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FIRSTDIVISION

[G.R.No.118342.January5,1998]

DEVELOPMENTBANKOFTHEPHILIPPINES,petitioner,vs.COURTOFAPPEALS
andLYDIACUBA,respondents.

[G.R.No.118367.January5,1998]

LYDIAP.CUBA,petitioner, vs. COURT OF APPEALS, DEVELOPMENT BANK OF

THEPHILIPPINESandAGRIPINAP.CAPERAL,respondents.
DECISION
DAVIDE,JR.,J.:

Thesetwoconsolidatedcasesstemmedfromacomplaint[1]filedagainsttheDevelopmentBankof
thePhilippines(hereafterDBP)andAgripinaCaperalfiledbyLydiaCuba(hereafterCUBA)on21May
1985 with the Regional Trial Court of Pangasinan, Branch 54. The said complaint sought (1) the
declaration of nullity of DBPs appropriation of CUBAs rights, title, and interests over a 44hectare
fishpondlocatedinBolinao,Pangasinan,forbeingviolativeofArticle2088oftheCivilCode(2)the
annulmentoftheDeedofConditionalSaleexecutedinherfavorbyDBP(3)theannulmentofDBPs
sale of the subject fishpond to Caperal (4) the restoration of her rights, title, and interests over the
fishpondand(5)therecoveryofdamages,attorneysfees,andexpensesoflitigation.
Afterthejoinderofissuesfollowingthefilingbythepartiesoftheirrespectivepleadings,thetrial
court conducted a pretrial where CUBA and DBP agreed on the following facts, which were
embodiedinthepretrialorder:[2]
1.PlaintiffLydiaP.CubaisagranteeofaFishpondLeaseAgreementNo.2083(new)datedMay13,
1974fromtheGovernment
2.PlaintiffLydiaP.CubaobtainedloansfromtheDevelopmentBankofthePhilippinesintheamountsof
P109,000.00P109,000.00andP98,700.00underthetermsstatedinthePromissoryNotesdated
September6,1974August11,1975andApril4,1977
3.Assecurityforsaidloans,plaintiffLydiaP.CubaexecutedtwoDeedsofAssignmentofherLeasehold
Rights
4. Plaintiff failed to pay her loan on the scheduled dates thereof in accordance with the terms of the
PromissoryNotes
5.Without foreclosure proceedings, whether judicial or extrajudicial, defendant DBP appropriated the
LeaseholdRightsofplaintiffLydiaCubaoverthefishpondinquestion
6.AfterdefendantDBPhasappropriatedtheLeaseholdRightsofplaintiffLydiaCubaoverthefishpond
inquestion,defendantDBP,inturn,executedaDeedofConditionalSaleoftheLeaseholdRightsin
favorofplaintiffLydiaCubaoverthesamefishpondinquestion
7. In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the Manager DBP,
DagupanCitydatedNovember6,1979andDecember20,1979.DBPthereafteracceptedtheoffer
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torepurchaseinaletteraddressedtoplaintiffdatedFebruary1,1982
8. After the Deed of Conditional Sale was executed in favor of plaintiff Lydia Cuba, a new Fishpond
LeaseAgreementNo.2083AdatedMarch24,1980wasissuedbytheMinistryofAgricultureand
FoodinfavorofplaintiffLydiaCubaonly,excludingherhusband
9.PlaintiffLydiaCubafailedtopaytheamortizationsstipulatedintheDeedofConditionalSale
10.After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of Conditional Sale, she
enteredwiththeDBPatemporaryarrangementwherebyinconsiderationforthedefermentofthe
Notarial Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba promised to make certain
paymentsasstatedintemporaryArrangementdatedFebruary23,1982
11.DefendantDBPthereaftersentaNoticeofRescissionthruNotarialActdatedMarch13,1984,and
whichwasreceivedbyplaintiffLydiaCuba
12. After the Notice of Rescission, defendant DBP took possession of the Leasehold Rights of the
fishpondinquestion
13.That after defendant DBP took possession of the Leasehold Rights over the fishpond in question,
DBPadvertisedintheSUNDAYPUNCHthepublicbiddingdatedJune24,1984,todisposeofthe
property
14.ThattheDBPthereafterexecutedaDeedofConditionalSaleinfavorofdefendantAgripinaCaperal
onAugust16,1984
15.Thereafter,defendantCaperalwasawardedFishpondLeaseAgreementNo.2083AonDecember
28,1984bytheMinistryofAgricultureandFood.

DefendantCaperaladmittedonlythefactsstatedinparagraphs14and15ofthepretrialorder.[3]
Trialwasthereafterhadonothermatters.
The principal issue presented was whether the act of DBP in appropriating to itself CUBAs
leaseholdrightsoverthefishpondinquestionwithoutforeclosureproceedingswascontrarytoArticle
2088 of the Civil Code and, therefore, invalid. CUBA insisted on an affirmative resolution. DBP
stressed that it merely exercised its contractual right under the Assignments of Leasehold Rights,
whichwasnotacontractofmortgage.DefendantCaperalsidedwithDBP.
ThetrialcourtresolvedtheissueinfavorofCUBAbydeclaringthatDBPstakingpossessionand
ownership of the property without foreclosure was plainly violative ofArticle 2088 of the Civil Code
whichprovidesasfollows:
ART.2088.Thecreditorcannotappropriatethethingsgivenbywayofpledgeormortgage,ordispose
ofthem.Anystipulationtothecontraryisnullandvoid.
It disagreed with DBPs stand that the Assignments of Leasehold Rights were not contracts of
mortgagebecause(1)theyweregivenassecurityforloans,(2)althoughthefishpondlandinquestion
isstillapublicland,CUBAsleaseholdrightsandinterestthereonarealienablerightswhichcanbethe
propersubjectofamortgageand(3)theintentionofthecontractingpartiestotreattheAssignmentof
LeaseholdRightsasamortgagewasobviousandunmistakablehence,uponCUBAsdefault,DBPs
onlyrightwastoforeclosetheAssignmentinaccordancewithlaw.
The trial court also declared invalid condition no. 12 of the Assignment of Leasehold Rights for
beingaclearcaseofpactumcommissoriumexpresslyprohibitedanddeclarednullandvoidbyArticle
2088oftheCivilCode.ItthenconcludedthatsinceDBPneveracquiredlawfulownershipofCUBAs
leasehold rights, all acts of ownership and possession by the said bank were void. Accordingly, the
Deed of Conditional Sale in favor of CUBA, the notarial rescission of such sale, and the Deed of
Conditional Sale in favor of defendant Caperal, as well as the Assignment of Leasehold Rights
executedbyCaperalinfavorofDBP,werealsovoidandineffective.
Astodamages,thetrialcourtfoundampleevidenceonrecordthatin1984therepresentativesof
DBPejectedCUBAandhercaretakersnotonlyfromthefishpondareabutalsofromtheadjoiningbig
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houseandthatwhenCUBAssonandcaretakerwentthereon15September1985,theyfoundthe
said house unoccupied and destroyed and CUBAs personal belongings, machineries, equipment,
tools,andotherarticlesusedinfishpondoperationwhichwerekeptinthehouseweremissing.The
missing items were valued at about P550,000. It further found that when CUBA and her men were
ejected by DBP for the first time in 1979, CUBA had stocked the fishpond with 250,000 pieces of
bangusfish(milkfish),allofwhichdiedbecausetheDBPrepresentativespreventedCUBAsmenfrom
feeding the fish. At the conservative price of P3.00 per fish, the gross value would have been
P690,000, and after deducting 25% of said value as reasonable allowance for the cost of feeds,
CUBA suffered a loss of P517,500. It then set the aggregate of the actual damages sustained by
CUBAatP1,067,500.
ThetrialcourtfurtherfoundthatDBPwasguiltyofgrossbadfaithinfalselyrepresentingtothe
Bureau of Fisheries that it had foreclosed its mortgage on CUBAs leasehold rights. Such
representationinducedthesaidBureautoterminateCUBAsleaseholdrightsandtoapprovetheDeed
of Conditional Sale in favor of CUBA. And considering that by reason of her unlawful ejectment by
DBP,CUBAsufferedmoralshock,degradation,socialhumiliation,andseriousanxietiesforwhichshe
became sick and had to be hospitalized the trial court found her entitled to moral and exemplary
damages.ThetrialcourtalsoheldthatCUBAwasentitledtoP100,000attorneysfeesinviewofthe
considerableexpensessheincurredforlawyersfeesandinviewofthefindingthatshewasentitledto
exemplarydamages.
Initsdecisionof31January1990,[4]thetrialcourtdisposedasfollows:
WHEREFORE,judgmentisherebyrenderedinfavorofplaintiff:
1.DECLARINGnullandvoidandwithoutanylegaleffecttheactofdefendantDevelopmentBank
ofthePhilippinesinappropriatingforitsowninterest,withoutanyjudicialorextrajudicial
foreclosure,plaintiffsleaseholdrightsandinterestoverthefishpondlandinquestionunderher
FishpondLeaseAgreementNo.2083(new)
2.DECLARINGtheDeedofConditionalSaledatedFebruary21,1980byandbetweenthe
defendantDevelopmentBankofthePhilippinesandplaintiff(Exh.EandExh.1)andtheacts
ofnotarialrescissionoftheDevelopmentBankofthePhilippinesrelativetosaidsale(Exhs.
16and26)asvoidandineffective
3.DECLARINGtheDeedofConditionalSaledatedAugust16,1984byandbetweenthe
DevelopmentBankofthePhilippinesanddefendantAgripinaCaperal(Exh.FandExh.21),
theFishpondLeaseAgreementNo.2083AdatedDecember28,1984ofdefendantAgripina
Caperal(Exh.23)andtheAssignmentofLeaseholdRightsdatedFebruary12,1985executed
bydefendantAgripinaCaperalinfavorofthedefendantDevelopmentBankofthePhilippines
(Exh.24)asvoidabinitio
4.ORDERINGdefendantDevelopmentBankofthePhilippinesanddefendantAgripinaCaperal,
jointlyandseverally,torestoretoplaintiffthelattersleaseholdrightsandinterestsandrightof
possessionoverthefishpondlandinquestion,withoutprejudicetotherightofdefendant
DevelopmentBankofthePhilippinestoforeclosethesecuritiesgivenbyplaintiff
5.ORDERINGdefendantDevelopmentBankofthePhilippinestopaytoplaintiffthefollowing
amounts:
a)ThesumofONEMILLIONSIXTYSEVENTHOUSANDFIVEHUNDREDPESOS
(P1,067,500.00),asandforactualdamages
b)ThesumofONEHUNDREDTHOUSAND(P100,000.00)PESOSasmoraldamages
c)ThesumofFIFTYTHOUSAND(P50,000.00)PESOS,asandforexemplarydamages
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d)AndthesumofONEHUNDREDTHOUSAND(P100,000.00)PESOS,asandforattorneys
fees
6.AndORDERINGdefendantDevelopmentBankofthePhilippinestoreimburseandpayto
defendantAgripinaCaperalthesumofONEMILLIONFIVEHUNDREDTHIRTYTWO
THOUSANDSIXHUNDREDTENPESOSANDSEVENTYFIVECENTAVOS
(P1,532,610.75)representingtheamountspaidbydefendantAgripinaCaperaltodefendant
DevelopmentBankofthePhilippinesundertheirDeedofConditionalSale.
CUBA and DBP interposed separate appeals from the decision to the Court of Appeals. The
formersoughtanincreaseintheamountofdamages,whilethelatterquestionedthefindingsoffact
andlawofthelowercourt.
In its decision [5] of 25 May 1994, the Court of Appeals ruled that (1) the trial court erred in
declaringthatthedeedofassignmentwasnullandvoidandthatdefendantCaperalcouldnotvalidly
acquire the leasehold rights from DBP (2) contrary to the claim of DBP, the assignment was not a
cessionunderArticle1255oftheCivilCodebecauseDBPappearedtobethesolecreditortoCUBA
cession presupposes plurality of debts and creditors (3) the deeds of assignment represented the
voluntaryactofCUBAinassigningherpropertyrightsinpaymentofherdebts,whichamountedtoa
novationofthepromissorynotesexecutedbyCUBAinfavorofDBP(4)CUBAwasestoppedfrom
questioning the assignment of the leasehold rights, since she agreed to repurchase the said rights
underadeedofconditionalsaleand(5)conditionno.12ofthedeedofassignmentwasanexpress
authorityfromCUBAforDBPtosellwhateverrightshehadoverthefishpond.ItalsoruledthatCUBA
wasnotentitledtolossofprofitsforlackofevidence,butagreedwiththetrialcourtastotheactual
damages of P1,067,500. It, however, deleted the amount of exemplary damages and reduced the
awardofmoraldamagesfromP100,000toP50,000andattorneysfees,fromP100,000toP50,000.
The Court of Appeals thus declared as valid the following: (1) the act of DBP in appropriating
Cubas leasehold rights and interest under Fishpond Lease Agreement No. 2083 (2) the deeds of
assignmentexecutedbyCubainfavorofDBP(3)thedeedofconditionalsalebetweenCUBAand
DBPand(4)thedeedofconditionalsalebetweenDBPandCaperal,theFishpondLeaseAgreement
in favor of Caperal, and the assignment of leasehold rightsexecuted by Caperal in favor of DBP. It
thenorderedDBPtoturnoverpossessionofthepropertytoCaperalaslawfulholderoftheleasehold
rightsandtopayCUBAthefollowingamounts:(a)P1,067,500asactualdamagesP50,000asmoral
damagesandP50,000asattorneysfees.
Sincetheirmotionsforreconsiderationweredenied,[6]DBPandCUBAfiledseparatepetitionsfor
review.
In its petition (G.R. No. 118342), DBP assails the award of actual and moral damages and
attorneysfeesinfavorofCUBA.
Upontheotherhand,inherpetition(G.R.No.118367),CUBAcontendsthattheCourtofAppeals
erred(1)innotholdingthatthequestioneddeedofassignmentwasapactumcommissoriumcontrary
toArticle2088oftheCivilCode(b)inholdingthatthedeedofassignmenteffectedanovationofthe
promissorynotes(c)inholdingthatCUBAwasestoppedfromquestioningthevalidityofthedeedof
assignmentwhensheagreedtorepurchaseherleaseholdrightsunderadeedofconditionalsaleand
(d)inreducingtheamountsofmoraldamagesandattorneysfees,indeletingtheawardofexemplary
damages,andinnotincreasingtheamountofdamages.
WeagreewithCUBAthattheassignmentofleaseholdrightswasamortgagecontract.
ItisundisputedthatCUBAobtainedfromDBPthreeseparateloanstotallingP335,000,eachof
whichwascoveredbyapromissorynote.Inallofthesenotes,therewasaprovisionthat:Intheevent
of foreclosure of the mortgage securing this notes, I/We further bind myself/ourselves, jointly and
severally,topaythedeficiency,ifany.[7]
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Simultaneous with the execution of the notes was the execution of Assignments of Leasehold
Rights [8]whereCUBAassignedherleaseholdrightsandinterestona44hectarefishpond,together
withtheimprovementsthereon.AspointedoutbyCUBA,thedeedsofassignmentconstantlyreferred
totheassignor(CUBA)asborrowertheassignedrights,asmortgagedpropertiesandtheinstrument
itself,asmortgagecontract.Moreover,underconditionno.22ofthedeed,itwasprovidedthatfailure
tocomplywiththetermsandconditionofanyoftheloansshallcauseallotherloanstobecomedue
and demandable and all mortgages shall be foreclosed. And, condition no. 33 provided that if
foreclosure is actually accomplished, the usual 10% attorneys fees and 10% liquidated damages of
the total obligation shall be imposed. There is, therefore, no shred of doubt that a mortgage was
intended.
Besides, in their stipulation of facts the parties admitted that the assignment was by way of
securityforthepaymentoftheloansthus:
3.Assecurityforsaidloans,plaintiffLydiaP.CubaexecutedtwoDeedsofAssignmentofher
LeaseholdRights.
InPeoplesBank&TrustCo.vs.Odom,[9]thisCourthadtheoccasiontorulethatanassignment
toguaranteeanobligationisineffectamortgage.
WefindnomeritinDBPscontentionthattheassignmentnovatedthepromissorynotesinthatthe
obligation to pay a sum of money the loans (under the promissory notes) was substituted by the
assignmentoftherightsoverthefishpond(underthedeedofassignment).Ascorrectlypointedoutby
CUBA, the said assignment merely complemented or supplemented the notes both could stand
together.Theformerwasonlyanaccessorytothelatter.ContrarytoDBPssubmission,theobligation
topayasumofmoneyremained,andtheassignmentmerelyservedassecurityfortheloanscovered
bythepromissorynotes.Significantly,boththedeedsofassignmentandthepromissorynoteswere
executed on the same dates the loans were granted. Also, the last paragraph of the assignment
stated:Theassignorfurtherreiteratesandstatesallterms,covenants,andconditionsstipulatedinthe
promissorynoteornotescoveringtheproceedsofthisloan,makingsaidpromissorynoteornotes,to
allintentandpurposes,anintegralparthereof.
NeitherdidtheassignmentamounttopaymentbycessionunderArticle1255oftheCivilCodefor
theplainandsimplereasonthattherewasonlyonecreditor,theDBP.Article1255contemplatesthe
existenceoftwoormorecreditorsandinvolvestheassignmentofallthedebtorsproperty.
Nordidtheassignmentconstitutedation in paymentunder Article1245of the civilCode,which
reads: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in
money, shall be governed by the law on sales. It bears stressing that the assignment, being in its
essenceamortgage,wasbutasecurityandnotasatisfactionofindebtedness.[10]
We do not, however, buy CUBAs argument that condition no. 12 of the deed of assignment
constitutedpactumcommissorium.Saidconditionreads:
12.Thateffectiveuponthebreachofanyconditionofthisassignment,theAssignorherebyappoints
theAssigneehisAttorneyinfactwithfullpowerandauthoritytotakeactualpossessionofthe
propertyabovedescribed,togetherwithallimprovementsthereon,subjecttotheapprovalofthe
SecretaryofAgricultureandNaturalResources,toleasethesameoranyportionthereofandcollect
rentals,tomakerepairsorimprovementsthereonandpaythesame,tosellorotherwisedisposeof
whateverrightstheAssignorhasormighthaveoversaidpropertyand/oritsimprovementsand
performanyotheractwhichtheAssigneemaydeemconvenienttoprotectitsinterest.Allexpenses
advancedbytheAssigneeinconnectionwithpurposeaboveindicatedwhichshallbearthesamerate
ofinterestaforementionedarealsoguaranteedbythisAssignment.Anyamountreceivedfromrents,
administration,saleordisposalofsaidpropertymaybesuppliedbytheAssigneetothepaymentof
repairs,improvements,taxes,assessmentsandotherincidentalexpensesandobligationsandthe
balance,ifany,tothepaymentofinterestandthenonthecapitaloftheindebtednesssecuredhereby.
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Ifafterdisposalorsaleofsaidpropertyanduponapplicationoftotalamountsreceivedthereshall
remainadeficiency,saidAssignorherebybindshimselftopaythesametotheAssigneeupon
demand,togetherwithallinterestthereonuntilfullypaid.Thepowerhereingrantedshallnotbe
revokedaslongastheAssignorisindebtedtotheAssigneeandallactsthatmaybeexecutedbythe
Assigneebyvirtueofsaidpowerareherebyratified.
Theelementsofpactumcommissoriumareasfollows:(1)thereshouldbeapropertymortgaged
bywayofsecurityforthepaymentoftheprincipalobligation,and(2)thereshouldbeastipulationfor
automaticappropriationbythecreditorofthethingmortgagedincaseofnonpaymentoftheprincipal
obligationwithinthestipulatedperiod.[11]
Conditionno.12didnotprovidethattheownershipovertheleaseholdrightswouldautomatically
passtoDBPuponCUBAsfailuretopaytheloanontime.Itmerelyprovidedfortheappointmentof
DBPasattorneyinfactwithauthority,amongotherthings,tosellorotherwisedisposeofthesaidreal
rights, in case of default by CUBA, and to apply the proceeds to the payment of the loan. This
provision is a standard condition in mortgage contracts and is in conformity with Article 2087 of the
Civil Code, which authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged
propertyforthepaymentoftheprincipalobligation.
DBP,however,exceededtheauthorityvestedbyconditionno.12ofthedeedofassignment.As
admitted by it during the pretrial, it had [w]ithout foreclosure proceedings, whether judicial or
extrajudicial,appropriatedthe[l]easehold[r]ightsofplaintiffLydiaCubaoverthefishpondinquestion.
Itscontentionthatitlimiteditselftomereadministrationbypostingcaretakersisfurtherbeliedbythe
deedofconditionalsaleitexecutedinfavorofCUBA.Thedeedstated:
WHEREAS,theVendor[DBP]byvirtueofadeedofassignmentexecutedinitsfavorbytheherein
vendees[Cubaspouses]theformeracquiredalltherightsandinterestofthelatterovertheabove
describedproperty
Thetitletotherealestateproperty[sic]andallimprovementsthereonshallremaininthenameofthe
Vendoruntilafterthepurchaseprice,advancesandinterestshallhavebeenfullypaid.(Emphasis
supplied).
ItisobviousfromtheabovequotedparagraphsthatDBPhadappropriatedandtakenownership
ofCUBAsleaseholdrightsmerelyonthestrengthofthedeedofassignment.
DBP cannot take refuge in condition no. 12 of the deed of assignment to justify its act of
appropriating the leasehold rights. As stated earlier, condition no. 12 did not provide that CUBAs
default would operate to vest in DBP ownership of the said rights. Besides, an assignment to
guarantee an obligation, as in the present case, is virtually a mortgage and not an absolute
conveyanceoftitlewhichconfersownershipontheassignee.[12]
Atanyrate,DBPsactofappropriatingCUBAsleaseholdrightswasviolativeofArticle2088ofthe
CivilCode,whichforbidsacreditorfromappropriating,ordisposingof,thethinggivenassecurityfor
thepaymentofadebt.
ThefactthatCUBAofferedandagreedtorepurchaseherleaseholdrightsfromDBPdidnotestop
her from questioning DBPs act of appropriation.Estoppel is unavailing in this case. As held by this
Court in some cases,[13] estoppel cannot give validity to an act that is prohibited by law or against
public policy. Hence, the appropriation of the leasehold rights, being contrary to Article 2088 of the
CivilCodeandtopublicpolicy,cannotbedeemedvalidatedbyestoppel.
InsteadoftakingownershipofthequestionedrealrightsupondefaultbyCUBA,DBPshouldhave
foreclosedthemortgage,ashasbeenstipulatedinconditionno.22ofthedeedofassignment. But,
as admitted by DBP, there was no such foreclosure. Yet, in its letter dated 26 October 1979,
addressedtotheMinisterofAgricultureandNaturalResourcesandcoursedthroughtheDirectorof
the Bureau of Fisheries and Aquatic Resources, DBP declared that it had foreclosed the mortgage
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andenforcedtheassignmentofleaseholdrightsonMarch21,1979forfailureofsaidspouses[Cuba
spouces] to pay their loan amortizations.[14] This only goes to show that DBP was aware of the
necessityofforeclosureproceedings.
InviewofthefalserepresentationofDBPthatithadalreadyforeclosedthemortgage,theBureau
ofFisheriescancelledCUBAsoriginalleasepermit,approvedthedeedofconditionalsale,andissued
anewpermitinfavorofCUBA.Saidactswhichwerepredicatedonsuchfalserepresentation,aswell
asthesubsequentactsemanatingfromDBPsappropriationoftheleaseholdrights,shouldtherefore
besetaside.TovalidatetheseactswouldopenthefloodgatestocircumventionofArticle2088ofthe
CivilCode.
Evenincaseswhereforeclosureproceedingswerehad,thisCourthadnothesitatedtonullifythe
consequentauctionsaleforfailuretocomplywiththerequirementslaiddownbylaw,suchasActNo.
3135,asamended.[15]Withmorereasonthatthesaleofpropertygivenassecurityforthepaymentof
adebtbesetasideiftherewasnopriorforeclosureproceeding.
Hence, DBP should render an accounting of the income derived from the operation of the
fishpond in question and apply the said income in accordance with condition no. 12 of the deed of
assignment which provided: Any amount received from rents, administration, may be applied to the
paymentofrepairs,improvements,taxes,assessment,andotherincidentalexpensesandobligations
andthebalance,ifany,tothepaymentofinterestandthenonthecapitaloftheindebtedness.
Weshallnowtakeuptheissueofdamages.
Article2199provides:
Exceptasprovidedbylaworbystipulation,oneisentitledtoanadequatecompensationonlyforsuch
pecuniarylosssufferedbyhimashehasdulyproved.Suchcompensationisreferredtoasactualor
compensatorydamages.
Actual or compensatory damages cannot be presumed, but must be proved with reasonable
degreeofcertainty.[16] A court cannot rely on speculations, conjectures, or guesswork as to the fact
andamountofdamages,butmustdependuponcompetentproofthattheyhavebeensufferedbythe
injured party and on the best obtainable evidence of the actual amount thereof.[17] It must point out
specificfactswhichcouldaffordabasisformeasuringwhatevercompensatoryoractualdamagesare
borne.[18]
In the present case, the trial court awarded in favor of CUBA P1,067,500 as actual damages
consistingofP550,000whichrepresentedthevalueoftheallegedlostarticlesofCUBAandP517,500
which represented the value of the 230,000 pieces of bangus allegedly stocked in 1979 when DBP
firstejectedCUBAfromthefishpondandtheadjoininghouse.ThisawardwasaffirmedbytheCourt
ofAppeals.
We find that the alleged loss of personal belongings and equipment was not proved by clear
evidence. Other than the testimony of CUBA and her caretaker, there was no proof as to the
existenceofthoseitemsbeforeDBPtookoverthefishpondinquestion.AspointedoutbyDBP,there
was not inventory of the alleged lost items before the loss which is normal in a project which
sometimes,ifnotmostoften,islefttothecareofotherpersons.Neitherwasasinglereceiptorrecord
ofacquisitionpresented.
Curiously,inhercomplaintdated17May1985,CUBAincludedlossesofpropertyasamongthe
damagesresultingfromDBPstakeoverofthefishpond.Yet,itwasonlyinSeptember1985whenher
son and a caretaker went to the fishpond and the adjoining house that she came to know of the
alleged loss of several articles. Such claim for losses of property, having been made before
knowledgeoftheallegedactualloss,wasthereforespeculative.Theallegedlosscouldhavebeena
mereafterthoughtorsubterfugetojustifyherclaimforactualdamages.

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With regard to the award of P517,000 representing the value of the alleged 230,000 pieces of
bangus which died when DBP took possession of the fishpond in March 1979, the same was not
called for. Such loss was not duly proved besides, the claim therefor was delayed unreasonably.
From 1979 until after the filing of her complaint in court in May 1985, CUBA did not bring to the
attentionofDBPtheallegedloss.Infact,inherletterdated24October1979,[19]shedeclared:
1.ThatfromFebruarytoMay1978,IwasthenseriouslyillinManilaandwithinthesameperiodI
neglectedthemanagementandsupervisionofthecultivationandharvestoftheproduceofthe
aforesaidfishpondtherebyresultingtotheirreparablelossintheproduceofthesameintheamount
ofaboutP500,000.00tomygreatdamageandprejudiceduetofraudulentactsofsomeofmy
fishpondworkers.
Nowhere in the said letter, which was written seven months after DBP took possession of the
fishpond,didCUBAintimatethatuponDBPstakeovertherewasatotalof230,000piecesofbangus,
butallofwhichdiedbecauseofDBPsrepresentativespreventedhermenfromfeedingthefish.
Theawardofactualdamagesshould,therefore,bestruckdownforlackofsufficientbasis.
Inview,however,ofDBPsactofappropriatingCUBAsleaseholdrightswhichwascontrarytolaw
and public policy, as well as its false representation to the then Ministry of Agriculture and Natural
Resourcesthatithadforeclosedthemortgage,anawardofmoraldamagesintheamountofP50,000
isinorderconformablywithArticle2219(10),inrelationtoArticle21,oftheCivilCode.Exemplaryor
corrective damages in the amount of P25,000 should likewise be awarded by way of example or
correction for the public good.[20] There being an award of exemplary damages, attorneys fees are
alsorecoverable.[21]
WHEREFORE,the25May1994DecisionoftheCourtofAppealsinCAG.R.CVNo.26535is
hereby REVERSED, except as to the award of P50,000 as moral damages, which is hereby
sustained.The 31 January 1990 Decision of the Regional Trial Court of Pangasinan, Branch 54, in
Civil Case No. A1574 is MODIFIED setting aside the finding that condition no. 12 of the deed of
assignmentconstitutedpactumcommissoriumandtheawardofactualdamagesandbyreducingthe
amounts of moral damages from P100,000 to P50,000 the exemplary damages, from P50,000 to
P25,000 and the attorneys fees, from P100,000 to P20,000. The Development Bank of the
Philippinesisherebyorderedtorenderanaccountingoftheincomederivedfromtheoperationofthe
fishpondinquestion.
LetthiscasebeREMANDEDtothetrialcourtforthereceptionoftheincomestatementofDBP,
as well as the statement of the account of Lydia P. Cuba, and for the determination of each partys
financialobligationtooneanother.
SOORDERED.
Bellosillo,Vitug,andKapunan,JJ.,concur.
[1]

OriginalRecord(OR),17.

[2]

OR,168170.

[3]

SeeOR,169.

[4]

PerJudgeArtemioR.Corpus.OR,686705.

[5]

PerManuelC.Herrera,J.,withArtemonD.LunaandAlfredoJ.Lagamon,JJ.,concurring.Rollo,G.R.No.118342,21
41Rollo,G.R.No.118367,3353.
[6]

RolloG.R.No.118342,43Rollo,G.R.No.118367,55.

[7]

ExhibitsB,C,andDOR,3739.

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[8]

ExhibitsB1,C1,andD1.

[9]

64Phil.126,132[1937].

[10]

DBPvsCA:118342:January5,1998:J.Davide,Jr.:FirstDivision

PhilippineBankofCommercev.DeVera,6SCRA1026,1029[1962].

[11]

VTolentiino,ArturoM.,Commentaries&JurisprudenceontheCivilCodeofthePhilippines536537[1992]citingUy
Tongv.CourtofAppeals,161SCRA383[1988].
[12]

PhilippineBankofCommercev.DeVera,supranote10.

[13]

Eugeniov.Perdido,97Phil.41,44[1955]Republicv.GoBonLee,1SCRA1166,1170[1961]Hianv.CourtofTax
Appeals,59SCRA110,124[1974].
[14]
[15]

ExhibitN1AOR,454.
Roxasv.CourtofAppeals,221SCRA729[1993]Sempiov.CourtofAppeals,263SCRA617[1996].

[16]

DelMundov.CourtofAppeals,240SCRA348[1995]LufthansaGermanAirlinesv.CourtofAppeals,243SCRA600
[1995]DevelopmentBankofthePhilippinesv.CourtofAppeals,249SCRA331[1995]DelRosariov.CourtofAppeals,
G.R.No.118325,29January1997.
[17]

LufthansaGermanAirlinesv.CourtofAppeals,supranote16Peoplev.Rosario,246SCRA658[1995]DelRosariov.
CourtofAppeals,supranote16Sumalpongv.CourtofAppeals,G.R.No.123404,26February1997.
[18]

DelMundov.CourtofAppeals,supranote16.
Exhibit4,OR,560.
[20]
Article2229,CivilCode.
[21]
Article2208(1),CivilCode.
[19]

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