or quotations" within the purview of "commercial lists" as these are not "standard handbooks or periodicals, containing data of everyday professional need and relied upon in the work of the occupation." 41 These are simply letters responding to the queries of Del Rosario. Thus, take for example Exhibit D which reads: January 20, 1987 PROFORMA INVOICE NO. PSPI-05/87-NAV MARIA EFIGINIA FISHING CORPORATION Navotas, Metro Manila Attention: MR. EDDIE DEL ROSARIO Gentlemen: In accordance to your request, we are pleated to quote our Cummins Marine Engine, to wit. Two (2) units CUMMINS Marine Engine model N855M, 195 bhp. at 1800 rpm., 6-cylinder in-line, 4-stroke cycle, natural aspirated, 5 1/2 in. x 6 in. bore and stroke, 855 cu. In. displacement, keel-cooled, electric starting coupled with Twin-Disc Marine gearbox model MG-509, 4.5:1 reduction ratio, includes oil cooler, companion flange, manual and standard accessories as per attached sheet. Price FOB Manila P580,000.00/unit Total FOB Manila P1,160,000.00 TERMS : CASH DELIVERY : 60-90 days from date of order. VALIDITY : Subject to our final confirmation. WARRANTY : One (1) full year against factory defect. V e r y t r u l

y y o u r s , P O W E R S Y S T E M S , I N C . ( S g d . ) E . D . D a c l a n To be sure, letters and telegrams are admissible in evidence but these are, however, subject to the general principles of evidence and to various rules relating to documentary evidence. 42 Hence, in one case, it was held that a letter from an automobile dealer offering an allowance for an automobile upon purchase of a new automobile after repairs had been completed, was not a "price current" or

"commercial list" within the statute which made such items presumptive evidence of the value of the article specified therein. The letter was not admissible in evidence as a "commercial list" even though the clerk of the dealer testified that he had written the letter in due course of business upon instructions of the dealer. 43 But even on the theory that the Court of Appeals correctly ruled on the admissibility of those letters or communications when it held that unless "plainly irrelevant, immaterial or incompetent," evidence should better be admitted rather than rejected on "doubtful or technical grounds," 44 the same pieces of evidence, however, should not have been given probative weight. This is a distinction we wish to point out. Admissibility of evidence refers to the question of whether or not the circumstance (or evidence) is to considered at all. 45 On the other hand, the probative value of evidence refers to the question of whether or not it proves an issue. 46 Thus, a letter may be offered in evidence and admitted as such but its evidentiary weight depends upon the observance of the rules on evidence. Accordingly, the author of the letter should be presented as witness to provide the other party to the litigation the opportunity to question him on the contents of the letter. Being mere hearsay evidence, failure to present the author of the letter renders its contents suspect. As earlier stated, hearsay evidence, whether objected to or not, has no probative value. Thus: The courts differ as to the weight to be given to hearsay evidence admitted without objection. Some hold that when hearsay has been admitted without objection, the same may be considered as any other properly admitted testimony. Others maintain that it is entitled to no more consideration than if it had been excluded. The rule prevailing in this jurisdiction is the latter one. Our Supreme Court held that although the question of admissibility of evidence can not be raised for the first time on appeal, yet if the evidence is hearsay it has no probative value and should be disregarded whether objected to or not. "If no objection is made" quoting Jones on Evidence "it (hearsay) becomes evidence by reason of the want of such objection even though its admission does not confer upon it any new attribute in point of weight. Its nature and quality remain the same, so far as its intrinsic weakness and incompetency to satisfy the mind are concerned, and as opposed to direct primary evidence, the latter always prevails.
The failure of the defense counsel to object to the presentation of incompetent evidence, like hearsay evidence or evidence that violates the rules of res inter alios acta, or his failure to ask for the striking out of the same does not give such evidence any probative value. But admissibility of evidence should not be equated with weight of evidence. Hearsay evidence whether objected to or not has no probative value. 47

Accordingly, as stated at the outset, damages may not be awarded on the basis of hearsay evidence. 48 Nonetheless, the non-admissibility of said exhibits does not mean that it totally deprives private respondent of any redress for the loss of its vessel. This is because in Lufthansa German Airlines v. Court of Appeals, 49 the Court said: In the absence of competent proof on the actual damage suffered, private respondent is "entitled to nominal damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered." [Emphasis supplied].

Nominal damages are awarded in every obligation arising from law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or in every case where property right has been invaded. 50 Under Article 2223 of the Civil Code, "(t)he adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns." Actually, nominal damages are damages in name only and not in fact. Where these are allowed, they are not treated as an equivalent of a wrong inflicted but simply in recognition of the existence of a technical injury. 51However, the amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained by private respondent considering the concept and purpose of such damages. 52 The amount of nominal damages to be awarded may also depend on certain special reasons extant in the case. 53 Applying now such principles to the instant case, we have on record the fact that petitioner's vessel Petroparcelwas at fault as well as private respondent's complaint claiming the amount of P692,680.00 representing the fishing nets, boat equipment and cargoes that sunk with the M/V Maria Efigenia XV. In its amended complaint, private respondent alleged that the vessel had an actual value of P800,000.00 but it had been paid insurance in the amount of P200,000.00 and, therefore, it claimed only the amount of P600,000.00. Ordinarily, the receipt of insurance payments should diminish the total value of the vessel quoted by private respondent in his complaint considering that such payment is causally related to the loss for which it claimed compensation. This Court believes that such allegations in the original and amended complaints can be the basis for determination of a fair amount of nominal damages inasmuch as a complaint alleges the ultimate facts constituting the plaintiffs cause of action. 54 Private respondent should be bound by its allegations on the amount of its claims. With respect to petitioner's contention that the lower court did not acquire jurisdiction over the amended complaint increasing the amount of damages claimed to P600,000.00, we agree with the Court of Appeals that the lower court acquired jurisdiction over the case when private respondent paid the docket fee corresponding to its claim in its original complaint. Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint should not be considered as having curtailed the lower court's jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, 55 the unpaid docket fee should be considered as a lien on the judgment even though private respondent specified the amount of P600,000.00 as its claim for damages in its amended complaint. Moreover, we note that petitioner did not question at all the jurisdiction of the lower court on the ground of insufficient docket fees in its answers to both the amended complaint and the second amended complaint. It did so only in its motion for reconsideration of the decision of the lower court after it had received an adverse decision. As this Court held in Pantranco North Express, Inc. v. Court of Appeals, 56 participation in all stages of the case before the trial court, that included invoking its authority in asking for affirmative relief, effectively barred petitioner by estoppel from challenging the court's jurisdiction. Notably, from the time it filed its answer to the second amended complaint on April 16, 1985, 57 petitioner did not question the lower court's jurisdiction. It was only on December 29, 1989 58 when it filed its motion for reconsideration of the lower court's decision that petitioner raised the question of the lower court's lack of jurisdiction. Petitioner thus foreclosed its right to raise the issue of jurisdiction by its own inaction. WHEREFORE, the challenged decision of the Court of Appeals dated October 14, 1992 in CA-G.R. CV No. 26680 affirming that of the Regional Trial Court of Caloocan City, Branch 121, is hereby MODIFIED insofar as it awarded actual damages to private respondent Maria Efigenia Fishing Corporation in the amount of P6,438,048.00 for lack of evidentiary bases therefor. Considering the

fact, however, that: (1) technically petitioner sustained injury but which, unfortunately, was not adequately and properly proved, and (2) this case has dragged on for almost two decades, we believe that an award of Two Million (P2,000,000.00) 59 in favor of private respondent as and for nominal damages is in order. No pronouncement as to costs. SO ORDERED. Kapunan and Purisima, JJ., concur. Narvasa, C.J., is on leave.

Torts and Damages Case Digest: PNOC v. CA (1998)

Labels: 1998, Case Digest, Definition and Concept of Damages, G.R. No. 107518, Juris Doctor,Kinds, October 8, torts and damages, torts and damages case digest

G.R. No. 107518 October 8, 1998 Lessons Applicable: Kinds of Damages (Torts and Damages) Laws Applicable: FACTS:

September 21, 1977 early morning: M/V Maria Efigenia XV, owned by Maria Efigenia Fishing Corporation on its way to Navotas, Metro Manila collided with the vessel Petroparcel owned by the Luzon Stevedoring Corporation (LSC)

Board of Marine Inquiry, Philippine Coast Guard Commandant Simeon N. Alejandro found Petroparcel to be at fault Maria Efigenia sued the LSC and the Petroparcel captain, Edgardo Doruelo praying for an award of P692,680.00 representing the value of the fishing nets, boat equipment and cargoes of M/V Maria Efigenia XV with interest at the legal rate plus 25% as attorneys fees and later on amended to add the lost value of the hull less the P200K insurance and unrealized profits and lost business opportunities

During the pendency of the case, PNOC Shipping and Transport Corporation sought to be substituted in place of LSC as it acquired Petroparcel Lower Court: against PNOC ordering it to pay P6,438,048 value of the fishing boat with interest plus P50K attorney's fees and cost of suit

CA: affirmed in toto

ISSUE: W/N the damage was adequately proven HELD: YES. affirming with modification actual damages of P6,438,048.00 for lack of

evidentiary bases therefor. P2M nominal damages instead.

in connection with evidence which may appear to be of doubtful relevancy or incompetency or admissibility, it is the safest policy to be liberal, not rejecting them on doubtful or technical grounds, but admitting them unless plainly irrelevant, immaterial or incompetent, for the reason that their rejection places them beyond the consideration of the court.
o

If they are thereafter found relevant or competent, can easily be remedied by completely discarding or ignoring them

two kinds of actual or compensatory damages:

o o

loss of what a person already possesses (dao emergente) failure to receive as a benefit that which would have pertained to him

in the case of profit-earning chattels, what has to be assessed is the value of the chattel to its owner as a going concern at the time and place of the loss, and this means, at least in the case of ships, that regard must be had to existing and pending engagements

If the market value of the ship reflects the fact that it is in any case virtually certain of profitable employment, then nothing can be added to that value in respect of charters actually lost, for to do so would be pro tanto to compensate the plaintiff twice over.

if the ship is valued without reference to its actual future engagements and only in the light of its profit-earning potentiality, then it may be necessary to add to the value thus assessed the anticipated profit on a charter or other engagement which it was unable to fulfill.

damages cannot be presumed and courts, in making an award must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne

proven through sole testimony of general manager without objection from LSC

Admissibility of evidence refers to the question of whether or not the circumstance (or evidence) is to considered at all. On the other hand, the probative value of evidence refers to the question of whether or not it proves an issue
o

Hearsay evidence whether objected to or not has no probative value.

In the absence of competent proof on the actual damage suffered, private respondent is `entitled to nominal damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered
o

awarded in every obligation arising from law, contracts, quasicontracts, acts or omissions punished by law, and quasi-delicts, or in every case where property right has been invaded. damages in name only and not in fact amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained by private respondent considering the concept and purpose of such damages

o o

Ordinarily, the receipt of insurance payments should diminish the total value of the vessel quoted by private respondent in his complaint considering that such payment is causally related to the loss for which it claimed compensation.

Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint should not be considered as having curtailed the lower courts jurisdiction since the unpaid docket fee should be considered as a lien on the judgment

THIRD DIVISION

[G.R. No. 107518. October 8, 1998]

PNOC SHIPPING AND TRANSPORT CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS and MARIA EFIGENIA FISHING CORPORATION, respondents. DECISION
ROMERO, J.: A party is entitled to adequate compensation only for such pecuniary loss actually suffered and duly proved.[1] Indeed, basic is the rule that to recover actual damages, the amount of loss must not only be capable of proof but must actually

be proven with a reasonable degree of certainty, premised upon competent proof or best evidence obtainable of the actual amount thereof.[2] The claimant is dutybound to point out specific facts that afford a basis for measuring whatever compensatory damages are borne.[3] A court cannot merely rely on speculations, conjectures, or guesswork as to the fact and amount of damages[4] as well as hearsay[5] or uncorroborated testimony whose truth is suspect. [6] Such are the jurisprudential precepts that the Court now applies in resolving the instant petition. The records disclose that in the early morning of September 21, 1977, the M/V Maria Efigenia XV, owned by private respondent Maria Efigenia Fishing Corporation, was navigating the waters near Fortune Island in Nasugbu, Batangas on its way to Navotas, Metro Manila when it collided with the vessel Petroparcel which at the time was owned by the Luzon Stevedoring Corporation (LSC). After investigation was conducted by the Board of Marine Inquiry, Philippine Coast Guard Commandant Simeon N. Alejandro rendered a decision finding the Petroparcel at fault. Based on this finding by the Board and after unsuccessful demands on petitioner,[7] private respondent sued the LSC and the Petroparcel captain, Edgardo Doruelo, before the then Court of First Instance of Caloocan City, paying thereto the docket fee of one thousand two hundred fifty-two pesos (P1,252.00) and the legal research fee of two pesos (P2.00).[8] In particular, private respondent prayed for an award of P692,680.00, allegedly representing the value of the fishing nets, boat equipment and cargoes of M/V Maria Efigenia XV, with interest at the legal rate plus 25% thereof as attorneys fees. Meanwhile, during the pendency of the case, petitioner PNOC Shipping and Transport Corporation sought to be substituted in place of LSC as it had already acquired ownership of the Petroparcel.[9] For its part, private respondent later sought the amendment of its complaint on the ground that the original complaint failed to plead for the recovery of the lost value of the hull of M/V Maria Efigenia XV.[10] Accordingly, in the amended complaint, private respondent averred that M/V Maria Efigenia XV had an actual value of P800,000.00 and that, after deducting the insurance payment of P200,000.00, the amount of P600,000.00 should likewise be claimed. The amended complaint also alleged that inflation resulting from the devaluation of the Philippine peso had affected the replacement value of the hull of the vessel, its equipment and its lost cargoes, such that there should be a reasonable determination thereof. Furthermore, on account of the sinking of the vessel, private respondent supposedly incurred unrealized profits and lost business opportunities that would thereafter be proven.[11] Subsequently, the complaint was further amended to include petitioner as a defendant[12] which the lower court granted in its order of September 16, 1985.[13] After petitioner had filed its answer to the second amended complaint, on February 5, 1987, the lower court issued a pre-trial order[14] containing, among other things, a stipulations of facts, to wit:

1. On 21 September 1977, while the fishing boat `M/V MARIA EFIGENIA owned by plaintiff was navigating in the vicinity of

Fortune Island in Nasugbu, Batangas, on its way to Navotas, Metro Manila, said fishing boat was hit by the LSCO tanker Petroparcel causing the former to sink. 2. The Board of Marine Inquiry conducted an investigation of this marine accident and on 21 November 1978, the Commandant of the Philippine Coast Guard, the Honorable Simeon N. Alejandro, rendered a decision finding the cause of the accident to be the reckless and imprudent manner in which Edgardo Doruelo navigated the LSCO Petroparcel and declared the latter vessel at fault. 3. On 2 April 1978, defendant Luzon Stevedoring Corporation (LUSTEVECO), executed in favor of PNOC Shipping and Transport Corporation a Deed of Transfer involving several tankers, tugboats, barges and pumping stations, among which was the LSCO Petroparcel. 4. On the same date on 2 April 1979 (sic), defendant PNOC STC again entered into an Agreement of Transfer with co-defendant Lusteveco whereby all the business properties and other assets appertaining to the tanker and bulk oil departments including the motor tanker LSCO Petroparcel of defendant Lusteveco were sold to PNOC STC. 5. The aforesaid agreement stipulates, among others, that PNOCSTC assumes, without qualifications, all obligations arising from and by virtue of all rights it obtained over the LSCO `Petroparcel. 6. On 6 July 1979, another agreement between defendant LUSTEVECO and PNOC-STC was executed wherein Board of Marine Inquiry Case No. 332 (involving the sea accident of 21 September 1977) was specifically identified and assumed by the latter. 7. On 23 June 1979, the decision of Board of Marine Inquiry was affirmed by the Ministry of National Defense, in its decision dismissing the appeal of Capt. Edgardo Doruelo and Chief mate Anthony Estenzo of LSCO `Petroparcel. 8. LSCO `Petroparcel is presently owned and operated by PNOC-STC and likewise Capt. Edgardo Doruelo is still in their employ. 9. As a result of the sinking of M/V Maria Efigenia caused by the reckless and imprudent manner in which LSCO Petroparcel was navigated by defendant Doruelo, plaintiff suffered actual damages by the loss of its fishing nets, boat equipments (sic) and cargoes, which went down with the ship when it sank the replacement value of which should be left to the sound discretion of this Honorable Court.

After trial, the lower court[15] rendered on November 18, 1989 its decision disposing of Civil Case No. C-9457 as follows:

WHEREFORE, and in view of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant PNOC Shipping & Transport Corporation, to pay the plaintiff: a. The sum of P6,438,048.00 representing the value of the fishing boat with interest from the date of the filing of the complaint at the rate of 6% per annum; b. The sum of P50,000.00 as and for attorneys fees; and c. The costs of suit. The counterclaim is hereby DISMISSED for lack of merit. Likewise, the case against defendant Edgardo Doruelo is hereby DISMISSED, for lack of jurisdiction. SO ORDERED.
In arriving at the above disposition, the lower court cited the evidence presented by private respondent consisting of the testimony of its general manager and sole witness, Edilberto del Rosario. Private respondents witness testified that M/V Maria Efigenia XV was owned by private respondent per Exhibit A, a certificate of ownership issued by the Philippine Coast Guard showing that M/V Maria Efigenia XV was a wooden motor boat constructed in 1965 with 128.23 gross tonnage. According to him, at the time the vessel sank, it was then carrying 1,060 tubs (baeras) of assorted fish the value of which was never recovered. Also lost with the vessel were two cummins engines (250 horsepower), radar, pathometer and compass. He further added that with the loss of his flagship vessel in his fishing fleet of fourteen (14) vessels, he was constrained to hire the services of counsel whom he paid P10,000 to handle the case at the Board of Marine Inquiry and P50,000.00 for commencing suit for damages in the lower court. As to the award of P6,438,048.00 in actual damages, the lower court took into account the following pieces of documentary evidence that private respondent proffered during trial:

(a) Exhibit A certified xerox copy of the certificate of ownership of M/V Maria Efigenia XV; (b) Exhibit B a document titled Marine Protest executed by Delfin Villarosa, Jr. on September 22, 1977 stating that as a result of the collision, the M/V Maria Efigenia XVsustained a hole at its left side that caused it to sink with its cargo of 1,050 baeras valued at P170,000.00; (c) Exhibit C a quotation for the construction of a 95-footer trawler issued by Isidoro A. Magalong of I. A. Magalong Engineering and Construction on January 26, 1987 to Del Rosario showing that construction of such trawler would cost P2,250,000.00;

(d) Exhibit D pro forma invoice No. PSPI-05/87-NAV issued by E.D. Daclan of Power Systems, Incorporated on January 20, 1987 to Del Rosario showing that two (2) units of CUMMINS Marine Engine model N855-M, 195 bhp. at 1800 rpm. would cost P1,160,000.00; (e) Exhibit E quotation of prices issued by Scan Marine Inc. on January 20, 1987 to Del Rosario showing that a unit of Furuno Compact Daylight Radar, Model FR-604D, would cost P100,000.00 while a unit of Furuno Color Video Sounder, Model FCV-501 would cost P45,000.00 so that the two units would cost P145,000.00; (f) Exhibit F quotation of prices issued by Seafgear Sales, Inc. on January 21, 1987 to Del Rosario showing that two (2) rolls of nylon rope (5 cir. X 300fl.) would costP140,000.00; two (2) rolls of nylon rope (3 cir. X 240fl.), P42,750.00; one (1) binocular (7 x 50), P1,400.00, one (1) compass (6), P4,000.00 and 50 pcs. of floats, P9,000.00 or a total of P197, 150.00; (g) Exhibit G retainer agreement between Del Rosario and F. Sumulong Associates Law Offices stipulating an acceptance fee of P5,000.00, per appearance fee of P400.00, monthly retainer of P500.00, contingent fee of 20% of the total amount recovered and that attorneys fee to be awarded by the court should be given to Del Rosario; and (h) Exhibit H price quotation issued by Seafgear Sales, Inc. dated April 10, 1987 to Del Rosario showing the cost of poly nettings as: 50 rolls of 400/18 3kts. 100md x 100mtrs.,P70,000.00; 50 rolls of 400/18 5kts. 100md x 100mtrs., P81,500.00; 50 rolls of 400/18 8kts. 100md x 100mtrs., P116,000.00, and 50 rolls of 400/18 10kts. 100md x 100mtrs.,P146,500 and banera (tub) at P65.00 per piece or a total of P414,065.00
The lower court held that the prevailing replacement value of P6,438,048.00 of the fishing boat and all its equipment would regularly increase at 30% every year from the date the quotations were given. On the other hand, the lower court noted that petitioner only presented Lorenzo Lazaro, senior estimator at PNOC Dockyard & Engineering Corporation, as sole witness and it did not bother at all to offer any documentary evidence to support its position. Lazaro testified that the price quotations submitted by private respondent were excessive and that as an expert witness, he used the quotations of his suppliers in making his estimates. However, he failed to present such quotations of prices from his suppliers, saying that he could not produce a breakdown of the costs of his estimates as it was a sort of secret scheme. For this reason, the lower court concluded:

Evidently, the quotation of prices submitted by the plaintiff relative to the replacement value of the fishing boat and its equipments in the tune of P6,438,048.00 which were lost due to the recklessness and

imprudence of the herein defendants were not rebutted by the latter with sufficient evidence. The defendants through their sole witness Lorenzo Lazaro relied heavily on said witness bare claim that the amount afore-said is excessive or bloated, but they did not bother at all to present any documentary evidence to substantiate such claim. Evidence to be believed, must not only proceed from the mouth of the credible witness, but it must be credible in itself. (Vda. de Bonifacio vs. B. L. T. Bus Co., Inc. L-26810, August 31, 1970).

Aggrieved, petitioner filed a motion for the reconsideration of the lower courts decision contending that: (1) the lower court erred in holding it liable for damages; that the lower court did not acquire jurisdiction over the case by paying only P1,252.00 as docket fee; (2) assuming that plaintiff was entitled to damages, the lower court erred in awarding an amount greater than that prayed for in the second amended complaint; and (3) the lower court erred when it failed to resolve the issues it had raised in its memorandum.[16] Petitioner likewise filed a supplemental motion for reconsideration expounding on whether the lower court acquired jurisdiction over the subject matter of the case despite therein plaintiffs failure to pay the prescribed docket fee.[17] On January 25, 1990, the lower court declined reconsideration for lack of merit.[18] Apparently not having received the order denying its motion for reconsideration, petitioner still filed a motion for leave to file a reply to private respondents opposition to said motion.[19] Hence, on February 12, 1990, the lower court denied said motion for leave to file a reply on the ground that by the issuance of the order of January 25, 1990, said motion had become moot and academic.[20] Unsatisfied with the lower courts decision, petitioner elevated the matter to the Court of Appeals which, however, affirmed the same in toto on October 14, 1992.[21] On petitioners assertion that the award of P6,438,048.00 was not convincingly proved by competent and admissible evidence, the Court of Appeals ruled that it was not necessary to qualify Del Rosario as an expert witness because as the owner of the lost vessel, it was well within his knowledge and competency to identify and determine the equipment installed and the cargoes loaded on the vessel. Considering the documentary evidence presented as in the nature of market reports or quotations, trade journals, trade circulars and price lists, the Court of Appeals held, thus:

Consequently, until such time as the Supreme Court categorically rules on the admissibility or inadmissibility of this class of evidence, the reception of these documentary exhibits (price quotations) as evidence rests on the sound discretion of the trial court. In fact, where the lower court is confronted with evidence which appears to be of doubtful admissibility, the judge should declare in favor of admissibility rather than of non-admissibility (The Collector of Palakadhari, 124 [1899], p. 43, cited in Francisco, Revised Rules of Court, Evidence, Volume VII, Part I, 1990 Edition, p. 18). Trial courts

are enjoined to observe the strict enforcement of the rules of evidence which crystallized through constant use and practice and are very useful and effective aids in the search for truth and for the effective administration of justice. But in connection with evidence which may appear to be of doubtful relevancy or incompetency or admissibility, it is the safest policy to be liberal, not rejecting them on doubtful or technical grounds, but admitting them unless plainly irrelevant, immaterial or incompetent, for the reason that their rejection places them beyond the consideration of the court. If they are thereafter found relevant or competent, can easily be remedied by completely discarding or ignoring them. (Banaria vs. Banaria, et al., C.A. No. 4142, May 31, 1950; cited in Francisco, Supra). [Underscoring supplied].

Stressing that the alleged inadmissible documentary exhibits were never satisfactorily rebutted by appellants own sole witness in the person of Lorenzo Lazaro, the appellate court found that petitioner ironically situated itself in an inconsistent posture by the fact that its own witness, admi ttedly an expert one, heavily relies on the very same pieces of evidence (price quotations) appellant has so vigorously objected to as inadmissible evidence. Hence, it concluded:

x x x. The amount of P6,438,048.00 was duly established at the trial on the basis of appellees documentary exhibits (price quotations) which stood uncontroverted, and which already included the amount by way of adjustment as prayed for in the amended complaint. There was therefore no need for appellee to amend the second amended complaint in so far as to the claim for damages is concerned to conform with the evidence presented at the trial. The amount of P6,438,048.00 awarded is clearly within the relief prayed for in appellees second amended complaint.
On the issue of lack of jurisdiction, the respondent court held that following the ruling in Sun Insurance Ltd. v. Asuncion,[22] the additional docket fee that may later on be declared as still owing the court may be enforced as a lien on the judgment. Hence, the instant recourse. In assailing the Court of Appeals decision, petitioner posits the view that the award of P6,438,048 as actual damages should have been in light of these considerations, namely: (1) the trial court did not base such award on the actual value of the vessel and its equipment at the time of loss in 1977; (2) there was no evidence on extraordinary inflation that would warrant an adjustment of the replacement cost of the lost vessel, equipment and cargo; (3) the value of the lost cargo and the prices quoted in respondents documentary evidence only amount to P4,336,215.00; (4) private respondents failure to adduce evidence to support its claim for unrealized profit and business opportunities; and (5) private respondents failure to prove the extent and actual value of damages sustained as a result of the 1977 collision of the vessels.[23]

Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty.[24] In actions based on torts or quasi-delicts, actual damages include all the natural and probable consequences of the act or omission complained of.[25] There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses (dao emergente), and the other is the failure to receive as a benefit that which would have pertained to him ( lucro cesante).[26] Thus:

Where goods are destroyed by the wrongful act of the defendant the plaintiff is entitled to their value at the time of destruction, that is, normally, the sum of money which he would have to pay in the market for identical or essentially similar goods, plus in a proper case damages for the loss of use during the period before replacement. In other words, in the case of profit-earning chattels, what has to be assessed is the value of the chattel to its owner as a going concern at the time and place of the loss, and this means, at least in the case of ships, that regard must be had to existing and pending engagements.x x x. x x x. If the market value of the ship reflects the fact that it is in any case virtually certain of profitable employment, then nothing can be added to that value in respect of charters actually lost, for to do so would be pro tanto to compensate the plaintiff twice over. On the other hand, if the ship is valued without reference to its actual future engagements and only in the light of its profit-earning potentiality, then it may be necessary to add to the value thus assessed the anticipated profit on a charter or other engagement which it was unable to fulfill. What the court has to ascertain in each case is the `capitalised value of the vessel as a profit-earning machine not in the abstract but in view of the actual circumstances, without, of course, taking into account considerations which were too remote at the time of the loss. [Underscoring supplied].
[27]

As stated at the outset, to enable an injured party to recover actual or compensatory damages, he is required to prove the actual amount of loss with reasonable degree of certainty premised upon competent proof and on the best evidence available.[28] The burden of proof is on the party who would be defeated if no evidence would be presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other.[29] In other words, damages cannot be presumed and courts, in making an award must point out specific facts that could afford a basis for measuring whatever compensatory or actual damages are borne.[30]

In this case, actual damages were proven through the sole testimony of private respondents general manager and certain pieces of documentary evidence. Except for Exhibit B where the value of the 1,050 baeras of fish were pegged at their September 1977 value when the collision happened, the pieces of documentary evidence proffered by private respondent with respect to items and equipment lost show similar items and equipment with corresponding prices in early 1987 or approximately ten (10) years after the collision. Noticeably, petitioner did not object to the exhibits in terms of the time index for valuation of the lost goods and equipment. In objecting to the same pieces of evidence, petitioner commented that these were not duly authenticated and that the witness (Del Rosario) did not have personal knowledge on the contents of the writings and neither was he an expert on the subjects thereof.[31] Clearly ignoring petitioners objections to the exhibits, the lower court admitte d these pieces of evidence and gave them due weight to arrive at the award of P6,438,048.00 as actual damages. The exhibits were presented ostensibly in the course of Del Rosarios testimony. Private respondent did not present any other witnesses especially those whose signatures appear in the price quotations that became the bases of the award. We hold, however, that the price quotations are ordinary private writings which under the Revised Rules of Court should have been proffered along with the testimony of the authors thereof. Del Rosario could not have testified on the veracity of the contents of the writings even though he was the seasoned owner of a fishing fleet because he was not the one who issued the price quotations. Section 36, Rule 130 of the Revised Rules of Court provides that a witness can testify only to those facts that he knows of his personal knowledge. For this reason, Del Rosarios claim that private respondent incurred losses in the total amount of P6,438,048.00 should be admitted with extreme caution considering that, because it was a bare assertion, it should be supported by independent evidence. Moreover, because he was the owner of private respondent corporation[32] whatever testimony he would give with regard to the value of the lost vessel, its equipment and cargoes should be viewed in the light of his self-interest therein. We agree with the Court of Appeals that his testimony as to the equipment installed and the cargoes loaded on the vessel should be given credence[33] considering his familiarity thereto. However, we do not subscribe to the conclusion that his valuation of such equipment, cargo and the vessel itself should be accepted as gospel truth.[34] We must, therefore, examine the documentary evidence presented to support Del Rosarios claim as regards the amount of losses. The price quotations presented as exhibits partake of the nature of hearsay evidence considering that the persons who issued them were not presented as witnesses.[35] Any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of another person who is not on the witness stand. Hearsay evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence

rule.[36] On this point, we believe that the exhibits do not fall under any of the exceptions provided under Sections 37 to 47 of Rule 130.[37] It is true that one of the exceptions to the hearsay rule pertains to commercial lists and the like under Section 45, Rule 130 of the Revised Rules on Evidence. In this respect, the Court of Appeals considered private respondents exhibits as commercial lists. It added, however, that these exhibits should be admitted in evidence until such time as the Supreme Court categorically rules on the admissibility or inadmissibility of this class of evidence because the reception of these documentary exhibits (price quotations) as evidence rests on the sound discretion of the trial court.[38] Reference to Section 45, Rule 130, however, would show that the conclusion of the Court of Appeals on the matter was arbitrarily arrived at. This rule states:

Commercial lists and the like. Evidence of statements of matters of interest to persons engaged in an occupation contained in a list, register, periodical, or other published compilation is admissible as tending to prove the truth of any relevant matter so stated if that compilation is published for use by persons engaged in that occupation and is generally used and relied upon by them there.
Under Section 45 of the aforesaid Rule, a document is a commercial list if: (1) it is a statement of matters of interest to persons engaged in an occupation; (2) such statement is contained in a list, register, periodical or other published compilation; (3) said compilation is published for the use of persons engaged in that occupation, and (4) it is generally used and relied upon by persons in the same occupation. Based on the above requisites, it is our considered view that Exhibits B, C, D, E, F and H[39] are not commercial lists for these do not belong to the category of other published compilations under Section 45 aforequoted. Under the principle of ejusdem generis, (w)here general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned.[40] The exhibits mentioned are mere price quotations issued personally to Del Rosario who requested for them from dealers of equipment similar to the ones lost at the collision of the two vessels. These are not published in any list, register, periodical or other compilation on the relevant subject matter. Neither are these market reports or quotations within the purview of commercial lists as these are not standard handbooks or periodicals, containing data of everyday professional need and relied upon in the work of the occupation.[41] These are simply letters responding to the queries of Del Rosario. Thus, take for example Exhibit D which reads:

January 20, 1987 PROFORMA INVOICE NO. PSPI-05/87-NAV MARIA EFIGINIA FISHING CORPORATION Navotas, Metro Manila Attention: MR. EDDIE DEL ROSARIO

Gentlemen: In accordance to your request, we are pleased to quote our Cummins Marine Engine, to wit. Two (2) units CUMMINS Marine Engine model N855-M, 195 bhp. at 1800 rpm., 6-cylinder in-line, 4-stroke cycle, natural aspirated, 5 in. x 6 in. bore and stroke, 855 cu. In. displacement, keelcooled, electric starting coupled with Twin-Disc Marine gearbox model MG-509, 4.5:1 reduction ratio, includes oil cooler, companion flange, manual and standard accessories as per attached sheet. Price FOB Manila - - - - - - - - - - - - - - - P 580,000.00/unit Total FOB Manila - - - - - - - - - - - - - - - P 1,160,000.00 vvvvvvvvv TERMS : CASH DELIVERY : 60-90 days from date of order. VALIDITY : Subject to our final confirmation. WARRANTY : One (1) full year against factory defect. Very truly yours, POWER SYSTEMS, INC. (Sgd.) E. D. Daclan
To be sure, letters and telegrams are admissible in evidence but these are, however, subject to the general principles of evidence and to various rules relating to documentary evidence.[42]Hence, in one case, it was held that a letter from an automobile dealer offering an allowance for an automobile upon purchase of a new automobile after repairs had been completed, was not a price current or commercial list within the statute which made such items presumptive evidence of the value of the article specified therein. The letter was not admissible in evidence as a commercial list even though the clerk of the dealer testified that he had written the letter in due course of business upon instructions of the dealer.[43] But even on the theory that the Court of Appeals correctly ruled on the admissibility of those letters or communications when it held that unless plainly irrelevant, immaterial or incompetent, evidence should better be admitted rather than rejected on doubtful or technical grounds, [44] the same pieces of evidence, however, should not have been given probative weight. This is a distinction we wish to point out. Admissibility of evidence refers to the question of whether or not the circumstance (or evidence) is to considered at all.[45] On the other hand, the probative value of evidence refers to the question of whether or not it proves an issue.[46] Thus, a letter may be offered in evidence and admitted as such but its evidentiary weight depends upon the observance of the rules on evidence. Accordingly, the author of the letter should be presented as witness to provide the other party to the litigation the opportunity to question him on the contents of the letter. Being mere hearsay evidence,

failure to present the author of the letter renders its contents suspect. As earlier stated, hearsay evidence, whether objected to or not, has no probative value. Thus:

The courts differ as to the weight to be given to hearsay evidence admitted without objection. Some hold that when hearsay has been admitted without objection, the same may be considered as any other properly admitted testimony. Others maintain that it is entitled to no more consideration than if it had been excluded. The rule prevailing in this jurisdiction is the latter one. Our Supreme Court held that although the question of admissibility of evidence can not be raised for the first time on appeal, yet if the evidence is hearsay it has no probative value and should be disregarded whether objected to or not. `If no objection is made quoting Jones on Evidence - `it (hearsay) becomes evidence by reason of the want of such objection even though its admission does not confer upon it any new attribute in point of weight. Its nature and quality remain the same, so far as its intrinsic weakness and incompetency to satisfy the mind are concerned, and as opposed to direct primary evidence, the latter always prevails. The failure of the defense counsel to object to the presentation of incompetent evidence, like hearsay evidence or evidence that violates the rules of res inter alios acta, or his failure to ask for the striking out of the same does not give such evidence any probative value. But admissibility of evidence should not be equated with weight of evidence. Hearsay evidence whether objected to or not has no probative value.
[47]

Accordingly, as stated at the outset, damages may not be awarded on the basis of hearsay evidence.[48] Nonetheless, the non-admissibility of said exhibits does not mean that it totally deprives private respondent of any redress for the loss of its vessel. This is because in Lufthansa German Airlines v. Court of Appeals,[49] the Court said:

In the absence of competent proof on the actual damage suffered, private respondent is `entitled to nominal damages which, as the law says, is adjudicated in order that a right of the plaintiff, which has been violated or invaded by defendant, may be vindicated and recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered. [Underscoring supplied].
Nominal damages are awarded in every obligation arising from law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or in every case where property right has been invaded.[50] Under Article 2223 of the Civil Code, (t)he adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns.

Actually, nominal damages are damages in name only and not in fact. Where these are allowed, they are not treated as an equivalent of a wrong inflicted but simply in recognition of the existence of a technical injury.[51] However, the amount to be awarded as nominal damages shall be equal or at least commensurate to the injury sustained by private respondent considering the concept and purpose of such damages.[52] The amount of nominal damages to be awarded may also depend on certain special reasons extant in the case.[53] Applying now such principles to the instant case, we have on record the fact that petitioners vessel Petroparcel was at fault as well as private respondents complaint claiming the amount ofP692,680.00 representing the fishing nets, boat equipment and cargoes that sunk with the M/V Maria Efigenia XV. In its amended complaint, private respondent alleged that the vessel had an actual value of P800,000.00 but it had been paid insurance in the amount of P200,000.00 and, therefore, it claimed only the amount of P600,000.00. Ordinarily, the receipt of insurance payments should diminish the total value of the vessel quoted by private respondent in his complaint considering that such payment is causally related to the loss for which it claimed compensation. This Court believes that such allegations in the original and amended complaints can be the basis for determination of a fair amount of nominal damages inasmuch as a complaint alleges the ultimate facts constituting the plaintiff's cause of action.[54] Private respondent should be bound by its allegations on the amount of its claims. With respect to petitioners contention that the lower court did not acquire jurisdiction over the amended complaint increasing the amount of damages claimed to P600,000.00, we agree with the Court of Appeals that the lower court acquired jurisdiction over the case when private respondent paid the docket fee corresponding to its claim in its original complaint. Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint should not be considered as having curtailed the lower courts jurisdiction. Pursuant to the ruling inSun Insurance Office, Ltd. (SIOL) v. Asuncion,[55] the unpaid docket fee should be considered as a lien on the judgment even though private respondent specified the amount of P600,000.00 as its claim for damages in its amended complaint. Moreover, we note that petitioner did not question at all the jurisdiction of the lower court on the ground of insufficient docket fees in its answers to both the amended complaint and the second amended complaint. It did so only in its motion for reconsideration of the decision of the lower court after it had received an adverse decision. As this Court held in Pantranco North Express, Inc. v. Court of Appeals,[56] participation in all stages of the case before the trial court, that included invoking its authority in asking for affirmative relief, effectively barred petitioner by estoppel from challenging the courts juris diction. Notably, from the time it filed its answer to the second amended complaint on April 16, 1985,[57] petitioner did not question the lower courts jurisdiction. It was only on December 29, 1989[58] when it filed its motion for reconsideration of the lower courts decision that petitioner raised the question of the lower courts lack of

jurisdiction. Petitioner thus foreclosed its right to raise the issue of jurisdiction by its own inaction. WHEREFORE, the challenged decision of the Court of Appeals dated October 14, 1992 in CA-G. R. CV No. 26680 affirming that of the Regional Trial Court of Caloocan City, Branch 121, is hereby MODIFIED insofar as it awarded actual damages to private respondent Maria Efigenia Fishing Corporation in the amount of P6,438,048.00 for lack of evidentiary bases therefor. Considering the fact, however, that: (1) technically petitioner sustained injury but which, unfortunately, was not adequately and properly proved, and (2) this case has dragged on for almost two decades, we believe that an award of Two Million (P2,000,000.00)[59] in favor of private respondent as and for nominal damages is in order. No pronouncement as to costs. SO ORDERED. Kapunan, and Purisima, JJ., concur. Narvasa, C.J., (Chairman), on leave.

[1] [2]

Kierulf v. Court of Appeals, 269 SCRA 433 (1997); Article 2199, Civil Code. Bernardo v. Court of Appeals [Special Sixth Division], 275 SCRA 413 (1997); Development Bank of the Philippines v. Court of Appeals, 249 SCRA 331 (1995); Lufthansa German Airlines v. Court of Appeals, 243 SCRA 600 (1995); Sumalpong v. Court of Appeals, G. R. No. 123404, February 26, 1997; Del Rosario v. Court of Appeals, G. R. No. 118325, January 29, 1997; People v. Fabrigas, Jr., 261 SCRA 436 (1996). [3] Southeastern College, Inc. V. Court of Appeals, et al., G. R. No. 126389, July 10, 1998. [4] Development Bank of the Philippines v. Court of Appeals and Lydia Cuba, G. R. No. 118367, January 5, 1998; Barzaga v. Court of Appeals, 268 SCRA 105 (1997). [5] People v. Gutierrez, 258 SCRA 70 (1996). [6] Baliwag Transit, Inc. v. Court of Appeals, 256 SCRA 746 (1996). [7] Rollo, pp. 49-52. [8] Ibid., p. 53. [9] Ibid., pp. 54-55. [10] Ibid., p. 56. [11] Ibid., pp. 58-61. [12] Ibid., pp. 62-66. [13] Ibid., p. 67. [14] Ibid., p. 71. [15] Presided by Judge Adoracion G. Angeles. [16] Record of Civil Case No. C-9457, p. 408. [17] Ibid., p. 464. [18] Ibid., p. 477. [19] Ibid., p. 478. [20] Ibid., p. 486. [21] Penned by Associate Justices Ricardo J. Francisco; Sempio-Diy and Galvez, JJ, concurring. [22] 170 SCRA 274 (1989). [23] Petition, pp. 2-3. [24] TOLENTINO, CIVIL CODE OF THE PHILIPPINES, Vol. V, 1992 ed., p. 633. [25] Art. 2202, Civil Code; Europa v. Hunter Garments Mfg. (Phil.), Inc., G.R. No. 72827, July 18, 1989, 175 SCRA 394, 397.

[26] [27]

TOLENTINO, supra, at p. 636 citing 8 Manresa 100. CLERK & LINDSELL ON TORTS, 17th ed., pp. 1489-1490. [28] Fuentes, Jr. v. Court of Appeals, 323 Phil. 508, 519 (1996). [29] Summa Insurance Corporation v. Court of Appeals, 323 Phil. 214, 227 (1996). [30] Del Mundo v. Court of Appeals, 310 Phil 367, 376 (1995). [31] Rollo, pp. 170-173. [32] CA Decision, p. 4. [33] Ibid. [34] On this point, the Court of Appeals said: Contrary to appellants asseverations, Mr. Del Rosario need not be qualified as an expert witness, and at the same time on board the `M/V Maria Efigenia, in order to ascertain what cargoes and equipment were on board the sunken vessel. Being the owner of appellee-corporation which in turn owned the ill-fated vessel, it was well within his knowledge and competency to identify and determine the equipment installed and the cargoes loaded on appellee' vessel. His testimony on these matters commands great weight and cannot be undermined or excluded by the simple fact of his absence at the time of actual collision, nor by his apparent relationship with herein appellee corporation. The mere fact that a witness is related to any of the parties does not necessarily indicate that said witness has falsely testified, if the witness testimony is found to be reasonable, consistent, and not contradicted by evidence from any reliable source, and where it does not appear that the witness was guided by such relationship, or any ill-motive when he gave his testimony (People v. Maboab, 44 Off. Gaz. 564). Besides, appellee presented documentary exhibits in the form of price quotations from suppliers and pro-forma invoices to establish the current replacement value of the sunken vessel and the cargoes and equipment on board, whose admissibility were likewise challenged by appellant as being hearsay. x x x. [35] People v. Narciso, 330 Phil. 527, 536 (1996). [36] Philippine Home Assurance Corporation v. Court of Appeals, 327 Phil. 255, 267-268 (1996) citing Baguio v. Court of Appeals, G.R. No. 93417, September 14, 1993, 226 SCRA 366, 370. [37] These are: dying declaration, declaration against interest, act or declaration about pedigree, family reputation or tradition regarding pedigree; common reputation, part of the res gestae, entries in the course of business, entries in official records, commercial lists and the like, learned treatises and testimony or deposition at a former proceeding. [38] CA Decision, p. 5. [39] Exh. A is the certified true copy of the certificate of ownership of the vessel while Exh. G is the retainer agreement between Del Rosario and F. Sumulong Associates Law Offices. [40] Republic v. Migrio, G.R. No. 89483, August 30, 1990, 189 SCRA 289, 296-297. [41] FRANCISCO, supra. [42] 32 C. J. S. 970. [43] Bates v. General Steel Tank Co., Ala., App., 55 So.2d 213 (1951). [44] CA Decision, p. 5. [45] 2A WORDS AND PHRASES 8 citing Pickard v. Berryman, 142 S.W.2d 764, 768, 24 Tenn.App. 263. [46] 34 WORDS AND PHRASES 116 citing State v. Scott, 175 P.2d 1016, 1021, 111 Utah 9. [47] FRANCISCO, supra, at p. 529. [48] See note 5. [49] See note 2 for citation. Cf. Also Japan Airlines v. Court of Appeals, et al., G. R. No. 118664, August 7, 1998. [50] Arts. 2222 & 1157, Civil Code. [51] Robes-Francisco Realty & Development Corporation v. Court of First Instance of Rizal (Branch XXXIV), L-41093, October 30, 1978, 86 SCRA 59, 65 citing Fouraker v. Kidd Springs Boating and Fishing Club, 65 S.W.2d 796-797, citing C.J. 720, and a number of authorities. [52] China Air Lines, Ltd. v. Court of Appeals, G.R. No. 459985, May 18, 1990, 185 SCRA 449, 460. [53] Robes-Francisco Realty & Development Corporation v. Court of First Instance of Rizal (Branch XXXIV), supra, citing Northwest Airlines, Inc. v. Cuenca, 122 Phil. 403 (1965).

[54] [55]

See Villalon v. Buendia, 315 Phil. 663, 666-667 (1995). See note 22 for citation. [56] G.R. No. 105180, July 5, 1993, 224 SCRA 477, 491. [57] Record of Civil Case No. C-9457, p. 217. [58] Ibid., p. 408. [59] Note that under Article 2216 of the Civil Code, it is provided that the assessment of such damages (i.e. moral, nominal, temperate, and exemplary damages) is left to the discretion of the court, according to the circumstances of each case. [Underscoring supplied] Republic of the Philippines

SUPREME COURT Manila SECOND DIVISION G.R. No. 139130 November 27, 2002 RAMON K. ILUSORIO, petitioner, vs. HON. COURT OF APPEALS, and THE MANILA BANKING CORPORATION, respondents. DECISION QUISUMBING, J.: This petition for review seeks to reverse the decision1 promulgated on January 28, 1999 by the Court of Appeals in CA-G.R. CV No. 47942, affirming the decision of the then Court of First Instance of Rizal, Branch XV (now the Regional Trial Court of Makati, Branch 138) dismissing Civil Case No. 43907, for damages. The facts as summarized by the Court of Appeals are as follows: Petitioner is a prominent businessman who, at the time material to this case, was the Managing Director of Multinational Investment Bancorporation and the Chairman and/or President of several other corporations. He was a depositor in good standing of respondent bank, the Manila Banking Corporation, under current Checking Account No. 06-09037-0. As he was then running about 20 corporations, and was going out of the country a number of times, petitioner entrusted to his secretary, Katherine2 E. Eugenio, his credit cards and his checkbook with blank checks. It was also Eugenio who verified and reconciled the statements of said checking account.3 Between the dates September 5, 1980 and January 23, 1981, Eugenio was able to encash and deposit to her personal account about seventeen (17) checks drawn against the account of the petitioner at the respondent bank, with an aggregate amount of P119,634.34. Petitioner did not bother to check his statement of account until a business partner apprised him that he saw Eugenio use his credit cards. Petitioner fired Eugenio immediately, and instituted a criminal action against her for estafa thru falsification before the Office of the Provincial Fiscal of Rizal. Private respondent, through an affidavit executed by its employee, Mr. Dante Razon, also lodged a complaint for estafa thru falsification of commercial documents against Eugenio on the basis of petitioners statement that his signatures in the checks were forged.4 Mr. Razons affidavit states: That I have examined and scrutinized the following checks in accordance with prescribed verification procedures with utmost care and diligence by comparing the signatures affixed thereat against the specimen signatures of Mr. Ramon K. Ilusorio which we have on file at our said office on such dates, xxx That the aforementioned checks were among those issued by Manilabank in favor of its client MR. RAMON K. ILUSORIO, That the same were personally encashed by KATHERINE E. ESTEBAN, an executive secretary of MR. RAMON K. ILUSORIO in said Investment Corporation; That I have met and known her as KATHERINE E. ESTEBAN the attending verifier when she personally encashed the above-mentioned checks at our said office;

That MR. RAMON K. ILUSORIO executed an affidavit expressly disowning his signature appearing on the checks further alleged to have not authorized the issuance and encashment of the same.5 Petitioner then requested the respondent bank to credit back and restore to its account the value of the checks which were wrongfully encashed but respondent bank refused. Hence, petitioner filed the instant case.6 At the trial, petitioner testified on his own behalf, attesting to the truth of the circumstances as narrated above, and how he discovered the alleged forgeries. Several employees of Manila Bank were also called to the witness stand as hostile witnesses. They testified that it is the banks standard operating procedure that whenever a check is presented for encashment or clearing, the signature on the check is first verified against the specimen signature cards on file with the bank. Manila Bank also sought the expertise of the National Bureau of Investigation (NBI) in determining the genuineness of the signatures appearing on the checks. However, in a letter dated March 25, 1987, the NBI informed the trial court that they could not conduct the desired examination for the reason that the standard specimens submitted were not sufficient for purposes of rendering a definitive opinion. The NBI then suggested that petitioner be asked to submit seven (7) or more additional standard signatures executed before or about, and immediately after the dates of the questioned checks. Petitioner, however, failed to comply with this request. After evaluating the evidence on both sides, the court a quo rendered judgment on May 12, 1994 with the following dispositive portion: WHEREFORE, finding no sufficient basis for plaintiff's cause herein against defendant bank, in the light of the foregoing considerations and established facts, this case would have to be, as it is hereby DISMISSED. Defendants counterclaim is likewise DISMISSED for lack of sufficient basis. SO ORDERED.7 Aggrieved, petitioner elevated the case to the Court of Appeals by way of a petition for review but without success. The appellate court held that petitioners own negligence was the proximate cause of his loss. The appellate court disposed as follows: WHEREFORE, the judgment appealed from is AFFIRMED. Costs against the appellant. SO ORDERED.8 Before us, petitioner ascribes the following errors to the Court of Appeals: A. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE RESPONDENT BANK IS ESTOPPED FROM RAISING THE DEFENSE THAT THERE WAS NO FORGERY OF THE SIGNATURES OF THE PETITIONER IN THE CHECK BECAUSE THE RESPONDENT FILED A CRIMINAL COMPLAINT FOR ESTAFA THRU FALSIFICATION OF COMMERCIAL DOCUMENTS AGAINST KATHERINE EUGENIO USING THE AFFIDAVIT OF PETITIONER STATING THAT HIS SIGNATURES WERE FORGED AS PART OF THE AFFIDAVIT-COMPLAINT.9 B. THE COURT OF APPEALS ERRED IN NOT APPLYING SEC. 23, NEGOTIABLE INSTRUMENTS LAW.10 C. THE COURT OF APPEALS ERRED IN NOT HOLDING THE BURDEN OF PROOF IS WITH THE RESPONDENT BANK TO PROVE THE DUE DILIGENCE TO PREVENT DAMAGE, TO THE PETITIONER, AND THAT IT WAS NOT NEGLIGENT IN THE SELECTION AND SUPERVISION OF ITS EMPLOYEES.11 D. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT BANK SHOULD BEAR THE LOSS, AND SHOULD BE MADE TO PAY PETITIONER, WITH RECOURSE AGAINST KATHERINE EUGENIO ESTEBAN.12 Essentially the issues in this case are: (1) whether or not petitioner has a cause of action against private respondent; and (2) whether or not private respondent, in filing an estafa case against petitioners secretary, is barred from raising the defense that the fact of forgery was not established.

Petitioner contends that Manila Bank is liable for damages for its negligence in failing to detect the discrepant checks. He adds that as a general rule a bank which has obtained possession of a check upon an unauthorized or forged endorsement of the payees signature and which collects the amount of the check from the drawee is liable for the proceeds thereof to the payee. Petitioner invokes the doctrine of estoppel, saying that having itself instituted a forgery case against Eugenio, Manila Bank is now estopped from asserting that the fact of forgery was never proven. For its part, Manila Bank contends that respondent appellate court did not depart from the accepted and usual course of judicial proceedings, hence there is no reason for the reversal of its ruling. Manila Bank additionally points out that Section 2313 of the Negotiable Instruments Law is inapplicable, considering that the fact of forgery was never proven. Lastly, the bank negates petitioners claim of estoppel.14 On the first issue, we find that petitioner has no cause of action against Manila Bank. To be entitled to damages, petitioner has the burden of proving negligence on the part of the bank for failure to detect the discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish the fact of forgery, i.e., by submitting his specimen signatures and comparing them with those on the questioned checks. Curiously though, petitioner failed to submit additional specimen signatures as requested by the National Bureau of Investigation from which to draw a conclusive finding regarding forgery. The Court of Appeals found that petitioner, by his own inaction, was precluded from setting up forgery. Said the appellate court: We cannot fault the court a quo for such declaration, considering that the plaintiffs evidence on the alleged forgery is not convincing enough. The burden to prove forgery was upon the plaintiff, which burden he failed to discharge. Aside from his own testimony, the appellant presented no other evidence to prove the fact of forgery. He did not even submit his own specimen signatures, taken on or about the date of the questioned checks, for examination and comparison with those of the subject checks. On the other hand, the appellee presented specimen signature cards of the appellant, taken at various years, namely, in 1976, 1979 and 1981 (Exhibits "1", "2", "3" and "7"), showing variances in the appellants unquestioned signatures. The evidence further shows that the appellee, as soon as it was informed by the appellant about his questioned signatures, sought to borrow the questioned checks from the appellant for purposes of analysis and examination (Exhibit "9"), but the same was denied by the appellant. It was also the former which sought the assistance of the NBI for an expert analysis of the signatures on the questioned checks, but the same was unsuccessful for lack of sufficient specimen signatures.15 Moreover, petitioners contention that Manila Bank was remiss in the exercise of its duty as drawee lacks factual basis. Consistently, the CA and the RTC found that Manila Bank employees exercised due diligence in cashing the checks. The banks employees in the present case did not have a hint as to Eugenios modus operandi because she was a regular customer of the bank, having been designated by petitioner himself to transact in his behalf. According to the appellate court, the employees of the bank exercised due diligence in the performance of their duties. Thus, it found that: The evidence on both sides indicates that TMBCs employees exercised due diligence before encashing the checks. Its verifiers first verified the drawers signatures thereon as against his specimen signature cards, and when in doubt, the verifier went further, such as by referring to a more experienced verifier for further verification. In some instances the verifier made a confirmation by calling the depositor by phone. It is only after taking such precautionary measures that the subject checks were given to the teller for payment. Of course it is possible that the verifiers of TMBC might have made a mistake in failing to detect any forgery -- if indeed there was. However, a mistake is not equivalent to negligence if they were honest mistakes. In the instant case, we believe and so hold that if there were mistakes, the same were not deliberate, since the bank took all the precautions.16

As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do.17 In the present case, it appears that petitioner accorded his secretary unusual degree of trust and unrestricted access to his credit cards, passbooks, check books, bank statements, including custody and possession of cancelled checks and reconciliation of accounts. Said the Court of Appeals on this matter: Moreover, the appellant had introduced his secretary to the bank for purposes of reconciliation of his account, through a letter dated July 14, 1980 (Exhibit "8"). Thus, the said secretary became a familiar figure in the bank. What is worse, whenever the bank verifiers call the office of the appellant, it is the same secretary who answers and confirms the checks. The trouble is, the appellant had put so much trust and confidence in the said secretary, by entrusting not only his credit cards with her but also his checkbook with blank checks. He also entrusted to her the verification and reconciliation of his account. Further adding to his injury was the fact that while the bank was sending him the monthly Statements of Accounts, he was not personally checking the same. His testimony did not indicate that he was out of the country during the period covered by the checks. Thus, he had all the opportunities to verify his account as well as the cancelled checks issued thereunder -- month after month. But he did not, until his partner asked him whether he had entrusted his credit card to his secretary because the said partner had seen her use the same. It was only then that he was minded to verify the records of his account. 18 The abovecited findings are binding upon the reviewing court. We stress the rule that the factual findings of a trial court, especially when affirmed by the appellate court, are binding upon us19 and entitled to utmost respect20 and even finality. We find no palpable error that would warrant a reversal of the appellate courts assessment of facts anchored upon the evidence on record. Petitioners failure to examine his bank statements appears as the proximate cause of his own damage. Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.21 In the instant case, the bank was not shown to be remiss in its duty of sending monthly bank statements to petitioner so that any error or discrepancy in the entries therein could be brought to the banks attention at the earliest opportunity. But, petitioner failed to examine these bank statements not because he was prevented by some cause in not doing so, but because he did not pay sufficient attention to the matter. Had he done so, he could have been alerted to any anomaly committed against him. In other words, petitioner had sufficient opportunity to prevent or detect any misappropriation by his secretary had he only reviewed the status of his accounts based on the bank statements sent to him regularly. In view of Article 2179 of the New Civil Code,22 when the plaintiffs own negligence was the immediate and proximate cause of his injury, no recovery could be had for damages. Petitioner further contends that under Section 23 of the Negotiable Instruments Law a forged check is inoperative, and that Manila Bank had no authority to pay the forged checks. True, it is a rule that when a signature is forged or made without the authority of the person whose signature it purports to be, the check is wholly inoperative. No right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party, can be acquired through or under such signature. However, the rule does provide for an exception, namely: "unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority." In the instant case, it is the exception that applies. In our view, petitioner is precluded from setting up the forgery, assuming there is forgery, due to his own negligence in entrusting to his secretary his credit cards and checkbook including the verification of his statements of account.

Petitioners reliance on Associated Bank vs. Court of Appeals23 and Philippine Bank of Commerce vs. CA24 to buttress his contention that respondent Manila Bank as the collecting or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements is misplaced. In the cited cases, the fact of forgery was not in issue. In the present case, the fact of forgery was not established with certainty. In those cited cases, the collecting banks were held to be negligent for failing to observe precautionary measures to detect the forgery. In the case before us, both courts below uniformly found that Manila Banks personnel diligently performed their duties, having compared the signature in the checks from the specimen signatures on record and satisfied themselves that it was petitioners. On the second issue, the fact that Manila Bank had filed a case for estafa against Eugenio would not estop it from asserting the fact that forgery has not been clearly established. Petitioner cannot hold private respondent in estoppel for the latter is not the actual party to the criminal action. In a criminal action, the State is the plaintiff, for the commission of a felony is an offense against the State.25 Thus, under Section 2, Rule 110 of the Rules of Court the complaint or information filed in court is required to be brought in the name of the "People of the Philippines." 26 Further, as petitioner himself stated in his petition, respondent bank filed the estafa case against Eugenio on the basis of petitioners own affidavit,27 but without admitting that he had any personal knowledge of the alleged forgery. It is, therefore, easy to understand that the filing of the estafa case by respondent bank was a last ditch effort to salvage its ties with the petitioner as a valuable client, by bolstering the estafa case which he filed against his secretary. All told, we find no reversible error that can be ascribed to the Court of Appeals. WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the Court of Appeals dated January 28, 1999 in CA-G.R. CV No. 47942, is AFFIRMED. Costs against petitioner. SO ORDERED. Bellosillo, Acting C.J., (Chairman), Mendoza, Austria-Martinez, and Callejo, Sr., JJ., concur. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-65295 March 10, 1987 PHOENIX CONSTRUCTION, INC. and ARMANDO U. CARBONEL, petitioners, vs. THE INTERMEDIATE APPELLATE COURT and LEONARDO DIONISIO, respondents. FELICIANO, J: In the early morning of 15 November 1975 at about 1:30 a.m. private respondent Leonardo Dionisio was on his way home he lived in 1214-B Zamora Street, Bangkal, Makati from a cocktails-and-dinner meeting with his boss, the general manager of a marketing corporation. During the cocktails phase of the evening, Dionisio had taken "a shot or two" of liquor. Dionisio was driving his Volkswagen car and had just crossed the intersection of General Lacuna and General Santos Streets at Bangkal, Makati, not far from his home, and was proceeding down General Lacuna Street, when his car headlights (in his allegation) suddenly failed. He switched his headlights on "bright" and thereupon he saw a Ford dump truck looming some 2-1/2 meters away from his car. The dump truck, owned by and registered in the name of petitioner Phoenix Construction Inc. ("Phoenix"), was parked on the right hand side of General Lacuna Street (i.e., on the right hand side of a person facing in the same direction toward which Dionisio's car was proceeding), facing the oncoming traffic. The dump truck was parked askew (not parallel to the street curb) in such a manner as to stick out onto the street, partly blocking the way of oncoming traffic. There

were no lights nor any so-called "early warning" reflector devices set anywhere near the dump truck, front or rear. The dump truck had earlier that evening been driven home by petitioner Armando U. Carbonel, its regular driver, with the permission of his employer Phoenix, in view of work scheduled to be carried out early the following morning, Dionisio claimed that he tried to avoid a collision by swerving his car to the left but it was too late and his car smashed into the dump truck. As a result of the collision, Dionisio suffered some physical injuries including some permanent facial scars, a "nervous breakdown" and loss of two gold bridge dentures. Dionisio commenced an action for damages in the Court of First Instance of Pampanga basically claiming that the legal and proximate cause of his injuries was the negligent manner in which Carbonel had parked the dump truck entrusted to him by his employer Phoenix. Phoenix and Carbonel, on the other hand, countered that the proximate cause of Dionisio's injuries was his own recklessness in driving fast at the time of the accident, while under the influence of liquor, without his headlights on and without a curfew pass. Phoenix also sought to establish that it had exercised due rare in the selection and supervision of the dump truck driver. The trial court rendered judgment in favor of Dionisio and against Phoenix and Carbonel and ordered the latter: (1) To pay plaintiff jointly and severally the sum of P 15,000.00 for hospital bills and the replacement of the lost dentures of plaintiff; (2) To pay plaintiff jointly and severally the sum of P 1,50,000.-00 as loss of expected income for plaintiff brought about the accident in controversy and which is the result of the negligence of the defendants; (3) To pay the plaintiff jointly and severally the sum of P 10,000. as moral damages for the unexpected and sudden withdrawal of plaintiff from his lifetime career as a marketing man; mental anguish, wounded feeling, serious anxiety, social humiliation, besmirched reputation, feeling of economic insecurity, and the untold sorrows and frustration in life experienced by plaintiff and his family since the accident in controversy up to the present time; (4) To pay plaintiff jointly and severally the sum of P 10,000.00 as damages for the wanton disregard of defendants to settle amicably this case with the plaintiff before the filing of this case in court for a smaller amount. (5) To pay the plaintiff jointly and severally the sum of P 4,500.00 due as and for attorney's fees; and (6) The cost of suit. (Emphasis supplied) Phoenix and Carbonel appealed to the Intermediate Appellate Court. That court in CA-G.R. No. 65476 affirmed the decision of the trial court but modified the award of damages to the following extent: 1. The award of P15,000.00 as compensatory damages was reduced to P6,460.71, the latter being the only amount that the appellate court found the plaintiff to have proved as actually sustained by him; 2. The award of P150,000.00 as loss of expected income was reduced to P100,000.00,basically because Dionisio had voluntarily resigned his job such that, in the opinion of the appellate court, his loss of income "was not solely attributable to the accident in question;" and 3. The award of P100,000.00 as moral damages was held by the appellate court as excessive and unconscionable and hence reduced to P50,000.00. The award of P10,000.00 as exemplary damages and P4,500.00 as attorney's fees and costs remained untouched. This decision of the Intermediate Appellate Court is now before us on a petition for review. Both the trial court and the appellate court had made fairly explicit findings of fact relating to the manner in which the dump truck was parked along General Lacuna Street on the basis of which both courts drew the inference that there was negligence on the part of Carbonel, the dump truck driver, and that this negligence was the proximate cause of the accident and

Dionisio's injuries. We note, however, that both courts failed to pass upon the defense raised by Carbonel and Phoenix that the true legal and proximate cause of the accident was not the way in which the dump truck had been parked but rather the reckless way in which Dionisio had driven his car that night when he smashed into the dump truck. The Intermediate Appellate Court in its questioned decision casually conceded that Dionisio was "in some way, negligent" but apparently failed to see the relevance of Dionisio's negligence and made no further mention of it. We have examined the record both before the trial court and the Intermediate Appellate Court and we find that both parties had placed into the record sufficient evidence on the basis of which the trial court and the appellate court could have and should have made findings of fact relating to the alleged reckless manner in which Dionisio drove his car that night. The petitioners Phoenix and Carbonel contend that if there was negligence in the manner in which the dump truck was parked, that negligence was merely a "passive and static condition" and that private respondent Dionisio's recklessness constituted an intervening, efficient cause determinative of the accident and the injuries he sustained. The need to administer substantial justice as between the parties in this case, without having to remand it back to the trial court after eleven years, compels us to address directly the contention put forward by the petitioners and to examine for ourselves the record pertaining to Dionisio's alleged negligence which must bear upon the liability, or extent of liability, of Phoenix and Carbonel. There are four factual issues that need to be looked into: (a) whether or not private respondent Dionisio had a curfew pass valid and effective for that eventful night; (b) whether Dionisio was driving fast or speeding just before the collision with the dump truck; (c) whether Dionisio had purposely turned off his car's headlights before contact with the dump truck or whether those headlights accidentally malfunctioned moments before the collision; and (d) whether Dionisio was intoxicated at the time of the accident. As to the first issue relating to the curfew pass, it is clear that no curfew pass was found on the person of Dionisio immediately after the accident nor was any found in his car. Phoenix's evidence here consisted of the testimony of Patrolman Cuyno who had taken Dionisio, unconscious, to the Makati Medical Center for emergency treatment immediately after the accident. At the Makati Medical Center, a nurse took off Dionisio's clothes and examined them along with the contents of pockets together with Patrolman Cuyno. 1 Private respondent Dionisio was not able to produce any curfew pass during the trial. Instead, he offered the explanation that his family may have misplaced his curfew pass. He also offered a certification (dated two years after the accident) issued by one Major Benjamin N. Libarnes of the Zone Integrated Police Intelligence Unit of Camp Olivas, San Fernando, Pampanga, which was said to have authority to issue curfew passes for Pampanga and Metro Manila. This certification was to the effect that private respondent Dionisio had a valid curfew pass. This certification did not, however, specify any pass serial number or date or period of effectivity of the supposed curfew pass. We find that private respondent Dionisio was unable to prove possession of a valid curfew pass during the night of the accident and that the preponderance of evidence shows that he did not have such a pass during that night. The relevance of possession or non-possession of a curfew pass that night lies in the light it tends to shed on the other related issues: whether Dionisio was speeding home and whether he had indeed purposely put out his headlights before the accident, in order to avoid detection and possibly arrest by the police in the nearby police station for travelling after the onset of curfew without a valid curfew pass. On the second issue whether or not Dionisio was speeding home that night both the trial court and the appellate court were completely silent. The defendants in the trial court introduced the testimony of Patrolman Cuyno who was at the scene of the accident almost immediately after it occurred, the police station where he was based being barely 200 meters away. Patrolman Cuyno testified that people who had gathered at the scene of the accident told him that Dionisio's car was "moving fast" and did not have its headlights on. 2 Dionisio, on the other hand, claimed that he was travelling at a

moderate speed at 30 kilometers per hour and had just crossed the intersection of General Santos and General Lacuna Streets and had started to accelerate when his headlights failed just before the collision took place. 3 Private respondent Dionisio asserts that Patrolman Cuyno's testimony was hearsay and did not fag within any of the recognized exceptions to the hearsay rule since the facts he testified to were not acquired by him through official information and had not been given by the informants pursuant to any duty to do so. Private respondent's objection fails to take account of the fact that the testimony of Patrolman Cuyno is admissible not under the official records exception to the hearsay rule 4 but rather as part of the res gestae. 5 Testimonial evidence under this exception to the hearsay rule consists of excited utterances made on the occasion of an occurrence or event sufficiently startling in nature so as to render inoperative the normal reflective thought processes of the observer and hence made as a spontaneous reaction to the occurrence or event, and not the result of reflective thought. 6 We think that an automobile speeding down a street and suddenly smashing into a stationary object in the dead of night is a sufficiently startling event as to evoke spontaneous, rather than reflective, reactions from observers who happened to be around at that time. The testimony of Patrolman Cuyno was therefore admissible as part of theres gestae and should have been considered by the trial court. Clearly, substantial weight should have been ascribed to such testimony, even though it did not, as it could not, have purported to describe quantitatively the precise velocity at winch Dionisio was travelling just before impact with the Phoenix dump truck. A third related issue is whether Dionisio purposely turned off his headlights, or whether his headlights accidentally malfunctioned, just moments before the accident. The Intermediate Appellate Court expressly found that the headlights of Dionisio's car went off as he crossed the intersection but was non-committal as to why they did so. It is the petitioners' contention that Dionisio purposely shut off his headlights even before he reached the intersection so as not to be detected by the police in the police precinct which he (being a resident in the area) knew was not far away from the intersection. We believe that the petitioners' theory is a more credible explanation than that offered by private respondent Dionisio i.e., that he had his headlights on but that, at the crucial moment, these had in some mysterious if convenient way malfunctioned and gone off, although he succeeded in switching his lights on again at "bright" split seconds before contact with the dump truck. A fourth and final issue relates to whether Dionisio was intoxicated at the time of the accident. The evidence here consisted of the testimony of Patrolman Cuyno to the effect that private respondent Dionisio smelled of liquor at the time he was taken from his smashed car and brought to the Makati Medical Center in an unconscious condition. 7 This testimony has to be taken in conjunction with the admission of Dionisio that he had taken "a shot or two" of liquor before dinner with his boss that night. We do not believe that this evidence is sufficient to show that Dionisio was so heavily under the influence of liquor as to constitute his driving a motor vehicle per se an act of reckless imprudence. 8 There simply is not enough evidence to show how much liquor he had in fact taken and the effects of that upon his physical faculties or upon his judgment or mental alertness. We are also aware that "one shot or two" of hard liquor may affect different people differently. The conclusion we draw from the factual circumstances outlined above is that private respondent Dionisio was negligent the night of the accident. He was hurrying home that night and driving faster than he should have been. Worse, he extinguished his headlights at or near the intersection of General Lacuna and General Santos Streets and thus did not see the dump truck that was parked askew and sticking out onto the road lane. Nonetheless, we agree with the Court of First Instance and the Intermediate Appellate Court that the legal and proximate cause of the accident and of Dionisio's injuries was the wrongful or negligent manner in which the dump truck was parked in other words, the negligence of petitioner Carbonel. That there was a reasonable relationship between petitioner Carbonel's negligence on the one hand and the accident and respondent's injuries on the other hand, is

quite clear. Put in a slightly different manner, the collision of Dionisio's car with the dump truck was a natural and foreseeable consequence of the truck driver's negligence. The petitioners, however, urge that the truck driver's negligence was merely a "passive and static condition" and that private respondent Dionisio's negligence was an "efficient intervening cause and that consequently Dionisio's negligence must be regarded as the legal and proximate cause of the accident rather than the earlier negligence of Carbonel. We note that the petitioners' arguments are drawn from a reading of some of the older cases in various jurisdictions in the United States but we are unable to persuade ourselves that these arguments have any validity for our jurisdiction. We note, firstly, that even in the United States, the distinctions between "cause" and "condition" which the 'petitioners would have us adopt have already been "almost entirely discredited." Professors and Keeton make this quite clear:
Cause and condition. Many courts have sought to distinguish between the active "cause" of the harm and the existing "conditions" upon which that cause operated. If the defendant has created only a passive static condition which made the damage possible, the defendant is said not to be liable. But so far as the fact of causation is concerned, in the sense of necessary antecedents which have played an important part in producing the result it is quite impossible to distinguish between active forces and passive situations, particularly since, as is invariably the case, the latter are the result of other active forces which have gone before. The defendant who spills gasoline about the premises creates a "condition," but the act may be culpable because of the danger of fire. When a spark ignites the gasoline, the condition has done quite as much to bring about the fire as the spark; and since that is the very risk which the defendant has created, the defendant will not escape responsibility. Even the lapse of a considerable time during which the "condition" remains static will not necessarily affect liability; one who digs a trench in the highway may still be liable to another who fans into it a month afterward. "Cause" and "condition" still find occasional mention in the decisions; but the distinction is now almost entirely discredited. So far as it has any validity at all, it must refer to the type of case where the forces set in operation by the defendant have come to rest in a position of apparent safety, and some new force intervenes. But even in such cases, it is not the distinction between "cause" and "condition" which is important but the nature of the risk and the character of the intervening cause . 9

We believe, secondly, that the truck driver's negligence far from being a "passive and static condition" was rather an indispensable and efficient cause. The collision between the dump truck and the private respondent's car would in an probability not have occurred had the dump truck not been parked askew without any warning lights or reflector devices. The improper parking of the dump truck created an unreasonable risk of injury for anyone driving down General Lacuna Street and for having so created this risk, the truck driver must be held responsible. In our view, Dionisio's negligence, although later in point of time than the truck driver's negligence and therefore closer to the accident, was not an efficient intervening or independent cause. What the Petitioners describe as an "intervening cause" was no more than a foreseeable consequent manner which the truck driver had parked the dump truck. In other words, the petitioner truck driver owed a duty to private respondent Dionisio and others similarly situated not to impose upon them the very risk the truck driver had created. Dionisio's negligence was not of an independent and overpowering nature as to cut, as it were, the chain of causation in fact between the improper parking of the dump truck and the accident, nor to sever the juris vinculum of liability. It is helpful to quote once more from Professor and Keeton: Foreseeable Intervening Causes. If the intervening cause is one which in ordinary human experience is reasonably to be anticipated or one which the defendant has reason to anticipate under the particular circumstances, the defendant may be negligence among other reasons, because of failure to guard against it; or the defendant may be negligent only for that reason. Thus one who sets a fire may be required to foresee that an ordinary, usual and customary wind arising later wig spread it beyond the defendant's own property, and therefore to take precautions to prevent that event. The person who leaves the combustible or explosive material exposed in a public place may foresee the risk of fire from some

independent source. ... In all of these cases there is an intervening cause combining with the defendant's conduct to produce the result and in each case the defendant's negligence consists in failure to protect the plaintiff against that very risk. Obviously the defendant cannot be relieved from liability by the fact that the risk or a substantial and important part of the risk, to which the defendant has subjected the plaintiff has indeed come to pass. Foreseeable intervening forces are within the scope original risk, and hence of the defendant's negligence. The courts are quite generally agreed that intervening causes which fall fairly in this category will not supersede the defendant's responsibility. Thus it has been held that a defendant will be required to anticipate the usual weather of the vicinity, including all ordinary forces of nature such as usual wind or rain, or snow or frost or fog or even lightning; that one who leaves an obstruction on the road or a railroad track should foresee that a vehicle or a train will run into it; ...
The risk created by the defendant may include the intervention of the foreseeable negligence of others. ... [The standard of reasonable conduct may require the defendant to protect the plaintiff against 'that occasional negligence which is one of the ordinary incidents of human life, and therefore to be anticipated.' Thus, a defendant who blocks the sidewalk and forces the plaintiff to walk in a street where the plaintiff will be exposed to the risks of heavy traffic becomes liable when the plaintiff is run down by a car, even though the car is negligently driven; and one who parks an automobile on the highway without lights at night is not relieved of responsibility when another negligently drives into it. --- 10

We hold that private respondent Dionisio's negligence was "only contributory," that the "immediate and proximate cause" of the injury remained the truck driver's "lack of due care" and that consequently respondent Dionisio may recover damages though such damages are subject to mitigation by the courts (Article 2179, Civil Code of the Philippines). Petitioners also ask us to apply what they refer to as the "last clear chance" doctrine. The theory here of petitioners is that while the petitioner truck driver was negligent, private respondent Dionisio had the "last clear chance" of avoiding the accident and hence his injuries, and that Dionisio having failed to take that "last clear chance" must bear his own injuries alone. The last clear chance doctrine of the common law was imported into our jurisdiction by Picart vs. Smith 11 but it is a matter for debate whether, or to what extent, it has found its way into the Civil Code of the Philippines. The historical function of that doctrine in the common law was to mitigate the harshness of another common law doctrine or rule that of contributory negligence. 12 The common law rule of contributory negligence prevented any recovery at all by a plaintiff who was also negligent, even if the plaintiff's negligence was relatively minor as compared with the wrongful act or omission of the defendant. 13 The common law notion of last clear chance permitted courts to grant recovery to a plaintiff who had also been negligent provided that the defendant had the last clear chance to avoid the casualty and failed to do so. 14 Accordingly, it is difficult to see what role, if any, the common law last clear chance doctrine has to play in a jurisdiction where the common law concept of contributory negligence as an absolute bar to recovery by the plaintiff, has itself been rejected, as it has been in Article 2179 of the Civil Code of the Philippines. 15 Is there perhaps a general concept of "last clear chance" that may be extracted from its common law matrix and utilized as a general rule in negligence cases in a civil law jurisdiction like ours? We do not believe so. Under Article 2179, the task of a court, in technical terms, is to determine whose negligence the plaintiff's or the defendant's was the legal or proximate cause of the injury. That task is not simply or even primarily an exercise in chronology or physics, as the petitioners seem to imply by the use of terms like "last" or "intervening" or "immediate." The relative location in the continuum of time of the plaintiff's and the defendant's negligent acts or omissions, is only one of the relevant factors that may be taken into account. Of more fundamental importance are the nature of the negligent act or omission of each party and the character and gravity of the risks created by

such act or omission for the rest of the community. The petitioners urge that the truck driver (and therefore his employer) should be absolved from responsibility for his own prior negligence because the unfortunate plaintiff failed to act with that increased diligence which had become necessary to avoid the peril precisely created by the truck driver's own wrongful act or omission. To accept this proposition is to come too close to wiping out the fundamental principle of law that a man must respond for the forseeable consequences of his own negligent act or omission. Our law on quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate them among the members of society. To accept the petitioners' pro-position must tend to weaken the very bonds of society. Petitioner Carbonel's proven negligence creates a presumption of negligence on the part of his employer Phoenix16 in supervising its employees properly and adequately. The respondent appellate court in effect found, correctly in our opinion, that Phoenix was not able to overcome this presumption of negligence. The circumstance that Phoenix had allowed its truck driver to bring the dump truck to his home whenever there was work to be done early the following morning, when coupled with the failure to show any effort on the part of Phoenix to supervise the manner in which the dump truck is parked when away from company premises, is an affirmative showing of culpa in vigilando on the part of Phoenix. Turning to the award of damages and taking into account the comparative negligence of private respondent Dionisio on one hand and petitioners Carbonel and Phoenix upon the other hand, 17 we believe that the demands of substantial justice are satisfied by allocating most of the damages on a 20-80 ratio. Thus, 20% of the damages awarded by the respondent appellate court, except the award of P10,000.00 as exemplary damages and P4,500.00 as attorney's fees and costs, shall be borne by private respondent Dionisio; only the balance of 80% needs to be paid by petitioners Carbonel and Phoenix who shall be solidarity liable therefor to the former. The award of exemplary damages and attorney's fees and costs shall be borne exclusively by the petitioners. Phoenix is of course entitled to reimbursement from Carbonel. 18 We see no sufficient reason for disturbing the reduced award of damages made by the respondent appellate court. WHEREFORE, the decision of the respondent appellate court is modified by reducing the aggregate amount of compensatory damages, loss of expected income and moral damages private respondent Dionisio is entitled to by 20% of such amount. Costs against the petitioners. SO ORDERED. Yap (Chairman), Narvasa, Cruz, Gancayco and Sarmiento, JJ., concur. Melencio-Herrera, J., is on leave.

THIRD DIVISION

SPOUSES CESAR R. ROMULO and NENITA S. ROMULO, Petitioners,

G.R. No. 151217 Present: QUISUMBING, J.,

Chairperson, - versus CARPIO,

CARPIO MORALES, TINGA, and SPOUSES MOISES P. LAYUG, JR., and FELISARIN LAYUG, Respondents. Promulgated: VELASCO, JR., JJ.

September 8, 2006 x---------------------------------------------------------------------------x

DECISION

TINGA, J.:

This is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Court of Appeals Decision[1] and Resolution[2] in CA-G.R. CV No. 63965. Said Decision reversed and set aside the Decision[3] of the Regional Trial Court (RTC), Branch 258, Paraaque City, which nullified the Deed of Absolute Sale and Contract of Lease executed between herein petitioners and respondents. The following factual antecedents are matters of record. On April 11, 1996, petitioners Spouses Cesar and Nenita Romulo filed a verified Complaint for Cancellation of Title, Annulment of Deed of Absolute Sale and Contract of Lease with Damages against respondents Spouses Moises and Felisarin Layug. The complaint was docketed as Civil Case No. 96-0172 and raffled to Branch 258 of the RTC of Paraaque.[4] Petitioners averred in their complaint that sometime in 1986, they obtained from respondents a loan in the amount of P50,000.00 with a monthly interest of 10%, which subsequently ballooned to P580,292.00. To secure the payment of the loan, respondents allegedly duped petitioners into signing a

Contract of Lease and a Deed of Absolute Sale covering petitioners house and lot located at Phase II, BF Homes, Sucat, Paraaque and covered by Transfer Certificate of Title (TCT) No. S-71528. The Deed of Absolute Sale purportedly facilitated the cancellation of petitioners title on the house and lot and the issuance of TCT No. 20489 in the name of respondents. Thus, petitioners prayed for the nullification of the Deed of Absolute Sale, the contract of lease and TCT No. 20489, and the award of moral and exemplary damages.[5]

Respondents denied petitioners allegations. In their Answer,[6] they vouched for the validity of the Deed of Absolute Sale, particularly as having been voluntarily executed by the parties for the purpose of extinguishing petitioners indebtedness to respondents. As consideration of the sale, respondents allegedly paid the amount of P200,000.00 in addition to the writing off of petitioners obligation to them. That they allowed petitioners to occupy the house and lot as lessees thereof was founded on the trust they reposed on petitioners, claimed respondents.[7] Prior to the filing of Civil Case No. 96-0172, respondent Moises Layug, Jr. (Moises) filed Civil Case No. 9422, an action for ejectment, against petitioners to compel the latter to vacate the house and lot allegedly sold by petitioners to Moises and subsequently rented out by him to petitioners. Moises alleged that petitioners violated the terms of the Contract of Lease when the latter failed to pay any rental or exercise their option to repurchase the house and lot and refused to vacate the property despite demand. The Metropolitan Trial Court (MeTC), Branch 77, Paraaque dismissed the complaint for lack of cause of action.[8] The RTC, Branch 257, Paraaque, likewise dismissed Moises appeal based on its finding that the parties did not intend to enter into a lease agreement.[9] The Court of Appeals denied Moises petition for review on the ground of late filing.[10] Upon elevation to this Court, Moises petition for review on certiorari was denied with finality by this Court.[11]

On June 21, 1999, the trial court rendered judgment in favor of petitioners in Civil Case No. 96-0172. The dispositive portion of the decision reads:
WHEREFORE, the plaintiffs having been able to prove their claim by preponderance of evidence, judgment is hereby rendered in their favor and against spouses Moises P. Layug and Felisarin Layug whereby the Contract of Lease as well as the Deed of Sale allegedly executed by the herein parties are hereby declared NULL and VOID and of no force and effect and the Register of Deeds of the City of Paraaque is hereby ordered to cancel Transfer Certificate of Title No. 20489 registered in the names of MOISES P. LAYUG married to FELISARIN LAYUG and to issue a new one in the name of Spouses Cesar R. Romulo and Nenita S. Romulo, upon the payment of the required fees by the plaintiffs. Likewise, defendants Spouses Moises P. Layug and Felisarin Layug are hereby ordered to pay jointly and severally Spouses Cesar R. Romulo and Nenita S. Romulo the following, to wit: 1. 2. 3. 4. The amount of P100,000.00 as and by way of moral damages; The amount of P80,000.00 as exemplary damages; The amount of P50,000.00 as and by way of attorneys fees; and The costs of suit.

SO ORDERED.[12]

Respondents elevated the matter to the Court of Appeals, questioning, among others, the trial courts finding that the contract between petitioners and respondents was an equitable mortgage.[13] The Court of Appeals reversed and set aside the RTC Decision, mainly on the ground that petitioners failed to present sufficient evidence to prove their allegation that their signatures to the Deed of Absolute Sale were obtained fraudulently. Their motion for reconsideration rebuffed,[14] petitioners filed the instant petition raising the lone issue of whether or not the transaction between the parties constitutes an equitable mortgage. On this issue, the RTC and the Court of Appeals differ in opinion. The trial court based its declaration that an equitable mortgage was intended by

the parties on the finding that petitioners remained in possession of the house and lot even after the property was supposedly sold to respondents. The trial court also gave evidentiary weight to the decisions of the MeTC and RTC dismissing the action for ejectment in Civil Case No. 9422, where both courts found that petitioners neither vacated the property nor paid any rental even after the execution of the Deed of Absolute Sale. The Court of Appeals disagreed and declared that an absolute sale was contemplated by the parties based on the express stipulations in the Deed of Absolute Sale and on the acts of ownership by respondents subsequent to its execution.

Whether or not the parties intended an equitable mortgage is a factual issue. As a general rule, factual review is beyond the province of this Court. One of the exceptions to the rule is exemplified by the instant case where the factual findings of the RTC and Court of Appeals are contradictory. That petitioners obtained loans from respondents between 1985 and 1987, which remained unpaid up to the time of the execution of the assailed Deed of Absolute Sale, is established.[15] That petitioners signed the assailed instrument is also not disputed. Indeed, they admitted having signed said document qualifying, however, that they were forced by respondents to execute the same for the purpose of securing their indebtedness to respondents.[16] Respondents, on the other hand, insisted that the parties executed the Deed of Absolute Sale as an honest-to-goodness sales transaction. Respondents, however, admitted further that in addition to the amount of P200,000.00 stipulated in the Deed of Absolute Sale, the parties agreed to write off petitioners loan as consideration of the sale, although this clause was not expressed in the instrument.[17] From respondents admission, it can be gathered that the assailed Deed of Absolute Sale does not reflect the true arrangement of the parties. Now, is petitioners submission that the parties actually agreed to subject the house and lot as security for their unpaid

obligation supported by the evidence? Did the parties execute the assailed Deed of Absolute Sale with the intention of subjecting petitioners house and lot covered by the deed as a mere security for the payment of their debt?

The form of the instrument cannot prevail over the true intent of the parties as established by the evidence. We have also decreed that in determining the nature of a contract, courts are not bound by the title or name given by the parties. The decisive factor in evaluating such agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by their conduct, words, actions and deeds prior to, during and immediately after execution of the agreement.[18] In order to ascertain the intention of the parties, their contemporaneous and subsequent acts should be considered. Once the intention of the parties has been ascertained, that element is deemed as an integral part of the contract as though it has been originally expressed in unequivocal terms.[19] As such, documentary and parol evidence may be submitted and admitted to prove such intention. And, in case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.[20] Between 1985 and 1987, petitioner Nenita Romulo (Nenita) obtained from respondent Felisarin Layug (Felisarin) loans in various amounts totaling around P500,000.00. Being close friends at that time, Felisarin did not require any written instrument to secure payment, other than the title to the house and lot, which Nenita handed to Felisarin sometime in 1988.[21] When respondents demanded payment of the loan, petitioners defaulted. Nevertheless, as admitted by Layug, despite her repeated demands, she allowed petitioners some more time within which to pay their debts.[22] Felisarin claimed that eventually petitioners offered their house and lot as payment for their debt because petitioners no longer had any money.[23] However, even after the execution of the assailed Deed of Absolute Sale, respondents continued to grant petitioners loan accommodations as evidenced by the three promissory notes executed by petitioner Cesar Romulo.[24]

Respondents continuing to lend money to petitioners does not make sense if the intention of the parties was really to extinguish petitioners outstanding obligation. The logical and inevitable conclusion is that respondents deemed it wise to formalize a security instrument on petitioners house and lot by executing the Deed of Absolute Sale after realizing that petitioners could no longer fully satisfy their obligation to respondents. At that time, as petitioners were hard-pressed to come up with funds to pay their loan, they were hardly in a position to bargain. The preponderance of evidence shows that they signed knowing that said documents did not express their real intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining funds. Necessitous men are not, truly speaking, free men; but to answer a present emergency will submit to any terms that the crafty may impose upon them.[25] The circumstances surrounding the execution of the Deed of Absolute Sale, particularly the fact that respondents continued to extend some loans to petitioners after its execution, precludes the Court from declaring that the parties intended the transfer of the property from one to the other by way of sale. Consistent with the foregoing state of the evidence, Articles 1604 and 1602 of the Civil Code come into play. The articles provide that when the parties to a contract of sale actually intended such contract to secure the payment of an obligation, it shall be presumed to be an equitable mortgage:
Art. 1602. The contract shall be presumed to be an equitable mortgage in any of the following cases: 1) When the price of a sale with right to repurchase is unusually inadequate; 2) When the vendor remains in possession as lessee or otherwise;

3) When upon or after the expiration of the right to repurchase, another instrument extending the period of redemption or granting a new period is executed; 4) 5) When the vendor binds himself to pay the taxes on the thing sold; When the purchaser retains for himself a part of the purchase price;

6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. (Emphasis supplied.) Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.

For the presumption of equitable mortgage to arise, two requisites must be satisfied, namely: that the parties entered into a contract denominated as a contract of sale and that their intention was to secure an existing debt by way of mortgage. Under Article 1604 of the Civil Code, a contract purporting to be an absolute sale shall be presumed to be an equitable mortgage should any of the conditions in Article 1602 be present.[26] To stress, the existence of any one of the conditions under Article 1602, not a concurrence, or an overwhelming number of such circumstances, suffices to give rise to the presumption that the contract is an equitable mortgage.[27] It must be emphasized too, however, that there is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. In fact, it is often a question difficult to resolve and is frequently made to depend on the surrounding circumstances of each case. When in doubt, courts are generally inclined to construe a transaction purporting to be a sale as an equitable mortgage, which involves a lesser transmission of rights and interests over the property in controversy.[28] The Court has not hesitated to declare a purported contract of sale as an equitable mortgage even when only one of the enumerated circumstances under Article 1602 is proved.[29] In the case at bar, petitioners remained in possession of the house and lot even after the execution of the Deed of Absolute Sale. Moreover, they remained in possession of the property for more than the reasonable time that would suggest that petitioners were mere lessees thereof. For one, it took respondents more than five years from the time of the execution of the Deed of Absolute Sale and the Contract of Lease to file the action for ejectment. Within this period, petitioners neither paid any rental nor exercised the option to buy purportedly the leased property from respondents. Incidentally, in the decisions of the MeTC and the RTC in the separate action for ejectment, both lower courts observed that when

petitioners were made to sign a blank document, which turned out to be a Contract of Lease of their house and lot, they were of the belief that the blank document would serve only as guaranty for the payment of their obligation to respondents.

The claim that petitioners possession of the house and lot was by sheer tolerance of respondents is specious. Respondents could not explain why they allowed petitioners more than five years to look for another place to transfer. These circumstances only support the conclusion that the parties never really intended to transfer title to the property. Under paragraph 2 of Article 1602, where the purported vendor remains in possession of the property subject of the sale and it can be inferred that the true intention of the parties was to secure an existing debt, the transaction shall be deemed an equitable mortgage. Under paragraph 1 of Article 1602, where the purchase price is inadequate, a contract of sale is also presumed to be an equitable mortgage. Based on respondents evidence, petitioners property was valued at P700,000.00 but the assailed Deed of Absolute Sale stated a consideration of only P200,000.00. Contrary to the appellate courts declaration that the inadequacy of the purchase price is not sufficient to set aside the sale, the Court finds the same as clearly indicative of the parties intention to make the property only a collateral security of petitioners debt. The Court is not convinced that petitioners would allow the sale of their residential property for even less than half of its market value. The appellate court ruled that petitioners failed to rebut the presumption of the genuineness and due execution of the questioned Deed of Absolute Sale. Based on the examination of the assailed instrument and the Contract of Lease and the testimonies of the parties, the Court cannot sustain respondents claim that petitioners offered to sell their house and lot in satisfaction of their indebtedness. As observed by the trial court, the Contract of Lease appears to have been signed sometime in November 1988 or before the execution of the Deed of Sale. Respondents were unable to

explain why they had leased the property to petitioners before its supposed purchase by respondents. Furthermore, the records disclose that it was only after the institution of the ejectment case did petitioners learn about the cancellation of their title to the property although under the assailed Deed of Absolute Sale, petitioners were obliged to bear the expenses of its execution and registration. These circumstances lend credence to petitioners claim of the surreptitious manner by which respondents made them sign certain documents without completely disclosing the real import thereof.

The Supreme Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case.[30] Though petitioners did not raise in issue the appellate courts reversal of the award of damages in their favor, the Court has the discretion to pass upon this matter and determine whether or not there is sufficient justification for the award of damages. The trial court described respondents acts as malevolent, necessitating the award for moral and exemplary damages. An award of moral damages would require certain conditions to be met, to wit: (1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be a culpable act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the cases stated in Article 2219.[31] However, petitioners are not completely without fault. Had they exercised ordinary diligence in their affairs, petitioners could have avoided executing documents in blank. Respondents wrongful act, although the proximate cause of the injury suffered by petitioners, was mitigated by petitioners own

contributory negligence. Hence, the award of moral and exemplary damages must be reduced to one-half of the amounts awarded by the trial court.[32]

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV 63965 are REVERSED and SET ASIDE and the Decision of the Regional Trial Court, Branch 258, Paraaque City in Civil Case No. 96-0172 is REINSTATED with a MODIFICATION that the award of moral and exemplary damages is REDUCED to P50,000.00 and P40,000.00, respectively. Costs against respondents.

SO ORDERED.

DANTE O. TINGA Justice

Associate

WE CONCUR:

LEONARDO A. QUISUMBING Associate Justice Chairperson

ANTONIO T. CARPIO Associate Justice

CONCHITA CARPIO MORALES Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING Associate Justice Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN Chief Justice

[1]

Promulgated on 31 July 2001 and penned by J. Teodoro P. Regino and concurred in by JJ. Delilah Vidallon-Magtolis and Josefina Guevara-Salonga of the Court of Appeals Ninth Division. Rollo, pp. 4368.
[2]

Dated 21 December 2001. Rollo, p. 71. Dated 21 June 1999 and penned by Judge Raul E. de Leon. Rollo, pp. 93-108. Records, pp. 1-3.

[3]

[4]

[5]

Id. Id. at 27-28. Id. at 27. Rollo, pp. 76-80. Id. at 81-83.

[6]

[7]

[8]

[9]

[10]

Id. at 84-85. Id. at 87-88. Rollo, pp. 107-108. CA rollo, p. 43. Id. at 192. Records, pp. 238-241. Id. at 2. Id. at 27. Lapat v. Rosario, 371 Phil. 456, 465-466 (1999).

[11]

[12]

[13]

[14]

[15]

[16]

[17]

[18]

[19]

Lorenzo Shipping Corp. v. BJ Marthel International, Inc ., G.R. No. 145483, November 19, 2004, 443 SCRA 163, 175.
[20]

Lapat v. Rosario, supra note 18 at 466. Supra note 15. TSN, March 16, 1998, pp. 874-876. Id. Records, pp. 314-3166.

[21]

[22]

[23]

[24]

[25]

Spouses Reyes v. Spouses Victa, 393 Phil. 479, 493 (2000). Lustan v. Court of Appeals, 334 Phil. 609, 615-616 (1997). Aguirre v. Court of Appeals, 380 Phil. 736, 742 (2000). Legaspi v. Ong, G.R. No. 141311, May 26, 2005, 359 SCRA 122, 139.

[26]

[27]

[28]

[29]

See Lustan v. Court of Appeals, 334 Phil. 609 (1997); Ramirez v. Court of Appeals, 356 Phil. 1 (1998); Martinez v. Court of Appeals, G.R. No. 123547, May 21, 2001.
[30]

Aurora Land Projects Corp. v. NLRC, 334 Phil. 44, 59 (1997). Expertravel & Tours, Inc. v. Court of Appeals, 368 Phil. 444, 448 (1999).

[31]

[32]

CIVIL CODE, Art. 2179, states: When the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendants lack of due care, the plaintiff ,may recover damages, but the courts shall mitigate the damages to be awarded.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 144723 February 27, 2006 LARRY ESTACION, Petitioner, vs. NOE BERNARDO, thru and his guardian ad litem ARLIE BERNARDO, CECILIA BANDOQUILLO and GEMINIANO QUINQUILLERA, Respondents. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review on certiorari filed by Larry Estacion (petitioner) seeking to annul the Decision dated April 17, 20001 of the Court of Appeals (CA) in CA-GR CV No. 41447 which affirmed in toto the decision of the Regional Trial Court (RTC) of Dumaguete City, Branch 41, Negros Oriental, holding petitioner and his driver Bienvenido Gerosano (Gerosano) liable for damages for the injury sustained by Noe Bernardo (respondent Noe). Also assailed is the appellate courts Resolution dated August 16, 20002 denying petitioners motion for reconsideration. In the afternoon of October 16, 1982, respondent Noe was going home to Dumaguete from Cebu, via Bato and Tampi. At Tampi, he boarded a Ford Fiera passenger jeepney with plate no. NLD 720 driven by respondent Geminiano Quinquillera (Quinquillera), owned by respondent Cecilia Bandoquillo (Bandoquillo), and was seated on the extension seat placed at the center of the Fiera. From San Jose, an old woman wanted to ride, so respondent Noe offered his seat. Since the Fiera was already full, respondent Noe hung or stood on the left rear carrier of the vehicle. Somewhere along Barangay Sto. Nio, San Jose, Negros Oriental, between kilometers 13 and 14, the Fiera began to slow down and then stopped by the right shoulder of the road to pick up passengers. Suddenly, an Isuzu cargo truck, owned by petitioner and driven by Gerosano, which was traveling in the same direction, hit the rear end portion of the Fiera where respondent Noe was standing. Due to the tremendous force, the cargo truck smashed respondent Noe against the Fiera crushing his legs and feet which made him fall to the ground. A passing vehicle brought him to the Silliman University Medical Center where his lower left leg was amputated. Police investigation reports showed that respondent Noe was one of the 11 passengers of the Fiera who suffered injuries; that when the Fiera stopped to pick up a passenger, the cargo truck bumped the rear left portion of the Fiera; that only one tire mark from the front right wheel of the cargo truck was seen on the road. A sketch of the accident was drawn by investigator Mateo Rubia showing the relative positions of the two vehicles, their distances from the shoulder of the road and the skid marks of the right front wheel of the truck measuring about 48 feet. On February 18, 1993, respondent Noe, through his guardian ad litem Arlie Bernardo, filed with the RTC of Dumaguete City a complaint3 for damages arising from quasi delict against petitioner as the registered owner of the cargo truck and his driver Gerosano. He alleged that the proximate cause of his injuries and suffering was the reckless imprudence of Gerosano and petitioners negligence in the selection of a reckless driver and for operating a vehicle that was not roadworthy. He prayed for actual damages, loss of income, moral and exemplary damages, attorneys fees, litigation expenses and costs of suit. Petitioner and his driver Gerosano filed their Answer4 denying the material allegations in the complaint. They, in turn, filed a third party complaint5 against respondents Bandoquillo and Quinquillera, as owner and driver respectively of the Fiera. They alleged that it was the reckless imprudence of respondent driver Quinquillera and his clear violation of the traffic rules and regulations which was the proximate cause of the accident and asked for indemnification for whatever damages they would be sentenced to pay. Respondents

Bandoquillo and Quinquillera filed their Answer to the third party complaint asking for the dismissal of the third party complaint and for payment of attorneys fees. Driver Gerosano was charged criminally for reckless imprudence resulting to multiple physical injuries with damage to property before the Municipal Circuit Trial Court (MCTC) of Pamplona-Amlan and San Jose, Negros Oriental. On November 16, 1987, the MCTC rendered its decision6 finding him guilty of the crime charged and was sentenced to four months and one day to two years and four months and to pay the costs. On February 18, 1993, the RTC rendered its judgment in the civil case,7 the dispositive portion of which reads: WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and Estacion, to pay plaintiff, jointly or solidarily, the following: 1. P129,584.20 for actual damages in the form of medical and hospitalization expenses; 2. P50,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded feelings; 3. P10,000.00 for attorneys fees; and 4. P5,000.00 for litigation expenses. SO ORDERED.8 The trial court ruled that the negligence of Gerosano, petitioners driver, is the direct and proximate cause of the incident and of the injuries suffered by respondent Noe; that Gerosanos gross negligence and reckless imprudence had been confirmed by the Judgment in Criminal Case No. 463; that based on the findings of the police investigator, the faulty brakes caused the cargo truck to bump the Fiera; that the Traffic Accident Report showed that the tire mark of the cargo truck measuring 48 feet is visibly imprinted on the road where the incident took place indicating that the said vehicle was speeding fast; that the existence of one tire mark of the cargo truck proved that the said vehicle had a faulty brake, otherwise, it would have produced two tire marks on the road; and that the photographs taken right after the incident also showed who the guilty party was. The trial court did not give credence to the argument of petitioner and his driver that the truck was properly checked by a mechanic before it was dispatched for a trip. It found that petitioner is negligent in maintaining his vehicle in good condition to prevent any accident to happen; that petitioner is liable under Article 2180 of the Civil Code as employer of driver Gerosano for being negligent in the selection and supervision of his driver as well as for maintaining and operating a vehicle that was not roadworthy; and that petitioner and his driver are solidarily liable for all the natural and probable consequences of their negligent acts or omissions. The trial court dismissed the third party complaint filed by petitioner and his driver against respondents Bandoquillo and Quinquillera. Dissatisfied, only petitioner appealed to the CA. On April 17, 2000, the CA rendered the assailed decision which affirmed in toto the decision of the trial court. Petitioners motion for reconsideration was denied in a Resolution dated August 16, 2000. Hence, the herein petition for review. Petitioner submits the following issues for resolution:9 WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER LARRY ESTACION EXERCISED THE DUE DILIGENCE OF A GOOD FATHER OF A FAMILY TO PREVENT DAMAGE DESPITE ABUNDANCE OF EVIDENCE TO THAT EFFECT; WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER LARRY ESTACION EXERCISED DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF HIS EMPLOYEE AND IN MAINTAINING HIS CARGO TRUCK ROADWORTHY AND IN GOOD OPERATING CONDITION; WHETHER THE COURT OF APPEALS ERRED IN EXONERATING RESPONDENTS CECILIA BANDOQUILLO AND GEMINIANO QUINQUILLERA. In his Memorandum, petitioner contends that he was able to establish that he observed the diligence of a good father of a family not only in the selection of his employees but also in

maintaining his truck roadworthy and in good operating condition; that the CA erred in exonerating respondents Bandoquillo and Quinquillera, owner and driver, respectively of the Fiera from liability when their negligence was the proximate cause of respondent Noes injuries; that respondent Noes act of standing in the rear carrier of the Fiera is in itself negligence on his part which was aggravated by the fact that respondent Quinquillera overtook the cargo truck driven by Gerosano on the curve and suddenly cut into the latters lane; that due to the overloading of passengers, Gerosano was not able to see the brake lights of the Fiera when it suddenly stopped to pick up passengers; that overloading is in violation of the applicable traffic rules and regulations and Article 2185 is explicit when it provides that "unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation"; that since the Fiera driver was negligent, there arises a presumption that respondent Bandoquillo, as owner of the Fiera, is negligent in the selection and supervision of her employee; that assuming petitioner Estacion and his driver are not entirely blameless, the negligence of Quinquillera is sufficient basis why the respective liabilities should be delineated vis--vis their degree of negligence consistent with Article 217910 of the Civil Code. Respondent Noe filed his Memorandum alleging that the first and second issues raised are factual in nature which are beyond the ambit of a petition for review; that petitioner failed to overcome the presumption of negligence thus he is liable for the negligence of his driver Gerosano; and that the third issue is best addressed to respondents Bandoquillo and Quinquillera. Respondents Bandoquillo and Quinquillera failed to file their memorandum despite receipt of our Resolution requiring them to submit the same. We find it apropos to resolve first the third issue considering that the extent of the liability of petitioner and his driver is dependent on whether respondents Bandoquillo and Quinquillera are the ones negligent in the vehicular mishap that happened in the afternoon of October 16, 1982 where respondent Noe was injured, resulting in the amputation of his left leg. At the outset, the issue raised is factual in nature. Whether a person is negligent or not is a question of fact which we cannot pass upon in a petition for review on certiorari, as our jurisdiction is limited to reviewing errors of law.11As a rule, factual findings of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal. The established exceptions are: (1) when the inference made is manifestly mistaken, absurd or impossible; (2) when there is grave abuse of discretion; (3) when the findings are grounded entirely on speculations, surmises or conjectures; (4) when the judgment of the CA is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (7) when the findings of fact are conclusions without citation of specific evidence on which they are based; (8) when the CA manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and (9) when the findings of fact of the CA are premised on the absence of evidence and are contradicted by the evidence on record.12 On the basis of the records of this case, we find that there is cogent reason for us to review the factual findings of the lower courts to conform to the evidence on record and consider this case as an exception to the general rule. The trial court and the appellate court had made a finding of fact that the proximate cause of the injury sustained by respondent Noe was the negligent and careless driving of petitioners driver, Gerosano, who was driving at a fast speed with a faulty brake when the accident happened. We see no cogent reason to disturb the trial courts finding in giving more credence to the testimony of respondent Noe than the testimony of Gerosano, petitioners truck driver. The correctness of such finding is borne by the records. In his testimony, Gerosano said that he was driving the truck at a speed of about 40 kilometers per hour;13 that the Fiera was

behind him but upon reaching the curve, i.e., after passing San Jose going to Dumaguete, the Fiera overtook him and blocked his way;14 that he was 10 meters from the Fiera prior to the impact15 when he applied the brakes16 and tried to evade the Fiera but he still hit it.17 We agree with the trial court and the appellate court when they found that the truck was running at a fast speed because if Gerosano was really driving at a speed of 40 kilometers per hour and considering that the distance between the truck and the Fiera in front was about 10 meters, he had more than enough time to slacken his speed and apply his break to avoid hitting the Fiera. However, from the way the truck reacted to the application of the brakes, it showed that Gerosano was driving at a fast speed because the brakes skidded a lengthy 48 feet as shown in the sketch of police investigator Rubia of the tire marks visibly printed on the road. Moreover, the photographs taken after the incident and the testimony of Gerosano as to the extent of damage to the truck, i.e. the trucks windshield was broken and its hood was damaged after the impact,18 further support the finding of both courts that Gerosano was driving at a fast pace. The accident was further caused by the faulty brakes of the truck. Based on the sketch report, there was only one tire mark of the right tire of the cargo truck during the incident which, as testified to by police investigator Rubia, meant that the brakes of the truck were not aligned otherwise there would be two tire marks impressions on the road.19 Although petitioner contends that there are other factors to explain why only one skid mark was found at the place of the incident, such as the angle and edges of the road as well as the balance of the weight of the cargo laden in the truck, he failed to show that indeed those factors were present to prove his defense. Such claim cannot be given credence considering that investigator Rubia testified that the body of the truck was very much on the road, i.e., not over the shoulder of the road,20 and the road was straight.21 Indeed, it is the negligent act of petitioners driver of driving the cargo truck at a fast speed coupled with faulty brakes which was the proximate cause of respondent Noes injury. Petitioners claim that right after overtaking the cargo truck, the Fiera driver suddenly stopped to pick up three passengers from the side of the road; that the overloading of passengers prevented his truck driver from determining that the Fiera had pulled over to pick up passengers as the latters brakelights were obstructed by the passengers standing on the rear portion of the Fiera were not substantiated at all. Respondent Quinquillera, the driver of the Fiera, testified that the distance from the curve of the road when he stopped and picked up passengers was estimated to be about 80 to 90 feet.22 In fact, from the sketch drawn by investigator Rubia, it showed a distance of 145 feet from the curve of the road to the speed tire mark (which measured about 48 feet) visibly printed on the road to the Fiera. This means that the Fiera driver did not stop immediately after the curve as what petitioner claims. Moreover, Gerosano admitted that his truck was at a distance of 10 meters prior to the impact. The distance between the two vehicles was such that it would be impossible for Gerosano not to have seen that the Fiera had pulled over to pick up passengers. However, we agree with petitioner that respondent Noes act of standing on the rear carrier of the Fiera exposing himself to bodily injury is in itself negligence on his part. We find that the trial court and the CA erred when they failed to consider that respondent Noe was also guilty of contributory negligence. Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection. 23 It has been established by the testimony of respondent Noe that he was with four or five other persons standing on the rear carrier of the Fiera since it was already full. Respondent Noes act of standing on the left rear carrier portion of the Fiera showed his lack of ordinary care and foresight that such act could cause him harm or put his life in danger. It has been held that "to hold a person as having contributed to his injuries, it must be shown that he performed an act that brought about his injuries in disregard of warning or signs of an

impending danger to health and body.24 Respondent Noes act of hanging on the Fiera is definitely dangerous to his life and limb. We likewise find merit in petitioners contention that respondent Quinquillera, the Fiera driver, was also negligent. There is merit to petitioners claim that there was overloading which is in violation of traffic rules and regulations. Respondent Noe himself had testified that he was standing at the rear portion of the Fiera because the Fiera was already full. Respondent Quinquillera should not have taken more passengers than what the Fiera can accommodate. If the Fiera was not overloaded, respondent Noe would not have been standing on the rear carrier and sustained such extent of injury. Furthermore, we find that respondent Quinquillera was negligent in allowing respondent Noe to stand on the Fieras rear portion. Section 32(c) of Article III of Republic Act No. 4136, otherwise known as "The Land Transportation and Traffic Code" provides: (c) Riding on running boards No driver shall allow any person to ride on running board, step board or mudguard of his motor vehicle for any purpose while the vehicle is in motion. Respondent Quinquilleras act of permitting respondent Noe to hang on the rear portion of the Fiera in such a dangerous position creates undue risk of harm to respondent Noe. Quinquillera failed to observe that degree of care, precaution and vigilance that the circumstances justly demand. Thus, respondent Noe suffered injury.25Since respondent Quinquillera is negligent, there arises a presumption of negligence on the part of his employer, respondent Bandoquillo, in supervising her employees properly. Such presumption was not rebutted at all by Bandoquillo. Thus, the CA erred in affirming the dismissal of the third party complaint filed by petitioner against respondents Quinquillera and Bandoquillo. Petitioner contends that he was able to establish that he exercised the due diligence of a good father of a family in the selection of his employees as well as in the maintenance of his cargo truck in good operating condition. He claims that in addition to looking at Gerosanos drivers license, he accompanied the latter in his first two trips, during which he ascertained Gerosanos competence as a driver, petitioner being a driver himself; that the truck driven by Gerosano has never figured in any accident prior to the incident involved; that upon his acquisition of the cargo truck on March 16, 1982, only 7 months prior to the incident, the same was thoroughly checked up and reconditioned; and that he had in his employ a mechanic who conducted periodic check-ups of the engine and brake system of the cargo truck. We are not persuaded. Article 2180 of the Civil Code provides: Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those of persons for whom one is responsible. xxx Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. xxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. As the employer of Gerosano, petitioner is primarily and solidarily liable for the quasidelict committed by the former. Petitioner is presumed to be negligent in the selection and supervision of his employee by operation of law and may be relieved of responsibility for the negligent acts of his driver, who at the time was acting within the scope of his assigned task, only if he can show that he observed all the diligence of a good father of a family to prevent damage.26 In Yambao v. Zuniga,27 we have clarified the meaning of the diligence of a good father of a family, thus:

The "diligence of a good father" referred to in the last paragraph of the aforecited statute means diligence in the selection and supervision of employees. Thus, when an employee, while performing his duties, causes damage to persons or property due to his own negligence, there arises the juris tantum presumption that the employer is negligent, either in the selection of the employee or in the supervision over him after the selection. For the employer to avoid the solidary liability for a tort committed by his employee, an employer must rebut the presumption by presenting adequate and convincing proof that in the selection and supervision of his employee, he or she exercises the care and diligence of a good father of a family. x x x Petitioners claim that she exercised due diligence in the selection and supervision of her driver, Venturina, deserves but scant consideration. Her allegation that before she hired Venturina she required him to submit his drivers license and clearances is worthless, in view of her failure to offer in evidence certified true copies of said license and clearances. Bare allegations, unsubstantiated by evidence, are not equivalent to proof under the rules of evidence. x x x In any case, assuming arguendo that Venturina did submit his license and clearances when he applied with petitioner in January 1992, the latter still fails the test of due diligence in the selection of her bus driver. Case law teaches that for an employer to have exercised the diligence of a good father of a family, he should not be satisfied with the applicants mere possession of a professional drivers license; he must also carefully examine the applicant for employment as to his qualifications, his experience and record of service. Petitioner failed to present convincing proof that she went to this extent of verifying Venturinas qualifications, safety record, and driving history. The presumption juris tantum that there was negligence in the selection of her bus driver, thus, remains unrebutted. Nor did petitioner show that she exercised due supervision over Venturina after his selection. For as pointed out by the Court of Appeals, petitioner did not present any proof that she drafted and implemented training programs and guidelines on road safety for her employees. In fact, the record is bare of any showing that petitioner required Venturina to attend periodic seminars on road safety and traffic efficiency.Hence, petitioner cannot claim exemption from any liability arising from the recklessness or negligence of Venturina. In sum, petitioners liability to private respondents for the negligent and imprudent acts of her driver, Venturina, under Article 2180 of the Civil Code is both manifest and clear. Petitioner, having failed to rebut the legal presumption of negligence in the selection and supervision of her driver, is responsible for damages, the basis of the liability being the relationship of pater familias or on the employers own negligence. x x x28 (Emphasis supplied) Petitioner failed to show that he examined driver Gerosano as to his qualifications, experience and service records. In fact, the testimony of driver Gerosano in his crossexamination showed the non-observance of these requirements. Gerosano testified that petitioner was his first employer in Dumaguete and that he was accepted by petitioner on the very day he applied for the job;29 that his drivers license was issued in Mindanao where he came from30 and that while petitioner asked him about his driving record in Mindanao, he did not present any document of his driving record.31 Such admission clearly established that petitioner did not exercise due diligence in the selection of his driver Gerosano. Moreover, the fact that petitioners driver Gerosano was driving in an efficient manner when petitioner was with him in his first two trips would not conclusively establish that Gerosano was not at all reckless. It could not be considered as due diligence in the supervision of his driver to exempt petitioner from liability. In the supervision of his driver, petitioner must show that he had formulated training programs and guidelines on road safety for his driver which the records failed to show. We find that petitioner failed to rebut the presumption of negligence in the selection and supervision of his employees. Moreover, there was also no proof that he exercised diligence in maintaining his cargo truck roadworthy and in good operating condition. While petitioners mechanic driver testified that

he made a routine check up on October 15, 1982, one day before the mishap happened, and found the truck operational, there was no record of such inspection. Turning now to the award of damages, since there was contributory negligence on the part of respondent Noe, petitioners liability should be mitigated in accordance with Article 2179 of the Civil Code which provides: When the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. The underlying precept of the above article on contributory negligence is that a plaintiff who is partly responsible for his own injury should not be entitled to recover damages in full but must bear the consequences of his own negligence. The defendant must thus be held liable only for the damages actually caused by his negligence.32 In Phoenix Construction, Inc., v. Intermediate Appellate Court,33 where we held that the legal and proximate cause of the accident and of Dionisios injuries was the wrongful and negligent manner in which the dump truck was parked but found Dionisio guilty of contributory negligence on the night of the accident, we allocated most of the damages on a 20-80 ratio. In said case, we required Dionisio to bear 20% of the damages awarded by the appellate court, except as to the award of exemplary damages, attorneys fees and costs. In the present case, taking into account the contributing negligence of respondent Noe, we likewise rule that the demands of substantial justice are satisfied by distributing the damages also on a 20-80 ratio excluding attorneys fees and litigation expenses.34 Consequently, 20% should be deducted from the actual and moral damages awarded by the trial court in favor of respondent Noe, that is: 20% of P129,584.20 for actual damages isP25,916.84 and 20% of P50,000.00 for moral damages is P10,000.00. Thus, after deducting the same, the award for actual damages should be P103,667.36 and P40,000.00 for moral damages or 80% of the damages so awarded. Petitioner and respondents Bandoquillo and Quinquillera are jointly and severally liable for the 80% of the damages as well as attorneys fees and litigation expenses conformably with our pronouncement in Tiu v. Arriesgado35 where we held: The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly and severally liable for said amount, conformably with the following pronouncement of the Court in Fabre, Jr. v. Court of Appeals: The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals, thus: "Nor should it make difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasi delict. As early as 1913, we already ruled inGutierrez v. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasi delict."36 WHEREFORE, the instant petition is PARTIALLY GRANTED. The assailed Decision of the Court of Appeals dated April 17, 2000 as well as its Resolution dated August 16, 2000 are AFFIRMED with MODIFICATION to the effect that the dispositive portion of the Decision dated February 18, 1993 of the Regional Trial Court of Dumaguete City in Civil Case No. 8122, should read as follows:

"WHEREFORE, in view of the foregoing, judgment is hereby rendered, ordering defendants Gerosano and Estacion, as well as third party defendants Bandoquillo and Quinquillera, to pay plaintiff, jointly and solidarily, the following: 1. P103,667.36 for actual damages in the form of medical and hospitalization expenses; 2. P40,000.00 for moral damages, consisting of mental anguish, moral shock, serious anxiety and wounded feelings; 3. P10,000.00 for attorneys fees; and 4. P5,000.00 for litigation expenses. SO ORDERED." No pronouncement as to costs. SO ORDERED. MA. ALICIA AUSTRIA-MARTINEZ Associate Justice WE CONCUR: ARTEMIO V. PANGANIBAN Chief Justice Chairperson
1avvphil.net

(No Part) CONSUELO YNARES-SANTIAGO Associate Justice

ROMEO J. CALLEJO, SR. Asscociate Justice

(On Leave) MINITA V. CHICO-NAZARIO Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ARTEMIO V. PANGANIBAN Chief Justice