De Guzman vs. Tumolva Gr.

No 188072 , October 19, 2011

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court
assailing the February 24, 2009 Decision 1 of the Court of Appeals (CA) and its May
26, 2009 Resolution2 in CA-G.R. SP. No. 104945 entitled "Antonio M. Tumolva v.
Emerita M. De Guzman.
Facts:
On September 6, 2004, petitioner Emerita M. De Guzman , represented by her
attorneys-in-fact, Lourdes Rivera and Dhonna Chan, and respondent Antonio
Tumolva, doing business under the name and style A.M. Tumolva Engineering
Works (the Contractor), entered into a Construction Agreement3 (Agreement) for the
construction of an orphanage. Incorporated in the Agreement was the plan and
specifications of the perimeter fence. The Contractor, however, made deviations
from the agreed plan4 with respect to the perimeter fence of the orphanage. On
September 6, 2005, after the completion of the project, De Guzman issued a
Certificate of Acceptance. For his part, the Contractor issued a quitclaim
acknowledging the termination of the contract and the full compliance therewith by
De Guzman.
In November 2006, during typhoon "Milenyo," a portion of the perimeter fence
collapsed and other portions tilted. De Guzman, through counsel, demanded the
repair of the fence in accordance with the plan. In response, the Contractor claimed
that the destruction of the fence was an act of God and expressed willingness to
discuss the matter to avoid unnecessary litigation. De Guzman, however, reiterated
her demand for the restoration of the wall without additional cost on her part, or in
the alternative, for the Contractor to make an offer of a certain amount by way of
compensation for the damages she sustained. Her demand was not heeded.
On February 14, 2008, De Guzman filed a Request for Arbitration 5 of the dispute
before the Construction Industry Arbitration Commission (CIAC). She alleged that
the Contractor deliberately defrauded her in the construction of the perimeter
fence. She prayed for an award of actual, moral and exemplary damages, as well as
attorneys fees and expenses of litigation, and for the inspection and technical
assessment of the construction project and the rectification of any defect.
After due proceedings, the CIAC issued the Award in favor of De Guzman to pay
actual, exemplary moral damages and attoryneys fees.
Aggrieved, the Contractor filed before the CA a Petition for Review with prayer for
the issuance of a temporary restraining order, challenging the CIACs award of
damages in favor of De Guzman.
On February 24, 2009, the CA modified the Award rendered by CIAC.The CA held
that although the Contractor deviated from the plan, CIACs award of actual
damages was not proper inasmuch as De Guzman failed to establish its extent with
reasonable certainty. The CA, however, found it appropriate to award temperate

damages considering that De Guzman suffered pecuniary loss as a result of the

collapse of the perimeter fence due to the Contractors negligence and violation of
his undertakings in the Agreement. It further ruled that there was no basis for
awarding moral damages reasoning out that De Guzmans worry for the safety of
the children in the orphanage was insufficient to justify the award. Likewise, it could
not sustain the award of exemplary damages as there was no showing that the
Contractor acted in wanton, reckless, fraudulent, oppressive, or malevolent manner.
De Guzman filed a motion for reconsideration of the said decision, but it was denied
for lack of merit. Hence, De Guzman interposed the present petition before this
Court anchored on the following issue.
Issue:

1. THAT THE CA ERRED IN RULING THAT THE EVIDENCE ON RECORD FAILED TO

SUFFICIENTLY ESTABLISH THE AMOUNT OF ACTUAL DAMAGES THAT
PETITIONER DE GUZMAN CAN RECOVER FROM THE RESPONDENT.
2. THAT THE CA ERRED IN RULING THAT PETITIONER DE GUZMAN IS NOT
ENTITLED TO AWARDS OF MORAL AND EXEMPLARY DAMAGES.9
Ruling:
There is no doubt that De Guzman incurred damages as a result of the collapse of
the perimeter fence. The Contractor is clearly guilty of negligence and, therefore,
liable for the damages caused. As correctly found by the CA.
CIACs award of actual damages, however, is indeed not proper under the
circumstances as there is no concrete evidence to support the plea. In determining
actual damages, one cannot rely on mere assertions, speculations, conjectures or
guesswork, but must depend on competent proof and on the best evidence
obtainable regarding specific facts that could afford some basis for measuring
compensatory or actual damages.12 Article 2199 of the New Civil Code defines
actual or compensatory damages as follows:
Art. 2199. Except as provided by law or by stipulation, one is entitled to an
adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or compensatory damages.
Unfortunately, De Guzman failed to adduce evidence to satisfactorily prove the
amount of actual damage incurred. Contrary to her assertion, the handwritten
calculation of reconstruction costs made by Engineer Santos and attached to his
affidavit cannot be given any probative value because he never took the witness
stand to affirm the veracity of his allegations in his affidavit and be cross-examined
on them. In this regard, it is well to quote the ruling of the Court in the case
of Tating v. Marcella,13 to wit:

There is no issue on the admissibility of the subject sworn statement. However, the
admissibility of evidence should not be equated with weight of evidence. The
admissibility of evidence depends on its relevance and competence while the
weight of evidence pertains to evidence already admitted and its tendency to
convince and persuade. Thus, a particular item of evidence may be admissible, but
its evidentiary weight depends on judicial evaluation within the guidelines provided
by the rules of evidence. It is settled that affidavits are classified as hearsay
evidence since they are not generally prepared by the affiant but by another who
uses his own language in writing the affiants statements, which may thus be either
omitted or misunderstood by the one writing them. Moreover, the adverse party is
deprived of the opportunity to cross-examine the affiant. For this reason, affidavits
are generally rejected for being hearsay, unless the affiants themselves are placed
on the witness stand to testify thereon.
Neither is there any evidence presented to substantiate Engineer Santos
computation of the reconstruction costs. For such computation to be considered,
there must be some other relevant evidence to corroborate the same. 14Thus, the CA
was correct in disregarding the affidavit of Engineer Santos for being hearsay and in
not giving probative weight to it. There being no tangible document or concrete
evidence to support the award of actual damages, the same cannot be sustained.
Nevertheless, De Guzman is indeed entitled to temperate damages as provided
under Article 2224 of the Civil Code for the loss she suffered. When pecuniary loss
has been suffered but the amount cannot, from the nature of the case, be proven
with certainty, temperate damages may be recovered. Temperate damages may be
allowed in cases where from the nature of the case, definite proof of pecuniary loss
cannot be adduced, although the court is convinced that the aggrieved party
suffered some pecuniary loss.15
As to the CIACs award of P 100,000.00 as moral damages, this Court is one with the
CA that De Guzman is not entitled to such an award. The record is bereft of any
proof that she actually suffered moral damages as contemplated in Article 2217 of
the Code, which provides:
Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury. Though incapable of pecuniary computation, moral damages may
be recovered if they are the proximate result of the defendants wrongful act or
omission.
Certainly, the award of moral damages must be anchored on a clear showing that
she actually experienced mental anguish, besmirched reputation, sleepless nights,
wounded feelings, or similar injury. There could not have been a better witness to
this experience than De Guzman herself.16 Her testimony, however, did not provide
specific details of the suffering she allegedly went through after the fence collapsed
while she was miles away in the United States. As the CA aptly observed, "the
testimony of the OWNER as to her worry for the safety of the children in the
orphanage is insufficient to establish entitlement thereto." 17 Since an award of
moral damages is predicated on a categorical showing by the claimant that she

actually experienced emotional and mental sufferings, it must be disallowed absent

any evidence thereon.18
De Guzman cannot be awarded exemplary damages either, in the absence of any
evidence showing that the Contractor acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner as provided in Article 2232 of the Civil Code. The
ruling in the case of Nakpil and Sons v. Court of Appeals,21 relied upon by De
Guzman, where it was emphasized that the wanton negligence in effecting the
plans, designs, specifications, and construction of a building is equivalent to bad
faith in the performance of the assigned task, finds no application in the case at
bench. As already pointed out, there is negligence on the part of Contractor, but it is
neither wanton, fraudulent, reckless, oppressive, nor malevolent.
The award of exemplary damages cannot be made merely on the allegation of De
Guzman that the Contractors deviations from the plans and specifications without
her written consent was deplorable and condemnable. The Court regards the
deviations as excusable due to the unavailability of the approved construction
materials. Besides, these were made known to De Guzmans project manager who
was present all the time during the construction. Indeed, no deliberate intent on the
part of the Contractor to defraud the orphanages benefactors was ever shown,
much less proved. As may be gleaned from his testimony:
WHEREFORE, the petition is DENIED.

ARANETA V BANK OF AMERICA

G.R. No.L-25414; July 30, 1971; Makalintal, J.

FACTS
1. [June 30, 1961] Araneta issued a check for $500 payable to cash and drawn
against Bank of America (BOA).
a. At the time he had a credit balance of $532.81 in his account. However when
the check was received by the bank on September 8, 1961,it was dishonored
and stamped Account Closed.
b. Upon inquiry by Araneta, BOA admitted that it was an error, and sent an
apology to the payee of said check Harry Gregory of Hongkong.
2. [May 25 and 31, 1962] Araneta issued check 110 for $500 and check 111 for
$150 both payable to cash, both drawn against BOA.
a. Despite the sufficiency ofAranetas funds, both checks were also dishonored
and stamped Account Closed.
3. Araneta thus sent a letter to BOA demanding damages in the sum of $20,000.
The bank, while admitting responsibility offered to pay only P2,000.
4. [December 11, 1962] Araneta filed a complaint against bank of America for
P120,000:
a. Actual or compensatory Damages P30,000
b. Moral damages P20,000
c. Temperate damages P50,000
d. Exemplary Damages P10,000
e. Attys fees P10,000
5. TC awarded all items prayed for, but CA eliminated the award of compensatory
and temperate damages and reduce moral damages to P8,000, exemplary
damages to P1,000 and attys fees to P1,000.
ISSUES

W/N Temperate damages can be awarded without proof of actual

pecuniary loss? YES
In rejecting the claim for temperate damages, the CA referred specifically to
Aranetas failure to prove the existence of a supposed contract for him to buy
jewels at a profit, in connection with which he issued the two checks which were
dishonored.
o This may be true with particular reference to the alleged loss in that
particular transaction. But it does not detract from the finding of the same
court that actual damages have been suffered:
The adverse reflection against the credit of Araneta with said banks was
not cured nor explained by the letter of apology to Mr. Gregory.
the incident obviously affectd the credit of Araneta with Miss Saldana
(the payee of Check 110).
o The financial credit of a businessman is a prized and valuable asset, it being
a significant part of the foundation of his business.
o And it can hardly be possible that a customers check can be
wrongfully refused payment without some impeachment of his
credit, which must in fact be an actual injury, though he cannot []
furnish distinct proof thereof.
o The code commission in explaining Temperate damages under Art 2224
comments that temperate damages apply in cases where definite

proof of pecuniary loss cannot be offered, although the court is

convinced that there is such loss.
As found by the CA, Araneta is a merchant of long standing and good reputation
in the Philippines. His claim for temperate damages is justified.

W/N the claim for a higher award of Moral damages should have been granted? NO
It is true that under Article 2217 (NCC) besmirched reputation is a ground
upon which moral damages can be claimed. But the CA did take this emlement
into consideration when adjudging the sum of P8,000 in his favor.
Held
Judgment modified.Temparate damage is increased to P5,000, attys fees increased
to P4,000

Grand Union Supermarket Et Al., V. Jose J. Espino, Jr., Et Al., (1979)

Lessons Applicable: Public humiliation (Torts and Damages)

Laws Applicable: Articles 19 and 21 in relation to Article 2219 of the Civil Code, Art.
26,Art. 2214, New Civil Code
FACTS:

Jose J. Espino. Jr., a civil engineer and an executive of Procter and Gamble
Philippines, Inc, together with his wife and two daughters went to shop at South
Supermarket in Makati
Finding a cylindrical "rat tail" file which he needed for his hobby, he picked it
up and held it fearing it might get lost because of its tiny size
While shopping, they saw the maid of Jose's aunt so as he talked, he placed
the rat tail in his breast pocket partly exposed
At the check-out counter, he paid for their purchases worth P77 but forgot to
pay the file
As he was exiting the supermarket, he was approached by Guard Ebreo
regarding the file in his pocket. He quickly apologized saying "I'm Sorry" and he
turned towards the cashier to pay. But, he was stopped and instead was brought
to the rear of the supermarket when he was asked to fill out an Incident
Report labeling him as "Shoplifter"
His wife joined him since he was taking so long and they were brought to the
first checkout counter where Ms. Nelia Santos-Fandino's desk was. She made a
remark:"Ano, nakaw na naman ito". Jose told Ms. Fandino that he was going to
pay for the file because he needed it but she replied "That is all they say, the
people whom we cause not paying for the goods say... They all intended to pay
for the things that are found to them."
Jose objected stating he is a regular customer of the supermarket
He gave P5 to pay for the P3.85 cost of the file but Ms. Fandino said the P5
was his fine which will be rewarded to the guard. People were staring at them.
He took the file and paid the file at the nearest checkout counter with P50 and
got out as fast as they could. His first impulse was to go back to the
supermarket that night to throw rocks at its glass windows. But reason prevailed
over passion and he thought that justice should take its due course.
He filed against Grand Union Supermarket et al. founded on Article 21 in
relation to Article 2219 of the New Civil Code and prays for moral damages,
exemplary damages, attorney s fees and 'expenses of litigation, costs of the suit
and the return of the P5 fine
CFI: dismissed
CA: reversed and granted damages of P75,000 by way of moral damages,
P25,000 as exemplary damages, and P5,000 as attorney's fee

ISSUE:
W/N Grand Union Supermarket should be liable for public humiliation founded on
Article 21 in relation to Article 2219 of the New Civil Code
HELD:

YES. Grand Union Supermarket ordered to pay, jointly and severally moral damages
P5,000 and P2,000 as and for attorney's fees; and to return the P5 fine

Jose did not intend to steal the file and that is act of picking up the file from
the open shelf was not criminal nor done with malice or criminal intent for on the
contrary, he took the item with the intention of buying and paying for it

personal circumstances:

graduate Mechanical Engineer from U.P. Class 1950, employed

as an executive of Proctor & Gamble Phils., Inc., a corporate manager incharge
of motoring and warehousing therein; honorably discharged from the Philippine
Army in 1946; a Philippine government pensionado of the United States for six
months; member of the Philippine veterans Legion; author of articles published
in the Manila Sunday Times and Philippines Free Press; member of the Knights of
Columbus, Council No. 3713; son of the late Jose Maria Espino, retired Minister,
Department of Foreign Affairs at the Philippine Embassy Washington

Jose was falsely accused of shoplifting is evident

Fine branding him as a thief which was not right nor justified

the mode and manner in which he was subjected, shouting at him, imposing
upon him a fine, threatening to call the police and in the presence and hearing of
many people at the Supermarket which brought and caused him humiliation and
embarrassment, sufficiently rendered the petitioners liable for damages under
Articles 19 and 21 in relation to Article 2219 of the Civil Code

It is against morals, good customs and public policy to humiliate, embarrass

and degrade the dignity of a person

Everyone must respect the dignity, personality, privacy and peace of

mind of his neighbors and other persons (Article 26, Civil Code)

His forgetfullness led to his embarassment and humiliation thereby causing

him mental anguish, wounded feelings and serious anxiety. His act of omission
contributed to the occurrence of his injury or loss and such contributory
negligence is a factor which may reduce the damages that private respondent
may recover (Art. 2214, New Civil Code). Moreover, that many people were
present and they saw and heard the ensuing interrogation and altercation
appears to be simply a matter of coincidence in a supermarket which is a public
place and the crowd of onlookers, hearers or bystanders was not deliberately
sought or called by management to witness private respondent's predicament.

Grand Union Supermarket acted in good faith in trying to protect and recover
their property, a right which the law accords to them. - eliminate the grant of
exemplary damages

Sebastian Siga-an, petitioner, vs. Alicia Villanueva, respondent.

Facts:
Respondent filed a complaint for sum of money against petitioner. Respondent
claimed that petitioner approached her inside the PNO and offered to loan her the
amount of P540,000.00 of which the loan agreement was not reduced in writing and
there was no stipulation as to the payment of interest for the loan. Respondent
issued a check worth P500,000.00 to petitioner as partial payment of the loan. She

then issued another check in the amount of P200,000.00 to petitioner as payment

of the remaining balance of the loan of which the excess amount of P160,000.00
would be applied as interest for the loan. Not satisfied with the amount applied as
interest, petitioner pestered her to pay additional interest and threatened to block
or disapprove her transactions with the PNO if she would not comply with his
demand. Thus, she paid additional amounts in cash and checks as interests for the
loan. She asked petitioner for receipt for the payments but was told that it was not
necessary as there was mutual trust and confidence between them. According to
her computation, the total amount she paid to petitioner for the loan and interest
accumulated
to P1,200,000.00.
The RTC rendered a Decision holding that respondent made an overpayment of her
loan obligation to petitioner and that the latter should refund the excess amount to
the former. It ratiocinated that respondents obligation was only to pay the loaned
amount of P540,000.00, and that the alleged interests due should not be included in
the computation of respondents total monetary debt because there was no
agreement between them regarding payment of interest. It concluded that since
respondent made an excess payment to petitioner in the amount of P660,000.00
through mistake, petitioner should return the said amount to respondent pursuant
to the principle of solutio indebiti. Also, petitioner should pay moral damages for the
sleepless nights and wounded feelings experienced by respondent. Further,
petitioner should pay exemplary damages by way of example or correction for the
public
good,
plus
attorneys
fees
and
costs
of
suit.
Issue:
(1) Whether or not interest was due to petitioner; and (2) whether the principle of
solutio indebiti applies to the case at bar.
Ruling:
(1) No. Compensatory interest is not chargeable in the instant case because it was
not duly proven that respondent defaulted in paying the loan and no interest was
due on the loan because there was no written agreement as regards payment of
interest. Article 1956 of the Civil Code, which refers to monetary interest,
specifically mandates that no interest shall be due unless it has been expressly
stipulated in writing. As can be gleaned from the foregoing provision, payment of
monetary interest is allowed only if: (1) there was an express stipulation for the
payment of interest; and (2) the agreement for the payment of interest was reduced
in writing. The concurrence of the two conditions is required for the payment of
monetary interest. Thus, we have held that collection of interest without any
stipulation therefor in writing is prohibited by law.
(2) Petitioner cannot be compelled to return the alleged excess amount paid by
respondent as interest. Under Article 1960 of the Civil Code, if the borrower of loan
pays interest when there has been no stipulation therefor, the provisions of the Civil
Code concerning solutio indebiti shall be applied. Article 2154 of the Civil Code
explains the principle of solutio indebiti. Said provision provides that if something is
received when there is no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises. In such a case, a creditor-debtor

relationship is created under a quasi-contract whereby the payor becomes the

creditor who then has the right to demand the return of payment made by mistake,
and the person who has no right to receive such payment becomes obligated to
return the same. The quasi-contract of solutio indebiti harks back to the ancient
principle that no one shall enrich himself unjustly at the expense of another. The
principle of solutio indebiti applies where (1) a payment is made when there exists
no binding relation between the payor, who has no duty to pay, and the person who
received the payment; and (2) the payment is made through mistake, and not
through liberality or some other cause. We have held that the principle of solutio
indebiti applies in case of erroneous payment of undue interest.
Article 2232 of the Civil Code states that in a quasi-contract, such as solutio indebiti,
exemplary damages may be imposed if the defendant acted in an oppressive
manner. Petitioner acted oppressively when he pestered respondent to pay interest
and threatened to block her transactions with the PNO if she would not pay
interest. This forced respondent to pay interest despite lack of agreement thereto.
Thus, the award of exemplary damages is appropriate so as to deter petitioner and
other lenders from committing similar and other serious wrongdoings.

ALFONSO T. YUCHENGCO, Petitioner, v. THE MANILA CHRONICLE

PUBLISHING CORPORATION, NOEL CABRERA, GERRY ZARAGOZA, DONNA
GATDULA, RODNEY P. DIOLA, RAUL VALINO, THELMA SAN JUAN and ROBERT
COYIUTO, JR., Respondents.
PERALTA, J.:
FACTS:
The present controversy arose when in the last quarter of 1993, several allegedly
defamatory articles against petitioner were published in The Manila Chronicle by

Chronicle Publishing Corporation.

Petitioner filed a complaint against respondents before the RTC of Makati City under
three separate causes of action, namely: (1) for damages due to libelous publication
against Neal H. Cruz, Ernesto Tolentino, Noel Cabrera, Thelma San Juan, Gerry
Zaragoza, Donna Gatdula, Raul Valino, Rodney P. Diola, all members of the editorial
staff and writers of The Manila Chronicle, and Chronicle Publishing; (2) for damages
due to abuse of right against Robert Coyiuto, Jr. and Chronicle Publishing; and (3) for
attorneys fees and costs against all the respondents.
On November 8, 2002, the trial court rendered a Decision in favor of petitioner.
Aggrieved, respondents sought recourse before the CA. The CA rendered a Decision
affirming in toto the decision of the RTC.
Respondents then filed an MR. The CA rendered an Amended Decision reversing the
earlier Decision.
Subsequently, petitioner filed the present recourse before this Court.
On November 25, 2009, this Court rendered a Decision partially granting the
petition.
Respondents later filed a MR dated which the Court denied.
Meanwhile, respondent Coyiuto, Jr. also filed a Motion for Leave to File Supplemental
MR with Attached Supplemental Motion.
On April 21, 2010, this Court issued a Resolution grant Coyiuto, Jr.s motion for leave
to file supplemental motion for reconsideration, and require petitioner to comment
on the motion for reconsideration and supplemental motion for reconsideration.
Petitioner filed his Comment.
It is apparent that the MR of respondents generally reiterates the arguments
previously advanced by respondents.
However, from the supplemental motion for reconsideration, it is apparent that
Coyiuto, Jr. raises a new matter which has not been raised in the proceedings below.
This notwithstanding, basic equity dictates that Coyiuto, Jr. should be given all the
opportunity to ventilate his arguments in the present action, but more importantly,
in order to write finis to the present controversy.
ISSUE:

(1) Whether Coyuito, Jr., was Chariman of Manila Chronicle Publishing Corporation
when the libelous articles were published, (2) Whether petitioners cause of action
based on Abuse of Rights warrants the award of damages.
HELD:
FINDINGS OF FACTS BY THE LOWER COURT, WHEN CONFIRMED BY THE CA,
CONCLUSIVE UPON THIS COURT
From these Comments and contrary to Coyiuto, Jr.s contention, it was substantially
established that he was the Chairman of Manila Chronicle Publishing Corporation
when the subject articles were published. Coyiuto, Jr. even admitted this fact in his
Reply and Comment on Request for Admission. Both the trial court and the CA
affirmed this fact. We reiterate that factual findings of the trial court, when adopted
and confirmed by the CA, are binding and conclusive on this Court and will generally
not be reviewed on appeal.
AWARD OF DAMAGES BASED ON ABUSE OF RIGHT, PROPER
A right, though by itself legal because recognized or granted by law as such, may
nevertheless become the source of some illegality. When a right is exercised in a
manner which does not conform with the norms enshrined in Article 19 and results
in damage to another, a legal wrong is thereby committed for which the wrongdoer
must be held responsible. But while Article 19 lays down a rule of conduct for the
government of human relations and for the maintenance of social order, it does not
provide a remedy for its violation. Generally, an action for damages under either
Article 20 or Article 21 would be proper. Here, it was found that Coyiuto, Jr. indeed
abused his rights as Chairman of The Manila Chronicle, which led to the publication
of the libelous articles in the said newspaper, thus, entitling petitioner to damages
under Article 19, in relation to Article 20.
DUENAS VERSUS ALICE GUCE-AFRICA G.R. No. 165679 October 5, 2009
Facts:
The family of Africa was supposed to hold a family reunion on April 18, 1998 on their
ancestral home in San Vicente, Banay-banay, Lipa City. It was the wedding date of
her sister Sally Guce, and Africas other siblings from the United States of America,
as well as her mother, were expected to return to the country. The wedding
ceremony was set to be held at the familys ancestral house at where Africas
relatives planned to stay while in the Philippines. Africa found the occasion an
opportune time to renovate their ancestral house. Thus, in January 1998 she
entered into a Construction Contract with Dueas for the demolition of the ancestral
house and the construction of a new four-bedroom residential house. The parties
agreed that Africa would pay P500,000.00 to the petitioner, who obliged himself to
furnish all the necessary materials and labor for the completion of the project.

Dueas likewise undertook to finish all interior portions of the house on or before
March 31, 1998, or more than two weeks before Sallys wedding. On April 18, 1998,
however, the house remained unfinished. The wedding ceremony was thus held at
the Club Victorina and Africas relatives were forced to stay in a hotel. Her mother
lived with her children, transferring from one place to another. On July 27, 1998,
Africa filed a Complaint for breach of contract and damages against Dueas before
the Regional Trial Court of Pasig City. She alleged, among others, that Dueas
started the project without securing the necessary permit, that Dueas unjustly and
fraudulently abandoned the project leaving it substantially unfinished and
incomplete and that despite several demands being made, Dueas obstinately
refused to make good his contractual obligations. Both the trial court and the court
of appeals ruled in favor of Africa and awarded actual damages. Hence, the
recourse to the Supreme Court.
Issue:
Whether or not Africa is entitled to actual damages.
Held:
The Supreme Court rules that Africa is entitled to temperate damages in lieu of
actual damage. In the case there is an absence of competent proof on the amount
of actual damages suffered. Nonetheless, Africa is still entitled to temperate
damages, articles 2216, 2224 and 2225 of the Civil Code applies in the present
case. Temperate or moderate damages may be recovered when some pecuniary
loss has been suffered but its amount cannot, from the nature of the case, be
proved with certainty The amount thereof is usually left to the discretion of the
courts but the same should be reasonable, bearing in mind that temperate damages
should be more than nominal but less than compensatory. There is no doubt that
Africa sustained damages due to the breach committed by the petitioner. The
transfer of the venue of the wedding, the repair of the substandard work, and the
completion of the house necessarily entailed expenses. However, as earlier
discussed, Africa failed to present competent proof of the exact amount of such
pecuniary loss. Hence, the petition is partially granted.

FILINVEST LAND, INC., petitioner,

vs. THE HONORABLE COURT OF APPEALS, PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY and PACIFIC EQUIPMENT CORPORATION,
respondents.
[G.R. No. 138980. September 20, 2005]
FACTS:
Petitioner awarded to respondent Pacific Equipment Corp (Pecorp) development of
its residential subdivisions, a contract amounting to P12,470,000.00. Pecorp posted
two surety bonds to guarantee faithful compliance. Both agreed that liquidated
damages of P15,000/day shall be paid by Pecorp in case of delay. Petitioner claimed
that Pecorp failed to complete the works (94.53%) and claims for damages. Pecorp

on the other hand contended that their work stopped due to failure of petitioner to
pay for certain completed portion. RTC assigned a commissioner to evaluate the
claims and counter-claims. The total amount due to Pecorp was computed to be
P1,881,867.66. Petitioner claimed that liquidated damages amounted to
P3,990,000.00 Both claims and counter-claims were dismissed. Court of Appeals
affirmed the ruling of RTC.
ISSUE:
Whether or not the penalty (liquidated damages) of P15,000.00 per day of delay
shall be binding upon mutual agreement of parties.
RULING:
NO. As a general rule, courts are not at liberty to ignore the freedom of the parties
to agree on such terms and conditions as they see fit as long as they are not
contrary to law, morals, good customs, public order or public policy. The judge shall
equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has been no performance, the
penalty may also be reduced by the courts if it is iniquitous or unconscionable
(Art.1229, NCC). A penalty interest of P15,000.00 per day of delay as liquidated
damages or P3,990,000.00 (representing 32% penalty of the P12,470,000.00
contract price) is unconscionable considering that the construction was already not
far from completion.

MERCURY DRUG CORPORATION AND AURMELA GANZON, Petitioners,

Case Title VS. RAUL DE LEON, Respondent.
Fast Facts:
1 Raul T. De Leon noticed that his left eye was reddish. He also had difficulty
reading. On the same evening, he met a friend who happened to be a
doctor and had just arrived from abroad for dinner.
2 De Leon consulted Dr. Milla about his irritated left eye.The latter prescribed
the drugs "CortisporinOpthalmic" and "Ceftin" to relieve his eye problems.
3 Before heading to work the following morning, De Leon went to the
Betterliving, Paraaque, branch of Mercury Drug Store Corporation to buy
the prescribed medicines. He showed his prescription to petitioner
AurmelaGanzon, a pharmacist assistant.Subsequently, he paid for and took
the medicine handed over by Ganzon.

De Leon requested his sheriff to assist him in using the eye drops.As
instructed, the sheriff applied 2-3 drops on respondent's left eye.
5
Instead of relieving his irritation, respondent felt searing pain so
immediately, he rinsed the affected eye with water, but the pain did not
subside. Only then did he discover that he was given the wrong medicine,
"CortisporinOtic Solution.
6 De Leon returned to the same Mercury Drug branch and confronted Ganzon
why he was given ear drops, instead of the prescribed eye drops, she did
not apologize and instead brazenly replied that she was unable to fully read
the prescription. In fact, it was her supervisor who apologized and
informed De Leon that they do not have stock of the needed
CortisporinOpthalmic.
7 De Leon wrote Mercury Drug, through its president about the day's incident.
It did not merit any response. Instead, two sales persons went to his office
and informed him that their supervisor was busy with other matters. Having
been denied his simple desire for a written apology and explanation,De
Leon filed a complaint for damages against Mercury Drug.
8 MERCURY DRUGS CONTENTION- Mercury Drug and Ganzon pointed out that
De Leon's own negligence was the proximate cause of his injury. They
argued that any injury would have been averted had De Leon exercised due
Tortious
Act:
Pharmacist gave the wrong medicine
What is
it?
Culpa-contractual
Druggists must exercise the highest practicable degree of prudence
and vigilance, and the most exact and reliable safeguards
consistent with the reasonable conduct of the business, so that
Legal
human life may not constantly be exposed to the danger flowing from
Basis:
the substitution of deadly poisons for harmless medicines.
Issue:

Mercury Drug and Ganzonhad exercised the degree of diligence expected of

them.
Held:
No.
Ratio:
Mercury Drug and Ganzon failed to exercise the highest degree of diligence
expected of them. Mercury Drug and Ganzoncan not exculpate themselves from
any liability. As active players in the field of dispensing medicines to the public,
the highest degree of care and diligence is expected of them.
The profession of pharmacy demands care and skill, and druggists must
exercise care of a specially high degree, the highest degree of care known
to practical men. In other words, druggists must exercise the highest
practicable degree of prudence and vigilance, and the most exact and
reliable safeguards consistent with the reasonable conduct of the
business, so that human life may not constantly be exposed to the danger
flowing from the substitution of deadly poisons for harmless medicines.
one holding himself out as competent to handle drugs, having rightful
access to them, and relied upon by those dealing with him to exercise that
high degree of caution and care called for by the peculiarly dangerous
nature of the business, cannot be heard to say that his mistake by which he
furnishes a customer the most deadly of drugs for those comparatively
harmless, is not in itself gross negligence.
In cases where an injury is caused by the negligence of an employee, there
instantly arises a presumption of law that there has been negligence on the part
of the employer, either in the selection or supervision of one's employees. This
presumption may be rebutted by a clear showing that the employer has exercised
the care and diligence of a good father of the family. Mercury Drug failed to
overcome such presumption. Mercury Drug and Ganzon have similarly failed to
live up to high standard of diligence expected of them as pharmacy professionals.
They were grossly negligent in dispensing ear drops instead of the prescribed eye
drops to De Leon. Worse, they have once again attempted to shift the blame to
their victim by underscoring his own failure to read the label.
As a buyer, De Leon relied on the expertise and experience of Mercury Drug and
its employees in dispensing to him the right medicine. This Court has ruled that
in the purchase and sale of drugs, the buyer and seller do not stand at arms
length. There exists an imperative duty on the seller or the druggist to take
precaution to prevent death or injury to any person who relies on one's absolute
honesty and peculiar learning. Mercury Drug and Ganzon's defense that the latter
gave the only available Cortisporin solution in the market deserves scant
consideration. Ganzon could have easily verified whether the medicine she gave
De Leon was, indeed, the prescribed one or, at the very least, consulted her
supervisor. Absent the required certainty in the dispensation of the medicine, she

could have refused De Leon's purchase of the drug.

The award of damages is proper and shall only be reduced considering the
peculiar facts of the case. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of defendant's
wrongful act or omission. However, the award of damages must be commensurate
to the loss or injury suffered.
It is generally recognized that the drugstore business is imbued with public

G.R. No. 133803. September 16, 2005.

BIENVENIDO M. CASIO, JR., petitioner, vs. THE COURT OF APPEALS and
*

Same; Same; Same; Damages; There are two kinds of actual or compensatory damages
one is the loss of what a person already possesses and the other is the failure to receive as a
benefit that which would have pertained to him.Under Articles 2199 and 2200 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. Citing Producers Bank of the
Philippines vs. CA, 365 SCRA 326 (2002) this Court, in the subsequent case of Terminal
Facilities and Services Corporation vs. Philippine Ports Authority, 378 SCRA 82
(2002), ruled: There are two kinds of actual or compensatory damages: one is the loss of
what a person already possesses, and the other is the failure to receive as a benefit that

which would have pertained to him x x x. In the latter instance, the familiar rule is that
damages
consisting
of
unrealized
profits,
frequently
referred
as ganacias
frustradas or lucrum cessans, are not to be granted on the basis of mere speculation,
conjecture, or surmise, but rather by reference to some reasonably definite standard such as
market value, established experience, or direct inference from known circumstances.

Via this petition for review on certiorari under Rule 45 of the 1997 Rules of Court,
petitioner Bienvenido M. Casio, Jr. seeks the annulment and setting aside of the
following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 47702, to wit:
1. 1.Decision dated January 21, 1997, affirming an earlier decision of the
1

Regional Trial Court at Pasig which upheld private respondents rescission

of its contract with petitioner; and
2. 2.Resolution dated May 20, 1998, denying petitioners motion for
2

reconsideration.
On October 2, 1991 in the Regional Trial Court at Pasig City, respondent Octagon
Realty Development Corporation, a corporation duly organized and existing under
Philippine laws, filed a complaint for rescission of contract with damages against
petitioner Bienvenido M. Casio, Jr., owner and proprietor of the Casio Wood
Parquet and Sanding Services, relative to the parties agreement for the supply and
installation by petitioner of narra wood parquet ordered by respondent.
As recited by the Court of Appeals in the decision under review, the parties
principal pleadings in the Regional Trial Court disclose the following:
In its complaint, [respondent] alleges that on December 22, 1989, it entered into a contract
with [petitioner] for the supply and installation by the latter of narra wood parquet (kiln
dried) to the Manila Luxury Condominium Project, of which [respondent] is the developer,
covering a total area of 60,973 sq. ft. for a total price of P1,158,487.00; that the contract
stipulated that full delivery by [petitioner] of labor and materials was in May 1990; that in
accordance with the terms of payment in the contract, [respondent] paid to [petitioner] the
amount P463,394.50, representing 40% of the total contract price; that after delivering only
26,727.02 sq. ft. of wood parquet materials, [petitioner] incurred in delay in the delivery of
the remainder of 34,245.98 sq. ft.; that [petitioner] misrepresented to [respondent] that he
is qualified to do the work contracted when in truth and in fact he was not and,
furthermore, he lacked the necessary funds to execute the work as he was totally dependent
on the funds advanced to him by [respondent]; that due to [petitioners] unlawful and

malicious refusal to comply with its obligations, [respondent] incurred actual damages in
the amount of P912,452.39 representing estimated loss on the new price, unliquidated
damages and cost of money; that in order to minimize losses, the [respondent] contracted
the services of Hilvano Quality Parquet and Sanding Services to complete the [petitioners]
unfinished work, [respondent] thereby agreeing to pay the latter P1,198,609.30.
The [respondent] in its complaint prays for rescission of contract, actual damages of
P912,452.39, reimbursement in the amount of P1,198,609.30, moral damages of
P200,000.00, and attorneys fees of P50,000.00 plus a fee of P1,000.00 per appearance and
other expenses of the suit.
In his answer to the complaint, the [petitioner] admits the execution of the December 22,
1989 contract with the [respondent], the terms thereof relating to total price and scope of
work, as well as the payment by the [respondent] of the 40% downpayment. He, however,
avers that the manner of payment, period of delivery and completion of work and/or full
delivery of labor and materials were modified; that the delivery and completion of the work
could not be done upon the request and/or representations by the [respondent] because he
failed to make available and/or to prepare the area in a suitable manner for the work
contracted, preventing the [petitioner] from complying with the delivery schedule under the
contract; that [petitioner] delivered the required materials and performed the work despite
these constraints; that the [petitioner] delivered a total of 29,209.82 sq. ft. of wood parquet;
that the [respondent] failed to provide for a safe and secure area for the materials and work
in process or worked performed, thus exposing them to the elements and destroying the
materials and/or work; that the [respondent] failed to pay the [petitioners] second and third
billings for deliveries and work performed in the sum of P105,425.68, which amount the
[petitioner] demanded from the [respondent] with the warning of suspension of deliveries or
rescission for contract for non-payment; that the [petitioner] was fully qualified and had the
experience of at least nine years to perform the work; and that it was the [respondent], after
failing to prepare the area suitable for the delivery and installation of the wood parquet,
[respondent] x x x who advised or issued orders to the [petitioner] to suspend the delivery
and installation of the wood parquet, which created a storage problem for the [petitioner].
Set up by the [petitioner] as special and affirmative defenses, are that the filing of the
case is premature; that the [respondent] has no cause of action; that the obligation has been
waived/extinguished; that the [respondents] failure to accept deliveries compelled the
[petitioner] to store the materials in his warehouse/s and to use valuable space in his
premises, which he could have utilized for the storage of materials for other customers, and
also prevented him from accepting new orders from other customer causing him actual and
potential losses of income; that the [respondents] extrajudicial rescission of contract is void

since there is no breach or violation thereof by the [petitioner]; and that it was [respondent]
which violated the terms/conditions of the contract, entitling [petitioner] to have the same
judicially rescinded.
The [petitioner] pleaded counterclaims of rescission of contract and payment by the
[respondent] of P597,392.90 with legal interest from the filing of the complaint until fully
paid or, in the alternative payment of the cost of the billings in the sum of P105,425.68 plus
legal interest; actual and compensatory damages of P600,000.00 and P30,000.00,
respectively; moral damages of P100,000.00, attorneys fees of P40,000.00; and litigation
expenses and costs of the suit. (Words in bracket ours).
3

In a decision dated June 2, 1994, the trial court, upon a finding that petitioner is the
one who breached the parties agreement, rendered judgment for respondent, to wit:
WHEREFORE, based on the foregoing, this Court finds and so holds that the rescission of
contract effected by [respondent] is valid, and [petitioner]t is thereby ordered to pay the
[respondent] the following:
1. 1.P2,111,061.69 by way of actual and compensatory damages; and,
2. 2.P50,000.00, as attorneys fees.
No pronouncement as to cost.
SO ORDERED.
4

Explains the trial court in its decision:

x x x [T]he contract clearly and categorically stipulates that full delivery by [petitioner] of
labor and materials was to be in May 1990. However, as of January 30, 1991, no deliveries
have been made by [petitioner] necessitating the sending by [respondent] of a demand letter
x x x. Thereafter, while [petitioner] started mobilization, the workers assigned were
insufficient resulting in the very slow progress of the works for which reason Engr. Alcain
sent a letter to [petitioner] instructing [petitioner] to make full-blast delivery of the
materials. This, incidentally, effectively negates [petitioners] contention that [respondent]
had requested for the suspension of deliveries.
xxx xxx xxx
Finally, it was established that out of the total 60,973 sq. ft. of wood parquet, [petitioner]
was able to deliver only 26,727.02 sq. ft. In this connection [petitioner] denied this and
insisted that he was actually able to deliver 29,109.82 sq. ft. Whichever of the two figures is
correct, the fact remains that [petitioner] was unable to deliver the full quantity contracted
by [respondent]. For purposes of the record, however, this Court believes the figure given by

[respondent], which is supported by [petitioners] own statements of account where the total
amount of deliveries jibes with [respondents] alleged figure.
On the basis of the foregoing findings, this Court hereby finds that [respondent] has
established its right to rescind the contract dated December 22, 1989, on the strength of
Art. 1191 of the Civil Code.
In this case, [respondent], after [petitioners] breach of his contractual obligations,
considered the contract as rescinded and proceeded to contract with Hilvano Quality
Parquet & Sanding Services, in order to minimize losses in view of the delay in the
completion schedule of its condominium project. (Words in bracket ours).
5

On petitioners appeal to the Court of Appeals in CA-G.R. CV No. 47702, the

appellate court, in the herein assailed Decision dated January 21, 1997, affirmed
that of the trial court but modified the same by reducing the amount of damages
awarded, thus:
6

WHEREFORE, the decision appealed from is AFFIRMED with the MODIFICATION that
the [petitioner] be made to pay the [respondent] as actual and compensatory damages, the
amount of P1,662,003.80, with interest thereon at the legal rate from the finality of this
judgment until fully paid. SO ORDERED. (Words in bracket ours).

In time, petitioner and respondent filed their respective Motion for

Reconsideration and Motion for Partial Reconsideration. In its Resolution dated
May 20, 1998, the appellate court denied petitioners motion for lack of merit but
found that of respondent as well-grounded. Accordingly, and noting that the
amount of P97,699.67 x x x had already been factored in, in the computation of the
amount of P912,452.39, under the decision of the court a quo, the Court of Appeals
amended its original Decision by affirming in toto the decision of the trial court, as
follows:
7

WHEREFORE, [petitioners] appeal is dismissed. The Decision appealed from is

AFFIRMED IN TOTO. With costs against the [petitioner]. SO ORDERED. (Words in
bracket ours).

Undaunted, petitioner is now with us via the present recourse on his submissions
that:

1. A.THE SUBJECT DECISION DECLARING THE RESCISSION OF THE

QUESTIONED CONTRACT BY PRIVATE RESPONDENT AS VALID AND
HOLDING THE PETITIONER LIABLE FOR BREACH OF CONTRACT IS
CONTRARY TO OR IN VIOLATION OF ART. 1191, NEW CIVIL CODE;
2. B.THE AWARD TO PRIVATE RESPONDENT OF ACTUAL AND
COMPENSATORY DAMAGES OF P1,662,003.80 WITH LEGAL INTEREST
WAS NOT LEGALLY JUSTIFIED, OR PROVEN WITH REASONABLE
DEGREE OF CERTAINTY; and
3. C.THE SAME WAS ISSUED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION, AND/OR
CONTRARY TO THE FACTS, EVIDENCE, JURISPRUDENCE AND LAW.
8

The petition lacks merit.

It is undisputed that under their contract, petitioner and respondent had
respective obligations, i.e., the former to supply and deliver the contracted volume of
narra wood parquet materials and install the same at respondents condominium
project by May, 1990, and the latter, to pay for said materials in accordance with the
terms of payment set out under the parties agreement. But while respondent was
able to fulfill that which is incumbent upon it by making a downpayment
representing 40% of the agreed price upon the signing of the contract and even paid
the first billing of petitioner, the latter failed to comply with his contractual
commitment. For, after delivering only less than one-half of the contracted
materials, petitioner failed, by the end of the agreed period, to deliver and install
the remainder despite demands for him to do so. Doubtless, it is petitioner who
breached the contract.
9

Petitioner asserts that while he was ready to comply with his obligation to deliver
and install the remaining wood parquet, yet respondent was not ready to accept
deliveries due to the unsuitability of the work premises for the installation of the
materials. Petitioners contention flies in the light of the following observations of
the appellate court, to which we are in full accord:
x x x no sufficient proof was presented by the [petitioner] to substantiate his allegation. On
the other hand, the [respondent] was able to prove by substantial evidence that as of May,
1990, the time when the [petitioner] was supposed to make complete delivery there was

already available in the condominium building any space from the basement to the
fourteenth floor, and the [petitioner] could have chosen from any of those. (Words in bracket
ours).

Indeed, there can be denying of petitioners breach of his contractual obligation,

more so when, as here, the two courts below were one in holding so. This brings to
mind the settled rule of jurisprudence that factual findings of the Court of Appeals,
particularly when affirmatory of those of the trial court, are binding upon this
Court. Unless the evidence on record clearly do not support such findings or that
the same were arrived at based on a patent misunderstanding of facts, situations
which do not obtain in this case, this Court is not at liberty to disturb what has been
found below and supplant them with its own.
This is, as it should be. For, in petitions for review on certiorari as a mode of
appeal under Rule 45, only questions of law may be raised. This Court is not the
proper venue to consider factual issues as it is not a trier of facts.
With the reality that petitioner has failed to comply with his prestations under
his contract with respondent, the latter is vested by law with the right to rescind the
parties agreement, conformably with Article 1191 of the Civil Code, which partly
reads:
10

11

12

13

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission even
after he has chosen fulfillment, if the latter should become impossible.
xxx
xxx
xxx

Explicit it is from the foregoing that in reciprocal obligations, or those which arise
from the same cause, and in which each party is a debtor and a creditor of the other,
in the sense that the obligation of one is dependent upon the obligation of the
other, the right to rescind is implied such that absent any provision providing for a
right to rescind, the parties may nevertheless rescind the contract should the other
obligor fail to comply with its obligations.
14

15

It must be stressed, though, that the right to rescind a contract for nonperformance of its stipulations is not absolute. The general rule is that rescission of
a contract will not be permitted for a slight or casual breach, but only for such
substantial and fundamental violations as would defeat the very object of the
parties in making the agreement.
16

Here, contrary to petitioners asseveration, the breach he committed cannot, by

any measure, be considered as slight or casual. For sure, petitioners failure to
make complete delivery and installation way beyond the time stipulated despite
respondents demands, is doubtless a substantial and fundamental breach, more so
when viewed in the light of the large amount of money respondent had to pay
another contractor to complete petitioners unfinished work. Again, to quote from
the challenged decision of the appellate court:
The [petitioner] also asserts that the breach was merely casual that does not warrant a
rescission. While apparently, the [petitioner] agreed to complete delivery and installation of
the narra wood parquet to the [respondents] condominium project by May, 1990, yet on
three occasions the [respondents] counsel sent letters demanding compliance with the
[petitioners] obligation. At that time, only 26,727.02 sq. ft. of parquet out of a total of
60,973 sq. ft., or less than one half of the contracted volume, had been delivered. Hence, the
[respondent] was finally forced to contract the services of another company and had to pay
the sum of P1,198,609.30 for the completion of the unfinished work. The large cost of
completion of the [petitioners] unfinished work can only evidence the gravity of the
[petitioners] failure to comply with the terms of the contract. (Words in bracket ours).
17

Likewise, contrary to petitioners claim, it cannot be said that he had no inkling

whatsoever of respondents recourse to rescission. True, the act of a party in
treating a contract as cancelled or resolved on account of infractions by the other
party must be made known to the other. In this case, however, petitioner cannot
feign ignorance of respondents intention to rescind, fully aware, as he was, of his
non-compliance with what was incumbent upon him, not to mention the several
letters respondent sent to him demanding compliance with his obligation.
18

19

In fine, we thus rule and so hold that respondent acted well within its rights in
unilaterally terminating its contract with petitioner and in entering into a new one
with a third person in order to minimize its losses, without prior need of resorting to
judicial action. As we once said in University of the Philippines v. De los
Angeles, involving the question of whether the injured party may consider the
contract as rescinded even before any judicial pronouncement has been made to that
effect:
20

x x x the party who deems the contract violated may consider it resolved or rescinded, and
act accordingly, without previous court action, but it proceeds at its own risk. For it is only
the final judgment of the corresponding court that will conclusively and finally settle
whether the action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file suit and wait for
a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party
injured by the others breach will have to passively sit and watch its damages accumulate
during the pendency of the suit until the final judgment of rescission is rendered when the
law itself requires that he should exercise due diligence to minimize its own damages x x x.
We see no conflict between this ruling and the previous jurisprudence of this Court invoked
by respondent declaring that judicial action is necessary for the resolution of a reciprocal
obligation; (Ocejo, Perez & Co. v. International Banking Corp., 37 Phil. 631; Republic v.
Hospital de San Juan de Dios, et al., 84 Phil. 820) since in every case where the
extrajudicial resolution is contested only the final award of the court of competent
jurisdiction can conclusively settle whether the resolution was proper or not. It is in this
sense that judicial action will be necessary, as without it, the extrajudicial resolution will
remain contestable and subject to judicial invalidation, unless attack thereon should
become barred by acquiescence, estoppel or prescription.

This brings us to the propriety of the award for actual or compensatory damages,
attorneys fees and litigation expenses.
Under Articles 2199 and 2200 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.
21

Citing Producers Bank of the Philippines vs. CA, this Court, in the subsequent
case of Terminal Facilities and Services Corporation vs Philippine Ports
Authority ruled:
22

23

There are two kinds of actual or compensatory damages: one is the loss of what a person
already possesses, and the other is the failure to receive as a benefit that which would have
pertained to him x x x. In the latter instance, the familiar rule is that damages consisting of
unrealized profits, frequently referred as ganacias frustradas or lucrum cessans, are not
to be granted on the basis of mere speculation, conjecture, or surmise, but rather by
reference to some reasonably definite standard such as market value, established
experience, or direct inference from known circumstances.

Absolute certainty, however, is not necessary to establish the amount of ganacias

frustradas or lucrum cessans.As we have said in Producers Bank of the
Philippines, supra:
When the existence of a loss is established, absolute certainty as to its amount is not
required. The benefit to be derived from a contract which one of the parties has absolutely
failed to perform is of necessity to some extent, a matter of speculation, but the injured
party is not to be denied for this reason alone. He must produce the best evidence of which
his case is susceptible and if that evidence warrants the inference that he has been
damaged by the loss of profits which he might with reasonable certainty have anticipated
but for the defendants wrongful act, he is entitled to recover.

Gauged by the aforequoted test, the evidence adduced by respondent is sufficient

enough to substantiate its claim for actual or compensatory damages in the amount
of P2,111,061. 69. As found by the trial court and affirmed by the Court of Appeals:
Clearly, [respondent] must be indemnified for the following damages it sustained by reason
of [petitioners] breach of contract. Finding [respondents] claim justified, this court awards
the following: P912,452.39, representing [respondents] estimated losses on new price,
unliquidated damages and cost of money, as substantiated by Exhibit Q; and
P1,198,609.30, representing the cost incurred by [respondent] in engaging the services of
Hilvano Quality Parquet and Sanding Services for the completion of the work unfinished by
[petitioner] (Exhibit C-4, par. 24) x x x. (Words in bracket ours).
24

Finally, on the matter of attorneys fees, respondents entitlement thereto is beyond

cavil, what with the fact that respondent was compelled to litigate and incurred
expenses relative thereto by reason of petitioners breach of his contractual
obligations.
WHEREFORE, the instant petition is DENIED and the assailed Decision and
Resolution of the appellate court AFFIRMED.
Costs against petitioner.
SO ORDERED.

November 26, 2014.G.R. No. 193914.*

SEVEN BROTHERS SHIPPING CORPORATION,
CONSTRUCTION RESOURCES, INC., respondent.

petitioner, vs. DMC-

Civil Law; Damages; Actual Damages; Jurisprudence has consistently held that to
justify an award of actual damages credence can be given only to claims which are duly
supported by receipts.Jurisprudence has consistently held that [t]o justify an award of
actual damages x x x credence can be given only to claims which are duly supported by
receipts. We take this to mean by credible evidence. Otherwise, the law mandates that
other forms of damages must be awarded, to wit: Art. 2216. No proof of pecuniary loss is
necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may
be adjudicated. The assessment of such damages, except liquidated ones, is left to the
discretion of the court, according to the circumstances of each case.
Same; Same; Nominal Damages; Under Article 2221 of the Civil Code, nominal
damages may be awarded in order that the plaintiffs right, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered.Under Article 2221 of the Civil Code,
nominal damages may be awarded in order that the plaintiffs right, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered. We have laid down the concept of
nominal damages in the following wise: Nominal damages are recoverable where a legal
right is technically violated and must be vindicated against an invasion that has produced
no actual present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown.

Same; Same; Temperate Damages; Under Article 2224 of the Civil Code, temperate or
moderate damages may be recovered when the court finds that some pecuniary loss has been
suffered but its amount cannot, from the nature of the case, be provided with certainty.In
contrast, under Article 2224, temperate or moderate damages may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be provided with certainty. This principle was thoroughly explained
in Araneta v. Bank of America, 40 SCRA 144 (1971), which cited the Code Commission, to
wit: The Code Commission, in explaining the concept of temperate damages under Article
2224, makes the following comment: In some States of the American Union, temperate
damages are allowed. There are cases where from the nature of the case, definite
proof of pecuniary loss cannot be offered, although the court is convinced that
there has been such loss. For instance, injury to ones commercial credit or to the
goodwill of a business firm is often hard to show with certainty in terms of money. Should
damages be denied for that reason? The judge should be empowered to calculate moderate
damages in such cases, rather than that the plaintiff should suffer, without redress from the
defendants wrongful act.
Same; Same; Same; In computing the amount of temperate or moderate damages, it is
usually left to the discretion of the courts, but the amount must be reasonable, bearing in
mind that temperate damages should be more than nominal but less than compensatory.In
computing the amount of temperate or moderate damages, it is usually left to the discretion
of the courts, but the amount must be reasonable, bearing in mind that temperate damages
should be more than nominal but less than compensatory.

This is a Rule 45 appeal1 dated 18 November 2010 assailing the Decision2 and
Resolution3 of the Court of Appeals (CA) in C.A.-G.R. CV No. 69819, which affirmed
with modifications the Decision4 of the Regional Trial Court (RTC), Branch 132,
Makati City in Civil Case No. 98-699, finding petitioner liable to respondent for
damages.
Petitioner Seven Brothers Shipping Corporation is the owner of the cargo ship
M/V Diamond Rabbit, (vessel), while respondent DMC-Construction Resource,
Inc. is the owner of coal-conveyor facility, which was destroyed when the vessel
became uncontrollable and unmanueverable during a storm. 5
We reproduce the narration of facts culled by the CA,6 as follows:

On 23 February 1996, the cargo ship M/V Diamond Rabbit (the Vessel) owned and
operated by defendant Seven Brothers Shipping Corporation (Seven Brothers), was at the
PICOP Pier in Mangagoy, Bislig, Surigao del Sur to dock there. According to the record, the
weather that day was windy with a wind force of 10 to 20 knots, and the sea condition was
rough, with waves 6 to 8 feet high. However, the parties also stipulated during pretrial that
prior to the occurrence of the incident, the vessel was anchored at the causeway of the port
of Bislig, where it was safe from inclement weather.
According to the report of the Master, it heaved its anchor and left the causeway in order
to dock at the PICOP Pier. A lifeboat pulled the vessel towards the Pier with a heaving line
attached to the vessels astern mooring rope, when suddenly, the heaving line broke loose,
causing the astern mooring rope to drift freely. The mooring rope got entangled in the
vessels propeller, thereby choking and disabling it, and preventing the further use of its
main engine for maneuvering.
In order to stop the vessel from further drifting and swinging, its Master dropped her
starboard anchor. To help secure the vessel, its forward mooring rope was sent ashore and
secured at the mooring fender. However, because of the strong winds and rough seas, the
vessels anchor and the mooring rope could not hold the vessel.
Under the influence of the wind and current, the dead weight of the vessel caused it to
swung from side to side until the fender, where the mooring rope was attached, collapsed.
The uncontrollable and unmaneuverable vessel drifted and dragged its anchor until it hit
several structures at the Pier, including the coal-conveyor facility owned by DMC
Construction Equipment Resources, Inc. (DMC). (Emphasis in the original)

On 5 March 1996, respondent sent a formal demand letter to petitioner, claiming

the amount above stated for the damages sustained by their vessel.7
When petitioner failed to pay, respondent filed with the RTC a Complaint for
damages against respondent on 23 March 1998. Based on the pieces of evidence
presented by both parties, the RTC ruled that as a result of the incident, the loading
conveyor and related structures of respondent were indeed damaged. 8 In the course
of the destruction, the RTC found that no force majeure existed, considering that
petitioners captain was well aware of the bad weather, and yet proceeded against
the strong wind and rough seas, instead of staying at the causeway and waiting out
the passage of the typhoon.9 It further concluded that there was negligence on the

part of the captain; hence, defendant [petitioner] as his employer and owner of the
vessel shall be liable for damages caused thereby. 10
Regarding liability, the RTC awarded respondent actual damages in the
amount of P3,523,175.92 plus legal interest of 6%, based on the testimony of
respondents engineer, Loreto Dalangin (Engr. Dalangin). The value represented
50% of the P7,046,351.84 claimed by the respondent as the fair and reasonable
valuation of the structure at the time of the loss, 11 because as manifested by Engr.
Dalangin at the time of the incident, the loading conveyor and related structures
were almost five years old, with a normal useful life of 10 years.12
Thus, on 18 January 2001, the RTC issued a Decision13to wit:
WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff:
(a) Actual damages in the amount of P3,523,175.92 plus legal interest of 6% per
annum from the date of the filing of this complaint until the same is fully paid; and
(b) Costs of suit.

Aggrieved, petitioner appealed via a Notice of Appeal on 5 February 2001. 14 The

appeal was dismissed by the CA in a Decision dated 30 April 2010, 15 the dispositive
portion of which is quoted herein:
WHEREFORE, the appeal is DISMISSED, and the Decisiondated 18 January 2001 of
the Regional Trial Court, Branch 132, Makati City in Civil Case No. 98-699,
is AFFIRMED with modification in that Seven Brothers Shipping Corporation is found
liable to DMC Construction Equipment Resources, Inc. for nominal damages in the
amount of P3,523,175.92 due to the destruction of the latters coal-conveyor post and
terminal by the cargo ship M/V Diamond Rabbit. (Emphasis in the original)

The CA affirmed the RTCs Decision with respect to the finding of negligence on
the part of the vessels captain. However, the appellate court modified the nature of
damages awarded (from actual to nominal), on the premise that actual damages had
not been proved. Respondent merely relied on estimates to prove the cost of
replacing the structures destroyed by the vessel, as no actual receipt was
presented.16

On
19
May
2010,
petitioner
filed
a
Motion
for
Partial
17
Reconsideration. Respondent filed a Comment on the Motion on 22 June
2010,18 and the former, a Reply on 29 June 2010. 19 In a Resolution promulgated on 24
September 2010,20 the CA denied petitioners Motion.
Hence, the instant Petition.
This Court noted respondents Comment dated 27 April 2011; 21 respondents
Manifestation dated 4 May 2011;22and petitioners Reply dated 2 June 2011.23
Issue
From the foregoing, the sole issue proffered to us by petitioner is whether or not
the CA erred in awarding nominal damages to respondent after having ruled that
the actual damages awarded by the RTC was unfounded.
The Courts Ruling
Petitioner argues that under Articles 2221 and 2223 of the Civil Code, 24 nominal
damages are only awarded to vindicate or recognize a right that has been violated,
and not to indemnify a party for any loss suffered by the latter. They are not
awarded as a simple replacement for actual damages that were not duly proven
during trial.25Assuming further that nominal damages were properly awarded by the
CA, petitioner is of the belief that the amount thereof must be equal or at least
commensurate to the injury sustained by the claimant, as ruled in PNOC Shipping
and Transportation Corp. v. Court of Appeals(PNOC).26 Considering that respondent
allegedly failed to substantiate its actual loss, it was therefore improper for the CA
to award nominal damages of P3,523,175.92, which was based on respondents
highly speculative claims.27
Respondent, on the other hand, alleges that nominal damages were rightly
assessed, since there was a categorical finding that its property right was
indubitably invaded and violated when damage to its conveyor and port equipment
due to petitioners negligence,28 was inflicted. Nominal damages are recoverable
where some injury has been done, but the evidence fails to show the corresponding
amount thereof. Accordingly, the assessment of damages is left to the discretion of
the court.29 Respondent asserts that the CAs award of P3,523,175.92 is not
unreasonable, following the amounts awarded in PNOC.

We rule that temperate, and not nominal, damages should be awarded to

respondent in the amount ofP3,523,175.92.

Factual findings of appellate and trial courts are entitled to great weight
and respect on appeal, especially when established by unrebutted
testimonial and documentary evidence.
To resolve the issue at hand, we must first determine whether there was indeed a
violation of petitioners right. In this light, we are inclined to adopt the factual
findings of the RTC and the CA as [t]his Court has repeatedly held that petitions
for review under Rule 45 of the Rules of Court may be brought only on questions of
law, not on questions of fact. Moreover, the factual findings of trial courts are
entitled to great weight and respect on appeal, especially when established by
unrebutted testimonial and documentary evidence. And the findings of facts of the
Court of Appeals are conclusive and binding on the Supreme Court except when
they conflict with the findings of the trial court.30
In this case, two facts have been established by the appellate and trial courts:
that respondent suffered a loss caused by petitioner; and that respondent failed to
sufficiently establish the amount due to him, as no actual receipt was presented.
Temperate or moderate damages may be recovered when the court finds that
some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be provided with certainty.
Under the Civil Code, when an injury has been sustained, actual damages may
be awarded under the following condition:
Except as provided by law or by stipulation, one is entitled to an adequate compensation
only for such pecuniary loss suffered by him as he has2199.Art. duly proved. Such
compensation is referred to as actual or compensatory damages. (Emphasis ours)

As we have stated in Dee Hua Liong Electrical Equipment Corp. v.

Reyes,31 [a]ctual or compensatory damages cannot be presumed, but must be duly
proved, and proved with a reasonable degree of certainty. A court cannot rely on
speculation, conjecture or guesswork as to the fact and amount of damages, but
must depend upon competent proof that they have suffered and on evidence of the

actual amount thereof. If the proof is flimsy and unsubstantial, no damages will be
awarded.
Jurisprudence has consistently held that [t]o justify an award of actual damages
x x x credence can be given only to claims which are duly supported by
receipts.32 We take this to mean by credible evidence. Otherwise, the law mandates
that other forms of damages must be awarded, to wit:

No proof of pecuniary loss is necessary in order that moral, nominal, temperate,

liquidated or exemplary damages, may be adjudicated. The assessment of such damages,
except liquidated ones, is left to the discretion of the court, according to the circumstances
of each case.2216.Art.

Under Article 2221 of the Civil Code, nominal damages may be awarded in order
that the plaintiffs right, which has been violated or invaded by the defendant, may
be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for
any loss suffered. We have laid down the concept of nominal damages in the
following wise:

Nominal damages are recoverable where a legal right is technically violated and must be
vindicated against an invasion that has produced no actual present loss of any kind or
where there has been a breach of contract and no substantial injury or actual damages
whatsoever have been or can be shown.
33

Thus, in Saludo v. Court of Appeals,34 nominal damages were granted because

while petitioner suffered no substantial injury, his right to be treated with due
courtesy was violated by the respondent, Transworld Airlines, Inc. Nominal
damages were likewise awarded in Northwestern Airlines v. Cuenca,35 Francisco v.
Ferrer,36 and Areola v. Court of Appeals,37 where a right was violated, but produced
no injury or loss to the aggrieved party.
In contrast, under Article 2224, temperate or moderate damages may be
recovered when the court finds that some pecuniary loss has been suffered but its
amount cannot, from the nature of the case, be provided with certainty. This
principle was thoroughly explained in Araneta v. Bank of America,38 which cited the
Code Commission, to wit:
The Code Commission, in explaining the concept of temperate damages under Article
2224, makes the following comment:

In some States of the American Union, temperate damages are allowed. There are
cases where from the nature of the case, definite proof of pecuniary loss cannot
be offered, although the court is convinced that there has been such loss. For
instance, injury to ones commercial credit or to the goodwill of a business firm is often hard
to show with certainty in terms of money. Should damages be denied for that reason? The
judge should be empowered to calculate moderate damages in such cases, rather than that
the plaintiff should suffer, without redress from the defendants wrongful act. (Emphasis
ours)

Thus, in Tan v. OMC Carriers, Inc.,39 temperate damages were rightly awarded
because plaintiff suffered a loss, although definitive proof of its amount cannot be
presented as the photographs produced as evidence were deemed insufficient.
Established in that case, however, was the fact that respondents truck was
responsible for the damage to petitioners property and that petitioner suffered
some form of pecuniary loss. In Canada v. All Commodities Marketing
Corporation,40 temperate damages were also awarded wherein respondents goods
did not reach the Pepsi Cola Plant at Muntinlupa City as a result of the negligence
of petitioner in conducting its trucking and hauling services, even if the amount of
the pecuniary loss had not been proven. In Philtranco Services Enterprises, Inc. v.
Paras,41 the respondent was likewise awarded temperate damages in an action for
breach of contract of carriage, even if his medical expenses had not been established
with certainty. In People v. Briones,42 in which the accused was found guilty of
murder, temperate damages were given even if the funeral expenses for the victim
had not been sufficiently proven.
Given these findings, we are of the belief that temperate and not nominal
damages should have been awarded, considering that it has been established that
respondent herein suffered a loss, even if the amount thereof cannot be proven with
certainty.
The amount of temperate damages to be awarded is usually left to the
discretion of the courts, but such amount must be reasonable.
Consequently, in computing the amount of temperate or moderate damages, it is
usually left to the discretion of the courts, but the amount must be reasonable,
bearing in mind that temperate damages should be more than nominal but less
than compensatory.43

Here, we are convinced that respondent sustained damages to its conveyor

facility due to petitioners negligence. Nonetheless, for failure of respondent to
establish by competent evidence the exact amount of damages it suffered, we are
constrained to award temperate damages. Considering that the lower courts have
factually established that the conveyor facility had a remaining life of only five of its
estimated total life of ten years during the time of the collision, then the
replacement cost of P7,046,351.84 should rightly be reduced to 50% or
P3,523,175.92. This is a fair and reasonable valuation, having taking into account
the remaining useful life of the facility.
WHEREFORE, the Petition for Review on Certiorari is hereby DISMISSED.
The assailed Decision and Resolution of the Court of Appeals in C.A.-G.R. CV No.
69819, are hereby MODIFIED, in that temperate damages in the amount of
P3,523,175.92 are awarded, in lieu of nominal damages.
SO ORDERED.