B.F. METAL (CORPORATION), petitioners,

vs.

SPS. ROLANDO M. LOMOTAN and LINAFLOR LOMOTAN and RICO UMUYON, respondents.

Facts:

- Umuyon was driving the owner-type jeep owned by SPS. Lomotan- at the opposite lane, the speeding ten-wheeler truck driven by Onofre Rivera overtook a car by invading the lane

being traversed by the jeep and rammed into the jeep. - The jeep was a total wreck while Umuyon suffered injury which entailed his hospitalization for 19 days.- w/ this, Umuyon could no longer drive, reducing his daily income from P150.00 to P100.00.- Resp filed separate civil action for damages against BF Metal (truck owner) and Rivera alleging that rivera’s

gross negligence was the immediate cause and bf metal failed to exercise the required diligence in the selection and supervision of Rivera.

- The complaint prayed for the award of actual, exemplary and moral damages and attorney’s fees in favor of respondents.

- Bf metal and rivera denied and averred that resp were not proper parties in interest not being the regd owner of the jeep

- the auto-repair shop owner gave a cost estimate for the repair of the wrecked jeep. Among the documentary evidence presented were the 1989 cost estimate of Pagawaan Motors, Inc.,3 which pegged the repair cost of the jeep at P96,000.00, and the cost estimate of Fajardo Motor Works4 done in 1993, which reflected an increased repair cost at P130,655.00.

- They also presented in evidence a copy of the Decision of the RTC, in Criminal Case People of the Philippines v. Onofre V. Rivera, finding Rivera guilty of reckless imprudence resulting in damage to property with physical injuries.

- For petitioner’s part they presented guidelines in preventive maintenance of vehicles- Tc rendered them guilty - The trial court split the award of actual damages into three items, namely, the cost of the wrecked jeep, the

medical expenses incurred by respondent Umuyon and the monetary value of his earning capacity. - On appeal, the Court of Appeals reduced the amount of medical expenses and loss of earning capacity to which

respondent Umuyon is entitled but increased from P96,700.00 to P130,655.00 the award in favor of Spouses Lomotan for the cost of repairing the wrecked jeep.

- Bf metal argued that the alleged cost of repairing the jeep has not been incurred but is only a job estimate- It argues that the best evidence obtainable to prove with a reasonable degree of certainty the value of the jeep

is the acquisition cost or the purchase price of the jeep minus depreciation for one year of use equivalent to 10% of the purchase price.

-

Issue:

1. Won the actual damages based only on a job estimate should be lowered?2. Won sps lomotan are also entitled to moral damages and exemplary damages and atty’s fees

Ruling:

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.

In the instant case, no evidence was submitted to show the amount actually spent for the repair or replacement of the wrecked jeep.

Spouses Lomotan presented two different cost estimates to prove the alleged actual damage

neither estimate is competent to prove actual damages. Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages.

the best evidence to prove the value of the wrecked jeep is reflected in Exhibit "I," the Deed of Sale showing the jeep’s acquisition cost at P72,000.00.

However, the depreciation value of equivalent to 10% of the acquisition cost cannot be deducted from it in the absence of proof in support thereof.

As to moral damages, bf argued that only umuyon is entitled since only he suffered PI

SC ruled that In the case of moral damages, the damages must be shown to be the proximate result of a wrongful act or omission.

The claimant must establish the factual basis of the damages and its causal tie with the acts of the defendant.

In fine, an award of moral damages would require

1. evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant;2. a culpable act or omission factually established; 3. proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by

the claimant; 4. that the case is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of

the Civil Code.

Undoubtedly, petitioner is liable for the moral damages suffered by respondent Umuyon. Its liability is based on a quasi-delict or on its negligence in the supervision and selection of its driver, causing the vehicular accident and physical injuries to respondent Umuyon. Rivera is also liable for moral damages to respondent Umuyon based on either culpa criminal or quasi-delict. Since the decision in the criminal case, which found Rivera guilty of criminal negligence, did not award moral damages, the same may be awarded in the instant civil action for damages.

Jurisprudence show that in criminal offenses resulting to the death of the victim, an award within the range of P50,000.00 to P100,000.00 as moral damages has become the trend.20 Under the circumstances, because respondent Umuyon did not die but had become permanently incapacitated to drive as a result of the accident, the award of P30,000.00 for moral damages in his favor is justified.21

However, there is no legal basis in awarding moral damages to Spouses Lomotan whether arising from the criminal negligence committed by Rivera or based on the negligence of petitioner under Article 2180.

Article 2219 speaks of recovery of moral damages in case of a criminal offense resulting in physical injuries or quasi-delicts causing physical injuries, the two instances where Rivera and petitioner are liable for moral damages to respondent Umuyon.

Article 2220 does speak of awarding moral damages where there is injury to property, but the injury must be willful and the circumstances show that such damages are justly due. There being no proof that the accident was willful, Article 2220 does not apply.

Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages.

Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence.

While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded.

Spouses Lomotan have shown that they are entitled to compensatory damages while respondent Umuyon can recover both compensatory and moral damages. To serve as an example for the public good, the Court affirms the award of exemplary damages in the amount of P100,000.00 to respondents. Because exemplary damages are awarded, attorney’s fees may also be awarded in consonance with Article 2208 (1). The Court affirms the appellate court’s award of attorney’s fees in the amount of P25,000.00.

Actual – 72k (acq cost)

Moral – 30k only umuyon (only suffered PI)

legal interest of 6% per annum from the date of promulgation of the

12% per annum from the time the Decision of this Court attains finality, on all sums awarded until their full satisfaction.

HEIRS OF RAYMUNDO CASTRO, petitioners,

vs.

APOLONIO BUSTOS, respondent.

Facts:

Respondent Apolonio Bustos was charged with the crime of murder for the killing of Raymundo Castro whose heirs are now the petitioners.

The trial court found Bustos guilty only of homicide and, crediting him with two mitigating circumstances

namely, passion or obfuscation and voluntary surrender,

and ordered to indemnify the petitioners, who were represented in the case by a private prosecutor, in the sum of six thousand pesos (P6,000) "without prejudice to whatever the accused (respondent) is entitled from the Government Service Insurance System (GSIS) for his services of around twenty-six (26) years as a public school teacher

Petitioner appealed praying that the portion regarding what said respondent will receive from the GSIS be deleted and that he be ordered to pay petitioners "the aggregate sum of P50,764.00 as indemnity and actual, moral, temperate and exemplary damages."

CA initially awarded:

6k 0 indemnity

13,380 – loss of earning capacity (annual salary 2676) - compensatory

Ca amended decision and held that in view of the presence of two mitigating circumstances, without any aggravating one to offset them, the award of moral and compensatory damages should be eliminated.

Issue: WON the deleting of moral and compensatory is proper?

Ruling: No.

CA Having held that it had discretion in the premises, the court easily yielded to the argument that simply because it had credited the respondent with two mitigating circumstances, it was already justified

in eliminating the items of damages already adverted to, presumably having in mind said Art. 2204 which provides that:

In crimes, the damages to be adjudicated may be respectively increased or lessened according to the aggravating or mitigating circumstances.

Under Art 2202 of CC

In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant.

Art 2206 (involving death)

1. As indemnity for the death of the victim of the offense — P12,000.00, without the need of any evidence or proof of damages, and even though there may have been mitigating circumstances attending the commission of the offense.

2. As indemnity for loss of earning capacity of the deceased — an amount to be fixed by the Court according to the circumstances of the deceased related to his actual income at the time of death and his probable life expectancy, the said indemnity to be assessed and awarded by the court as a matter of duty, unless the deceased had no earning capacity at said time on account of permanent disability not caused by the accused. If the deceased was obliged to give support, under Art. 291, Civil Code, the recipient who is not an heir, may demand support from the accused for not more than five years, the exact duration to be fixed by the court.

3. As moral damages for mental anguish, — an amount to be fixed by the court. This may be recovered even by the illegitimate descendants and ascendants of the deceased.

4. As exemplary damages, when the crime is attended by one or more aggravating circumstances, — an amount to be fixed in the discretion of the court, the same to be considered separate from fines.

5. As attorney's fees and expresses of litigation, — the actual amount thereof, (but only when a separate civil action to recover civil liability has been filed or when exemplary damages are awarded).

6. Interests in the proper cases.

7. It must be emphasized that the indemnities for loss of earning capacity of the deceased and for moral damages are recoverable separately from and in addition to the fixed sum of P12,000.00 corresponding to the indemnity for the sole fact of death, and that these damages may, however, be respectively increased or lessened according to the mitigating or aggravating circumstances, except items 1 and 4 above, for obvious reasons.

The next item objected to refers to the damages awarded to the heirs of the deceased passengers for loss of earning capacity, separately from the indemnities by reason of death. The ground for the objection is that loss of earning capacity was not specifically pleaded or claimed in the complaint. This item, however, may be considered included in the

prayer for "actual damages" and for other "just and equitable reliefs", especially if taken in the light of Art. 2206, in connection with Art. 1764, of the Civil Code, which allows, in addition to an indemnity of at least P3,000 by reason of death, recovery for loss of earning capacity on the part of the deceased, the same to be paid to his heirs "in every case ... unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death."

No sufficient basis to increase the amts fixed by CA. although CA faied to state the legal basis , SC opt to save time not to remand

their only claim is that "the Court of Appeals erred when it issued the amended decision eliminating the award of P6,000 moral damages and the award of P13,380.00 loss of earnings of the deceased Raymundo Castro." In these circumstances, even if We should award the amounts of damages just mentioned, inspite of the absence of the pertinent findings of fact by the Court of Appeals, We would not have to reach beyond amounts that are undisputed by the respondent.

Held: 6k – moral

13,380 compensatory

6k – indemnity

THIRD DIVISION

SPS. MOISES and CLEMENCIA ANDRADA,

Petitioners,

- versus -

PILHINO SALES CORPORATION, represented by its Branch Manager, JOJO S. SAET,

Respondent.

G.R. No. 156448

Present:

BRION, Acting Chairperson,*

BERSAMIN,

ABAD,**

VILLARAMA, JR., and

SERENO, JJ.

Promulgated:

February 23, 2011

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

D E C I S I O N

BERSAMIN, J.:

An appeal by petition for review on certiorari under Rule 45 shall raise only questions of law. Thus, the herein petition for review must fail for raising a question essentially of fact.

Antecedents

On December 28, 1990, respondent Pilhino Sales Corporation (Pilhino) sued Jose Andrada, Jr. and his wife, Maxima, in the Regional Trial Court in Davao City (RTC) to recover the principal sum of P240,863.00, plus interest and incidental charges (Civil Case No. 20,489-90). Upon Pilhino’s application, the RTC issued a writ of preliminary attachment, which came to be implemented against a Hino truck and a Fuso truck both owned by Jose Andrada, Jr. However, the levies on attachment were lifted after Jose filed a counter-attachment bond.

In due course, the RTC rendered a decision against Jose Andrada, Jr. and his wife. Pilhino opted to enforce the writ of execution against the properties of the Andradas instead of claiming against the counter-attachment bond considering that the premium on the bond had not been paid. As a result, the sheriff seized the Hino truck and sold it at the ensuing public auction, with Pilhino as the highest bidder. However, the Hino truck could not be transferred to Pilhino’s name due to its having been already registered in the name of petitioner Moises Andrada. It appears that the Hino truck had been meanwhile sold by Jose Andrada, Jr. to Moises Andrada, which sale was unknown to Pilhino, and that Moises had mortgaged the truck to BA Finance Corporation (BA Finance) to secure his own obligation.

BA Finance sued Moises Andrada for his failure to pay the loan (Civil Case No. 5117). After a decision was rendered in the action in favor of BA Finance, a writ of execution issued, by which the sheriff levied upon and seized the Hino truck while it was in the possession of Pilhino and sold it at public auction, with BA Finance as the highest bidder.

Consequently, Pilhino instituted this action in the RTC in Davao City against Spouses Jose Andrada, Jr. and Maxima Andrada, Spouses Moises Andrada and Clemencia Andrada, Jose Andrada, Sr., BA Finance, Land Transportation Office (in

Surallah, South Cotabato), and the Registrar of Deeds of General Santos City to annul the following: (a) the deed of sale between Jose Andrada, Jr. and Moises Andrada; (b) the chattel mortgage involving the Hino truck between Moises Andrada and BA Finance; (c) the deed of conveyance executed by Jose Andrada, Jr. in favor of his father, Jose Andrada, Sr., involving a hard-top jeep; and (d) the certificate of registration of the Hino truck in the name of Moises Andrada as well as the registration of the chattel mortgage with the Registry of Deeds of General Santos City. The action was docketed as Civil Case No. 21,898-93.

Of the Andradas who were defendants in Civil Case No. 21,898-93, only Moises Andrada and his wife filed their responsive pleading. Later on, Jose Andrada, Jr. and his wife and Pilhino submitted a compromise agreement dated August 20, 1993. They submitted a second compromise agreement dated March 4, 1994 because the first was found to be defective and incomplete. The RTC thereafter rendered a partial judgment on March 21, 1994 based on the second compromise agreement. After that, further proceedings were taken in Civil Case No. 21,898-93 only with respect to Moises Andrada and his wife, and BA Finance.

Moises Andrada and his wife averred as defenses that they had already acquired the Hino truck from Jose Andrada, Jr. free from any lien or encumbrance prior to its seizure by the sheriff pursuant to the writ of execution issued in Civil Case No. 20,489-90; that their acquisition had been made in good faith, considering that at the time of the sale the preliminary attachment had already been lifted; and that Pilhino’s recourse was to proceed against the counter-attachment bond.

For its part, BA Finance claimed lack of knowledge of the truth of the material allegations of the complaint of Pilhino; and insisted that the Hino truck had been validly mortgaged to it by Moises Andrada, the lawful owner, to secure his own valid obligation.

On March 25, 1998, the RTC, citing the compromise agreement between Pilhino and Jose Andrada, Jr. that had settled all the claims of Pilhino against Jose Andrada, Jr., and the good faith of Pilhino and BA Finance in filing their respective actions, rendered its decision in Civil Case No. 21,898-93,[1] disposing:

WHEREFORE, judgment is rendered dismissing this case insofar as the spouses Moises Andrada and Clemencia Andrada, Jose Andrada, Sr. and BA Finance Corporation, now accordingly BA Savings Bank, including the counterclaims.

SO ORDERED.

Spouses Moises and Clemencia Andrada appealed the decision rendered on March 25, 1998 to the extent that the RTC thereby: (a) dismissed their counterclaim; (b) declared that the deed of sale of the Hino truck between Jose Andrada, Jr. and Moises Andrada had been simulated; and (c) approved the compromise agreement between Pilhino and Spouses Jose Andrada, Jr. and Maxima Andrada.

On December 13, 2001, the Court of Appeals (CA) promulgated its decision, as follows:[2]

WHEREFORE, the judgment appealed from is AFFIRMED with the modification that the sale of the Hino truck by defendant Jose Andrada, Jr. in favor of defendant-appellant Moises Andrada is declared valid, subject to the rights of BA Finance as mortgagee and highest bidder.

SO ORDERED.

Spouses Moises and Clemencia Andrada are now before the Court via petition for review on certiorari to pose the following issues: [3]

1. Whether or not Pilhino should be held liable for the damages the petitioners sustained from Pilhino’s levy on execution upon the Hino truck under Civil Case No. 20,489-90; and

2. Whether or not Pilhino was guilty of bad faith when it proceeded with the levy on execution upon the Hino truck owned by Moises Andrada.

Ruling

We find no merit in the petition for review.

The petitioners assail the decision promulgated by the CA to the extent that it denied their claim for the damages they had sought by way of counterclaim. They anchored their claim on Article 21 of the Civil Code, which provides that “any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damage.”

Article 21 of the Civil Code, in conjunction with Article 19 of the Civil Code, is part of the cause of action known in this jurisdiction as “abuse of rights.” The elements of abuse of rights are: (a) there is a legal right or duty; (b) exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.[4]

In its assailed decision, the CA found that Pilhino had acted in good faith in bringing Civil Case No. 21,898-93 to annul the deed of sale involving the Hino truck executed by Jose Andrada, Jr. in favor of Moises Andrada, considering that Pilhino had “believed that the sale in favor of defendants-appellants [had been] resorted to so that Jose Andrada [might] evade his obligations.”[5] The CA concluded that no remedy was available for any damages that the petitioners sustained from the filing of Civil Case No. 21,898-93 against them because “the law affords no remedy for such damages resulting from an act which does not amount to a legal injury or wrong.”[6]

Worthy to note is that the CA’s finding and conclusion rested on the RTC’s own persuasion that the sale of the Hino truck to Moises Andrada had been simulated.[7]

Yet, the petitioners still insist in this appeal that both lower courts erred in their conclusion on the absence of bad faith on the part of Pilhino.

We cannot side with the petitioners. Their insistence, which represents their disagreement with the CA’s declaration that the second and third elements of abuse of rights, supra, were not established, requires the consideration and review of factual issues. Hence, this appeal cannot succeed, for an appeal by petition for review on certiorari cannot determine factual issues. In the exercise of its power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial. Perforce, the findings of fact by the CA are conclusive and binding on the Court. This restriction of the review to questions of law has been institutionalized in Section 1, Rule 45 of the Rules of Court, viz:

Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth. (1a, 2a)[8]

It is true that the Court has, at times, allowed exceptions from the restriction. Among the recognized exceptions are the following, to wit:[9]

(a) When the findings are grounded entirely on speculation, surmises, or conjectures;

(b) When the inference made is manifestly mistaken, absurd, or impossible;

(c) When there is grave abuse of discretion;

(d) When the judgment is based on a misapprehension of facts;

(e) When the findings of facts are conflicting;

(f) When in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee;

(g) When the CA’s findings are contrary to those by the trial court;

(h) When the findings are conclusions without citation of specific evidence on which they are based;

(i) When the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent;

(j) When the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; or

(k) When the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.

However, the circumstances of this case do not warrant reversing or modifying the findings of the CA, which are consistent with the established facts. Verily, the petitioners did not prove the concurrence of the elements of abuse of rights.

The petitioners further seek attorney’s fees based on Article 2208 (4) of the Civil Code, which provides that “in the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except xxx (4) in cases of clearly unfounded civil action or proceeding against the plaintiff xxx.”

The petitioners are not entitled to attorney’s fees.

It is well accepted in this jurisdiction that no premium should be placed on the right to litigate and that not every winning party is entitled to an automatic grant of attorney’s fees.[10] Indeed, before the effectivity of the new Civil Code, such fees could not be recovered in the absence of a stipulation.[11] It was only with the advent of the new Civil Code that the right to collect attorney’s fees in the instances mentioned in Article 2208 was recognized,[12] and such fees are now included in the concept of actual damages.[13] One such instance is where the defendant is guilty of gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim.[14] This is a corollary of the general principle expressed in Article 19 of the Civil Code that everyone must, in the performance of his duties, observe honesty and good faith and the rule embodied in Article 1170 that anyone guilty of fraud (bad faith) in the performance of his obligation shall be liable for damages.

But, as noted by the Court in Morales v. Court of Appeals,[15] the award of attorney’s fees is the exception rather than the rule. The power of a court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification; its basis cannot be left to speculation and conjecture.[16] The general rule is that attorney’s fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate.[17]

Herein, the element of bad faith on the part of Pilhino in commencing and prosecuting Civil Case No. 21,898-93, which was necessary to predicate the lawful grant of attorney’s fees based on Article 2208 (4) of the Civil Code, was not established. Accordingly, the petitioners’ demand for attorney’s fees must fail.

WHEREFORE, we deny the petition for review on certiorari for its lack of merit, and affirm the decision of the Court of Appeals.

SO ORDERED.

G.R. No. L-28589 January 8, 1973

RAFAEL ZULUETA, ET AL., plaintiffs-appellees,

vs.

PAN AMERICAN WORLD AIRWAYS, INC., defendant-appellant.

Alfredo L. Benipayo for plaintiffs-appellee Rafael Zulueta and Carolina Zulueta.

Justo L. Albert for plaintiff-appellee Telly Albert Zulueta.

V.E. del Rosario and Associates and Salcedo, Del Rosario, Bito, Misa and Lozada for defendant-appellant.

R E S O L U T I O N

CONCEPCION, C.J.:

Both parties in this case have moved for the reconsideration of the decision of this Court promulgated on February 29, 1972. Plaintiffs maintain that the decision appealed from should be affirmed in toto. The defendant, in turn, prays that the decision of this Court be "set aside ... with or without a new trial, ... and that the complaint be dismissed, with costs; or, in the alternative, that the amount of the award embodied therein be considerably reduced." .

Subsequently to the filing of its motion for reconsideration, the defendant filed a "petition to annul proceedings and/or to order the dismissal of plaintiffs-appellees' complaint" upon the ground that "appellees' complaint actually seeks the recovery of only P5,502.85 as actual damages, because, for the purpose of determining the jurisdiction of the lower court, the unspecified sums representing items of alleged damages, may not be considered, under the settled doctrines of this Honorable Court," and "the jurisdiction of courts of first instance when the complaint in the present case was filed on Sept. 30, 1965" was limited to cases "in which the demand, exclusive of interest, or the value of the property in controversy amounts to more than ten thousand pesos" and "the mere fact that the complaint also prays for unspecified moral damages and attorney's fees, does not bring the action within the jurisdiction of the lower court."

We find no merit in this contention. To begin with, it is not true that "the unspecified sums representing items or other alleged damages, may not be considered" — for the purpose of determining the jurisdiction of the court — "under the settled doctrines of this Honorable Court." In fact, not a single case has been cited in support of this allegation.

Secondly, it has been held that a clam for moral damages is one not susceptible of pecuniary estimation. 1 In fact, Article 2217 of the Civil Code of the Philippines explicitly provides that "(t)hough incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission." Hence, "(n)o proof pecuniary loss necessary" — pursuant to Article 2216 of the same Code — "in order that moral ... damages may be adjudicated." And "(t)he assessment of such damages ... is left to the discretion of the court" - said article adds - "according to the circumstances of each case." Appellees' complaint is, therefore, within the original jurisdiction of courts of first instance, which includes "all civil actions in which the subject of the litigation is not capable of pecuniary estimation." 2

Thirdly, in its answer to plaintiffs' original and amended complainants, defendant had set up a counterclaim in the aggregate sum of P12,000, which is, also, within the original jurisdiction of said courts, thereby curing the alleged defect if any, in plaintiffs' complaint. 3

We need not consider the jurisdictional controversy as to the amount the appellant sues to recover because the counterclaim interposed establishes the jurisdiction of the District Court. Merchants' Heat & Light Co. v. James B. Clow & Sons, 204 U.S. 286, 27 S. Ct. 285, 51 L. Ed. 488; O. J. Lewis Mercantile Co. v. Klepner, 176 F. 343 (C.C.A. 2), certiorari denied 216 U.S. 620, 30 S Ct. 575, 54 L. Ed. 641. ... . 4

... courts have said that "when the jurisdictional amount is in question, the tendering of a counterclaim in an amount which in itself, or added to the amount claimed in the petition, makes up a sum equal to the amount necessary to the jurisdiction of this court, jurisdiction is established, whatever may be the state of the plaintiff's complaint." American Sheet & Tin Plate Co. v. Winzeler (D.C.) 227 F. 321, 324. 5

Thus, in Ago v. Buslon, 6 We held:

... . Then, too, petitioner's counterclaim for P37,000.00 was, also, within the exclusive original jurisdiction of the latter courts, and there are ample precedents to the effect that "although the original claim involves less than the jurisdictional amount, ... jurisdiction can be sustained if the counterclaim (of the compulsory type)" — such as the one set up by petitioner herein, based upon the damages allegedly suffered by him in consequence of the filing of said

complaint — "exceeds the jurisdictional amount." (Moore Federal Practice, 2nd ed. [1948], Vol. 3, p. 41; Ginsburg vs. Pacific Mutual Life Ins. Co. of California, 69 Fed. [2d] 97; Home Life Ins. Co. vs. Sipp., 11 Fed. [2d]474; American Sheet & Tin Plate Co. vs. Winzeler [D.C.], 227 Fed. 321, 324; Brix vs. People's Mutual Life Ins. Co., 41 P. 2d. 537, 2 Cal. 2d. 446; Emery vs. Pacific Employees Ins. Co., 67 P. 2d. 1046, 8 Cal. 2d. 663).

Needless to say, having not only failed to question the jurisdiction of the trial court — either in that court or in this Court, before the rendition of the latter's decision, and even subsequently thereto, by filing the aforementioned motion for reconsideration and seeking the reliefs therein prayed for — but, also, urged both courts to exercise jurisdiction over the merits of the case, defendant is now estopped from impugning said jurisdiction. 7

Before taking up the specific questions raised in defendant's motion for reconsideration, it should be noted that the same is mainly predicated upon the premise that plaintiffs' version is inherently incredible, and that this Court should accept the theory of the defense to the effect that petitioner was off-loaded because of a bomb-scare allegedly arising from his delay in boarding the aircraft and subsequent refusal to open his bags for inspection. We need not repeat here the reasons given in Our decision for rejecting defendant's contention and not disturbing the findings of fact of His Honor, the Trial Judge, who had the decided advantage — denied to Us — of observing the behaviour of the witnesses in the course of the trial and found those of the plaintiffs worthy of credence, not the evidence for the defense.

It may not be amiss however, to stress the fact that, in his written report, made in transit from Wake to Manila — or immediately after the occurrence and before the legal implications or consequences thereof could have been the object of mature deliberation, so that it could, in a way, be considered as part of the res gestae — Capt. Zentner stated that Zulueta had been off-loaded "due to drinking" and "belligerent attitude," thereby belying the story of the defense about said alleged bomb-scare, and confirming the view that said agent of the defendant had acted out of resentment because his ego had been hurt by Mr. Zulueta's adamant refusal to be bullied by him. Indeed, had there been an iota of truth in said story of the defense, Capt. Zentner would have caused every one of the passengers to be frisked or searched and the luggage of all of them examined — as it is done now — before resuming the flight from Wake Island. His failure to do so merely makes the artificious nature of defendant's version more manifest. Indeed, the fact that Mrs. Zulueta and Miss Zulueta were on board the plane shows beyond doubt that Mr. Zulueta could not possibly have intended to blow it up.

The defense tries to explain its failure to introduce any evidence to contradict the testimony of Mr. Zulueta as to why he had gone to the beach and what he did there, alleging that, in the very nature of things, nobody else could have witnessed it. Moreover, the defense insists, inter alia, that the testimony of Mr. Zulueta is inherently incredible because he had no idea as to how many toilets the plane had; it could not have taken him an hour to relieve himself in the beach; there were eight (8) commodes at the terminal toilet for men ; if he felt the need of relieving himself, he would have seen to it that the soldiers did not beat him to the terminal toilets; he did not tell anybody about the reason for going to the beach, until after the plane had taken off from Wake.

We find this pretense devoid of merit. Although Mr. Zulueta had to look for a secluded place in the beach to relieve himself, beyond the view of others, defendant's airport manager, whom Mr. Zulueta informed about it, soon after the departure of the plane, could have forthwith checked the veracity of Mr. Zulueta's statement by asking him to indicate the specific place where he had been in the beach and then proceeding thereto for purposes of verification.

Then, again, the passenger of a plane seldom knows how many toilets it has. As a general rule, his knowledge is limited to the toilets for the class — first class or tourist class — in which he is. Then, too, it takes several minutes for the passengers of big aircrafts, like those flying from the U.S. to the Philippines, to deplane. Besides, the speed with which a given passenger may do so depends, largely, upon the location of his seat in relation to the exit door. He cannot go over the heads of those nearer than he thereto. Again, Mr. Zulueta may have stayed in the toilet terminal for some time, expecting one of the commodes therein to be vacated soon enough, before deciding to go elsewhere to look for a place suitable to his purpose. But he had to walk, first, from the plane to the terminal building and, then, after vainly waiting therein for a while, cover a distance of about 400 yards therefrom to the beach, and seek there a place not visible by the people in the plane and in the terminal, inasmuch as the terrain at Wake Island is flat. What is more, he must have had to takeoff part, at least, of his clothing, because, without the facilities of a toilet, he had to wash himself and, then, dry himself up before he could be properly attired and walk back the 400 yards that separated him from the terminal building and/or the plane. Considering, in addition to the foregoing, the fact that he was not feeling well, at that time, We are not prepared to hold that it could not have taken him around an hour to perform the acts narrated by him.

But, why — asks the defendant — did he not reveal the same before the plane took off? The record shows that, even before Mr. Zulueta had reached the ramp leading to the plane, Capt. Zentner was already demonstrating at him in an intemperate and arrogant tone and attitude ("What do you think you are?), thereby impelling Mr. Zulueta to answer back in the same vein. As a consequence, there immediately ensued an altercation in the course of which each apparently tried to show that he could not be cowed by the other. Then came the order of Capt. Zentner to off-load all of the Zuluetas, including Mrs. Zulueta and the minor Miss Zulueta, as well as their luggage, their overcoats and other effects handcarried by them; but, Mr. Zulueta requested that the ladies be allowed to continue the trip. Meanwhile, it had taken time to locate his four (4) pieces of luggage. As a matter of fact, only three (3) of them were found, and the fourth eventually remained in the plane. In short, the issue between Capt. Zentner and Mr. Zulueta had been limited to determining whether the latter would allow himself to be browbeaten by the former. In the heat of the altercation, nobody had inquired about the cause of Mr. Zulueta's delay in returning to the plane, apart from the fact that it was rather embarrassing for him to explain, in the presence and within the hearing of the passengers and the crew, then assembled around them, why he had gone to the beach and why it had taken him some time to answer there a call of nature, instead of doing so in the terminal building.

Defendant's motion for reconsideration assails: (1) the amount of damages awarded as excessive; (2) the propriety of accepting as credible plaintiffs' theory; (3) plaintiffs' right to recover either moral or exemplary damages; (4) plaintiffs' right to recover attorney's fees; and (5) the non-enforcement of the compromise agreement between the defendant and plaintiff's wife, Mrs. Zulueta. Upon the other hand, plaintiffs' motion for reconsideration contests the decision of this Court reducing the amount of damages awarded by the trial court to approximately one-half thereof, upon the ground, not only that, contrary to the findings of this Court, in said decision, plaintiff had not contributed to the aggravation of his altercation or incident with Capt. Zentner by reacting to his provocation with extreme belligerency thereby allowing himself to be dragged down to the level on which said agent of the defendant had placed himself, but, also, because the purchasing power of our local currency is now much lower than when the trial court rendered its appealed decision, over five (5) years ago, on July 5, 1967, which is an undeniable and undisputed fact. Precisely, for this reason, defendant's characterization as exorbitant of the aggregate award of over P700,000 by way of damages, apart from attorney's fees in the sum of P75,000, is untenable. Indeed, said award is now barely equivalent to around 100,000 U. S. dollars.

It further support of its contention, defendant cites the damages awarded in previous cases to passengers of airlines, 8 as well as in several criminal cases, and some cases for libel and slander. None of these cases is, however, in point. Said cases against airlines referred to passengers who were merely constrained to take a tourist class accommodation,

despite the fact that they had first class tickets, and that although, in one of such cases, there was proof that the airline involved had acted as it did to give preference to a "white" passenger, this motive was not disclosed until the trial in court. In the case at bar, plaintiff Rafael Zulueta was "off-loaded" at Wake Island, for having dared to retort to defendant's agent in a tone and manner matching, if not befitting his intemperate language and arrogant attitude. As a consequence, Capt. Zentner's attempt to humiliate Rafael Zulueta had boomeranged against him (Zentner), in the presence of the other passengers and the crew. It was, also, in their presence that defendant's agent had referred to the plaintiffs as "monkeys," a racial insult not made openly and publicly in the abovementioned previous cases against airlines.

In other words, Mr. Zulueta was off-loaded, not to protect the safety of the aircraft and its passengers, but to retaliate and punish him for the embarrassment and loss of face thus suffered by defendant's agent. This vindictive motive is made more manifest by the note delivered to Mr. Zulueta by defendant's airport manager at Wake Island, Mr. Sitton, stating that the former's stay therein would be "for a minimum of one week," during which he would be charged $13.30 per day. This reference to a "minimum of one week" revealed the intention to keep him there stranded that long, for no other plane, headed for Manila, was expected within said period of time, although Mr. Zulueta managed to board, days later, a plane that brought him to Hawaii, whence he flew back to the Philippines, via Japan.

Neither may criminal cases, nor the cases for libel and slander cited in the defendant's motion for reconsideration, be equated with the present case. Indeed, in ordinary criminal cases, the award for damages is, in actual practice, of purely academic value, for the convicts generally belong to the poorest class of society. There is, moreover, a fundamental difference between said cases and the one at bar. The Zuluetas had a contract of carriage with the defendant, as a common carrier, pursuant to which the latter was bound, for a substantial monetary consideration paid by the former, not merely to transport them to Manila, but, also, to do so with "extraordinary diligence" or "utmost diligence." 9 The responsibility of the common carrier, under said contract, as regards the passenger's safety, is of such a nature, affecting as it does public interest, that it "cannot be dispensed with" or even "lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise." 10 In the present case, the defendant did not only fail to comply with its obligation to transport Mr. Zulueta to Manila, but, also, acted in a manner calculated to humiliate him, to chastise him, to make him suffer, to cause to him the greatest possible inconvenience, by leaving him in a desolate island, in the expectation that he would be stranded there for a "minimum of one week" and, in addition thereto, charged therefor $13.30 a day.

It is urged by the defendant that exemplary damages are not recoverable in quasi-delicts, pursuant to Article 2231 of our Civil Code, except when the defendant has acted with "gross negligence," and that there is no specific finding that it had so acted. It is obvious, however, that in off-loading plaintiff at Wake Island, under the circumstances heretofore adverted to, defendant's agents had acted with malice aforethought and evident bad faith. If "gross negligence" warrants the award of exemplary damages, with more reason is its imposition justified when the act performed is deliberate, malicious and tainted with bad faith. Thus, in Lopez v. PANAM, 11 We held:

The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages (Articles 2229, 2232, New Civil Code.)

Similarly, in NWA v. Cuenca, 12 this Court declared that an award for exemplary damages was justified by the fact that the airline's "agent had acted in a wanton, reckless and oppressive manner" in compelling Cuenca, upon arrival at

Okinawa, to transfer, over his objection, from the first class, where he was accommodated from Manila to Okinawa, to the tourist class, in his trip to Japan, "under threat of otherwise leaving him in Okinawa," despite the fact that he had paid in full the first class fare and was issued in Manila a first class ticket.

Defendant cites Rotea v. Halili, 13 in support of the proposition that a principal is not liable for exemplary damages owing to acts of his agent unless the former has participated in said acts or ratified the same. Said case involved, however, the subsidiary civil liability of an employer arising from criminal acts of his employee, and "exemplary damages ... may be imposed when the crime was committed with one or more aggravating circumstances." 14 Accordingly, the Rotea case is not in point, for the case at bar involves a breach of contract, as well as a quasi-delict.

Neither may the case of Palisoc v. Brillantes, 15 invoked by the defendant, be equated with the case at bar. The Palisoc case dealt with the liability of school officials for damages arising from the death of a student (Palisoc) due to fist blows given by another student (Daffon), in the course of a quarrel between them, while in a laboratory room of the Manila Technical Institute. In an action for damages, the head thereof and the teacher in charge of said laboratory were held jointly and severally liable with the student who caused said death, for failure of the school to provide "adequate supervision over the activities of the students in the school premises," to protect them "from harm, whether at the hands of fellow students or other parties." Such liability was predicated upon Article 2180 of our Civil Code, the pertinent part of which reads:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible.

xxx xxx xxx

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody.

xxx xxx xxx

Obviously, the amount of damages warded in the Palisoc case is not and cannot serve as the measure of the damages recoverable in the present case, the latter having been caused directly and intentionally by an employee or agent of the defendant, whereas the student who killed the young Palisoc was in no wise an agent of the school. Moreover, upon her arrival in the Philippines, Mrs. Zulueta reported her husband's predicament to defendant's local manager and asked him to forthwith have him (Mr. Zulueta) brought to Manila, which defendant's aforementioned manager refused to do, thereby impliedly ratifying the off-loading of Mr. Zulueta at Wake Island.

It is next urged that, under the contract of carriage with the defendant, Mr. Zulueta was bound to be present at the time scheduled for the departure of defendant's plane and that he had, consequently, violated said contract when he did not show up at such time. This argument might have had some weight had defendant's plane taken off before Mr. Zulueta had shown up. But the fact is that he was ready, willing and able to board the plane about two hours before it actually

took off, and that he was deliberately and maliciously off-loaded on account of his altercation with Capt. Zentner. It should, also, be noted that, although Mr. Zulueta was delayed some 20 to 30 minutes, the arrival or departure of planes is often delayed for much longer periods of time. Followed to its logical conclusion, the argument adduced by the defense suggests that airlines should be held liable for damages due to the inconvenience and anxiety, aside from actual damages, suffered by many passengers either in their haste to arrive at the airport on scheduled time just to find that their plane will not take off until later, or by reason of the late arrival of the aircraft at its destination.

PANAM impugns the award of attorney's fees upon the ground that no penalty should be imposed upon the right to litigate; that, by law, it may be awarded only in exceptional cases; that the claim for attorney's fees has not been proven; and that said defendant was justified in resisting plaintiff's claim "because it was patently exorbitant."

Nothing, however, can be farther from the truth. Indeed apart from plaintiff's claim for actual damages, the amount of which is not contested, plaintiffs did not ask any specific sum by way of exemplary and moral damages, as well as attorney's fees, and left the amount thereof to the "sound discretion" of the lower court. This, precisely, is the reason why PANAM, now, alleges — without justification that the lower court had no jurisdiction over the subject matter of the present case.

Moreover, Article 2208 of our Civil Code expressly authorizes the award of attorney's fees "when exemplary damages are awarded," — as they are in this case —as well as "in any other case where the court deems it just and equitable that attorney's fees ... be recovered," and We so deem it just and equitable in the present case, considering the "exceptional" circumstances obtaining therein, particularly the bad faith with which defendant's agent had acted, the place where and the conditions under which Rafael Zulueta was left at Wake Island, the absolute refusal of defendant's manager in Manila to take any step whatsoever to alleviate Mr. Zulueta's predicament at Wake and have him brought to Manila — which, under their contract of carriage, was defendant's obligation to discharge with "extra-ordinary" or "utmost" diligence — and, the "racial" factor that had, likewise, tainted the decision of defendant's agent, Capt. Zentner, to off-load him at Wake Island.

As regards the evidence necessary to justify the sum of P75,000 awarded as attorney's fees in this case, suffice it to say that the quantity and quality of the services rendered by plaintiffs' counsel appearing on record, apart from the nature of the case and the amount involved therein, as well as his prestige as one of the most distinguished members of the legal profession in the Philippines, of which judicial cognizance may be taken, amply justify said award, which is a little over 10% of the damages (P700,000) collectible by plaintiffs herein. Indeed, the attorney's fees in this case is proportionally much less than that adjudged in Lopez v. PANAM 16 in which the judgment rendered for attorney's fees (P50,000) was almost 20% of the damages (P275,000) recovered by the plaintiffs therein.

The defense assails the last part of the decision sought to be reconsidered, in which — relying upon Article 172 of our Civil Code, which provides that "(t)he wife cannot bind the conjugal partnership without the husband's consent, except in cases provided by law," and it is not claimed that this is one of such cases — We denied a motion, filed by Mrs. Zulueta, for the dismissal of this case, insofar as she is concerned - she having settled all her differences with the defendant, which appears to have paid her the sum of P50,000 therefor - "without prejudice to this sum being deducted from the award made in said decision." Defendant now alleges that this is tantamount to holding that said compromise agreement is both effective and ineffective.

This, of course, is not true. The payment is effective, insofar as it is deductible from the award, and, because it is due (or part of the amount due) from the defendant, with or without its compromise agreement with Mrs. Zulueta. What is ineffective is the compromise agreement, insofar as the conjugal partnership is concerned. Mrs. Zulueta's motion was for the dismissal of the case insofar as she was concerned, and the defense cited in support thereof Article 113 of said Code, pursuant to which "(t)he husband must be joined in all suits by or against the wife except: ... (2) If they have in fact been separated for at least one year." This provision, We held, however, refers to suits in which the wife is the principal or real party in interest, not to the case at bar, "in which the husband is the main party in interest, both as the person principally aggrieved and as administrator of the conjugal partnership ... he having acted in this capacity in entering into the contract of carriage with PANAM and paid the amount due to the latter, under the contract, with funds of the conjugal partnership," to which the amounts recoverable for breach of said contract, accordingly, belong. The damages suffered by Mrs. Zulueta were mainly an in accident of the humiliation to which her husband had been subjected. The Court ordered that said sum of P50,00 paid by PANAM to Mrs. Zulueta be deducted from the aggregate award in favor of the plaintiffs herein for the simple reason that upon liquidation of the conjugal partnership, as provided by law, said amount would have to be reckoned with, either as part of her share in the partnership, or as part of the support which might have been or may be due to her as wife of Rafael Zulueta. It would surely be inane to sentence the defendant to pay the P700,000 due to the plaintiffs and to direct Mrs. Zulueta to return said P50,000 to the defendant.

In this connection, it is noteworthy that, for obvious reasons of public policy, she is not allowed by law to waive her share in the conjugal partnership, before the dissolution thereof. 17 She cannot even acquire any property by gratuitous title, without the husband's consent, except from her ascendants, descendants, parents-in-law, and collateral relatives within the fourth degree. 18

It is true that the law favors and encourages the settlement of litigations by compromise agreement between the contending parties, but, it certainly does not favor a settlement with one of the spouses, both of whom are plaintiffs or defendants in a common cause, such as the defense of the rights of the conjugal partnership, when the effect, even if indirect, of the compromise is to jeopardize "the solidarity of the family" — which the

law 19 seeks to protect — by creating an additional cause for the misunderstanding that had arisen between such spouses during the litigation, and thus rendering more difficult a reconciliation between them.

It is urged that there is no proof as to the purpose of the trip of the plaintiffs, that neither is there any evidence that the money used to pay the plane tickets came from the conjugal funds and that the award to Mrs. Zulueta was for her personal suffering or injuries. There was, however, no individual or specific award in favor of Mrs. Zulueta or any of the plaintiffs. The award was made in their favor collectively. Again, in the absence of said proof, the presumption is that the purpose of the trip was for the common benefit of the plaintiffs and that the money had come from the conjugal funds, for, unless there is proof to the contrary, it is presumed "(t)hat things have happened according to the ordinary course of nature and the ordinary habits of life." 20 In fact Manresa maintains 21 that they are deemed conjugal, when the source of the money used therefor is not established, even if the purchase had been made by the wife. 22 And this is the rule obtaining in the Philippines. Even property registered, under the Torrens system, in the name of one of the spouses, or in that of the wife only, if acquired during the marriage, is presumed to belong to the conjugal partnership, unless there is competent proof to the contrary. 23

PANAM maintains that the damages involved in the case at bar are not among those forming part of the conjugal partnership pursuant to Article 153 of the Civil Code, reading:

ART. 153. The following are conjugal partnership property:

(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;

(2) That which is obtained by the industry, or work, or as salary of the spouses, or of either of them;

(3) The fruits, rents or interests received or due during the marriage, coming from the common property or from the exclusive property of each spouse.

Considering that the damages in question have arisen from, inter alia, a breach of plaintiffs' contract of carriage with the defendant, for which plaintiffs paid their fare with funds presumably belonging to the conjugal partnership, We hold that said damages fall under paragraph (1) of said Article 153, the right thereto having been "acquired by onerous title during the marriage ... ." This conclusion is bolstered up by Article 148 of our Civil Code, according to which:

ART. 148. The following shall be the exclusive property of each spouse:

(1) That which is brought to the marriage as his or her own;

(2) That which each acquires, during the marriage, by lucrative title;

(3) That which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses;

(4) That which is purchased with exclusive money of the wife or of the husband.

The damages involved in the case at bar do not come under any of these provisions or of the other provisions forming part of Chapter 3, Title VI, of Book I of the Civil Code, which chapter is entitled "Paraphernal Property." What is more, if "(t)hat which is acquired by right of redemption or by exchange with other property belonging to only one of the spouses," and "(t)hat which is purchased with exclusive money of the wife or of the husband," 24 belong exclusively to such wife or husband, it follows necessarily that that which is acquired with money of the conjugal partnership belongs thereto or forms part thereof. The rulings in Maramba v. Lozano 25 and Perez v. Lantin, 26 cited in defendant's motion for reconsideration, are, in effect, adverse thereto. In both cases, it was merely held that the presumption under Article 160 of our Civil Code — to the effect that all property of the marriage belong to the conjugal partnership — does not apply unless it is shown that it was acquired during marriage. In the present case, the contract of carriage was concededly entered into, and the damages claimed by the plaintiffs were incurred, during marriage. Hence, the rights accruing from said contract, including those resulting from breach thereof by the defendant, are presumed to belong to the conjugal partnership of Mr. and Mrs. Zulueta. The fact that such breach of contract was coupled, also, with a quasi-

delict constitutes an aggravating circumstance and can not possibly have the effect of depriving the conjugal partnership of such property rights.

Defendant insists that the use of conjugal funds to redeem property does not make the property redeemed conjugal if the right of redemption pertained to the wife. In the absence, however, of proof that such right of redemption pertains to the wife — and there is no proof that the contract of carriage with PANAM or the money paid therefor belongs to Mrs. Zulueta — the property involved, or the rights arising therefrom, must be presumed, therefore, to form part of the conjugal partnership.

It is true that in Lilius v. Manila Railroad Co., 27 it was held that the "patrimonial and moral damages" awarded to a young and beautiful woman by reason of a scar — in consequence of an injury resulting from an automobile accident — which disfigured her face and fractured her left leg, as well as caused a permanent deformity, are her paraphernal property. Defendant cites, also, in support of its contention the following passage from Colin y Capitant:

No esta resuelta expresamente en la legislacion española la cuestion de si las indemnizaciones debidas por accidentes del trabaho tienen la consideracion de gananciales, o son bienes particulares de los conyuges.

Inclinan a la solucion de que estas indemnizaciones deben ser consideradas como gananciales, el hecho de que la sociedad pierde la capacidad de trabajocon el accidente, que a ella le pertenece, puesto que de la sociedad son losfrutos de ese trabajo; en cambio, la consideracion de que igual manera que losbienes que sustituyen a los que cada conyuge lleva al matrimonio como propiostienen el caracter de propios, hace pensar que las indemnizaciones que vengana suplir la capacidad de trabajo aportada por cada conyuge a la sociedad, debenser juridicamente reputadas como bienes propios del conyuge que haya sufrido elaccidente. Asi se llega a la misma solucion aportada por la jurisprudencia francesca. 28

This opinion is, however, undecisive, to say the least. It should be noted that Colin y Capitant were commenting on the French Civil Code; that their comment referred to indemnities due in consequence of "accidentes del trabajo "resulting in physical injuries sustained by one of the spouses (which Mrs. Zulueta has not suffered); and that said commentators admit that the question whether or not said damages are paraphernal property or belong to the conjugal partnership is not settled under the Spanish law. 29 Besides, the French law and jurisprudence — to which the comments of Planiol and Ripert, likewise, refer — are inapposite to the question under consideration, because they differ basically from the Spanish law in the treatment of the property relations between husband and wife. Indeed, our Civil Code, like the Spanish Civil Code, favors the system of conjugal partnership of gains. Accordingly, the former provides that, "(i)n the absence of marriage settlements, or when the same are void, the system of relative community or conjugal partnership of gains ... shall govern the property relations between" the spouses. 30 Hence, "(a)ll property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife." 31

No similar rules are found in the French Civil Code. What is more, under the provisions thereof, the conjugal partnership exists only when so stipulated in the "capitulaciones matrimoniales" or by way of exception. In the language of Manresa —

Prescindimos de los preceptos de los Condigos de Francia, Italia, Holanda, Portugal, Alemania y Suiza, porsue solo excepcionalmente, o cuando asi se pacta en las capitulaciones, admiten el sistema de gananciales. 32

Again, Colin y Capitant, as well as the Lilius case, refer to damages recovered for physical injuries suffered by the wife. In the case at bar, the party mainly injured, although not physically, is the husband.

Accordingly, the other Philippine cases 33 and those from Louisiana — whose civil law is based upon the French Civil Code — cited by the defendant, which similarly refer to moral damages due to physical injuries suffered by the wife, are, likewise, inapplicable to the case at bar.

We find, therefore, no plausible reason to disturb the views expressed in Our decision promulgated on February 29, 1972.

G.R. No. 169891 November 2, 2006

PHILIPPINE NATIONAL RAILWAYS, Petitioner,

vs.

ETHEL BRUNTY and JUAN MANUEL M. GARCIA, Respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 47567 and its Resolution2 denying the motion for reconsideration thereof. The assailed decision affirmed with partial modification the ruling3 of the Regional Trial Court (RTC) of Manila, Branch 20, directing petitioner Philippine National Railways (PNR) to indemnify respondents Ethel Brunty and Juan Manuel M. Garcia for the death of Rhonda Brunty, and to pay actual and moral damages, attorney’s fees and cost of suit.

Rhonda Brunty, daughter of respondent Ethel Brunty and an American citizen, came to the Philippines for a visit sometime in January 1980. Prior to her departure, she, together with her Filipino host Juan Manuel M. Garcia, traveled to Baguio City on board a Mercedes Benz sedan with plate number FU 799, driven by Rodolfo L. Mercelita. It was about 12:00 midnight, January 25, 1980. By then, PNR Train No. T-71, driven by Alfonso Reyes, was on its way to Tutuban, Metro Manila4 as it had left the La Union station at 11:00 p.m., January 24, 1980.

By 2:00 a.m., Rhonda Brunty, Garcia and Mercelita were already approaching the railroad crossing at Barangay Rizal, Moncada, Tarlac. Mercelita, driving at approximately 70 km/hr, drove past a vehicle, unaware of the railroad track up

ahead and that they were about to collide with PNR Train No. T-71. Mercelita was instantly killed when the Mercedes Benz smashed into the train; the two other passengers suffered serious physical injuries.5 A certain James Harrow6 brought Rhonda Brunty to the Central Luzon Doctor’s Hospital in Tarlac, where she was pronounced dead after ten minutes from arrival. Garcia, who had suffered severe head injuries, was brought via ambulance to the same hospital. He was transferred to the Manila Doctor’s Hospital, and later to the Makati Medical Center for further treatment.7

On July 28, 1981, Ethel Brunty sent a demand letter8 to the PNR demanding payment of actual, compensatory, and moral damages, as a result of her daughter’s death. When PNR did not respond, Ethel Brunty and Garcia, filed a complaint9 for damages against the PNR before the RTC of Manila. The case was raffled to Branch 20 and was docketed as Civil Case No. 83-18645. They alleged that the death of Mercelita and Rhonda Brunty, as well as the physical injuries suffered by Garcia, were the direct and proximate result of the gross and reckless negligence of PNR in not providing the necessary equipment at the railroad crossing in Barangay Rizal, Municipality of Moncada, Tarlac. They pointed out that there was no flagbar or red light signal to warn motorists who were about to cross the railroad track, and that the flagman or switchman was only equipped with a hand flashlight.10 Plaintiffs likewise averred that PNR failed to supervise its employees in the performance of their respective tasks and duties, more particularly the pilot and operator of the train.11 They prayed for the payment of the following damages:

1.) P200,000.00 as actual and compensatory damages to plaintiff Ethel Brunty;

2.) P2,800,000.00 for compensatory damages to plaintiff Ethel Brunty representing lost or unearned income of Rhonda Brunty;

3.) Such amounts of moral and exemplary damages as may be warranted by the evidence adduced, to plaintiff Ethel Brunty;

4.) At least P64,057.61 as actual damages representing medical expenses to plaintiff Juan Manuel M. Garcia and at least P1,000,000.00 as unearned or lost income of said plaintiff;

5.) At least P72,760.00 as actual damages representing cost of the Mercedes Benz car to plaintiff Juan Manuel M. Garcia;

6.) Such amounts of moral and exemplary damages as may be warranted by the evidence adduced, to plaintiff Juan Manuel M. Garcia; and

7.) Attorney’s fees equivalent to at least 15% of the total award to plaintiffs herein.12

In its Answer,13 PNR claimed that it exercised the diligence of a good father of a family not only in the selection but also in the supervision of its employees.14 By way of special and affirmative defense, it stressed that it had the right of way on the railroad crossing in question, and that it has no legal duty to put up a bar or red light signal in any such crossing. It insisted that there were adequate, visible, and clear warning signs strategically posted on the sides of the road before

the railroad crossing. It countered that the immediate and proximate cause of the accident was Mercelita’s negligence, and that he had the last clear chance to avoid the accident. The driver disregarded the warning signs, the whistle blasts of the oncoming train and the flashlight signals to stop given by the guard.15 As counterclaim, it prayed that it be awarded actual and compensatory damages, and litigation expenses.16

Plaintiffs filed an Amended Complaint17 dated July 28, 1986 to include, as party plaintiff, Chemical Industries of the Philippines, Inc. (Chemphil), Garcia’s employer, who claimed to have paid for the latter’s medical and hospitalization expenses, the services rendered by the funeral parlor of the deceased, and the expenses in transferring the remains of Rhonda Brunty to the United States.18

After trial on the merits, the RTC rendered its Decision19 on May 21, 1990 in favor of plaintiffs. The fallo reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs Ethel Brunty and Juan Manuel M. Garcia and against the defendant Philippine National Railways directing the latter to pay the former the sum of:

1. Thirty Thousand Pesos (P30,000.00) Philippine Currency, for the death of Rhonda Brunty formerly a resident of 1595 Ashland Avenue, Des Plaines, Illinois, U.S.A.;

2. One Million Pesos (P1,000,000.00) Philippine Currency for moral and actual damages due the heirs of Rhonda Brunty;

3. Seventy-Two Thousand Seven Hundred Sixty Pesos (P72,760.00) Philippine Currency for damages sustained by the Mercedes Benz;

4. Fifty Thousand Pesos (P50,000.00) Philippine Currency as and for attorney's fees, and;

5. Costs of suit.

SO ORDERED.20

Aggrieved, the PNR appealed the case to the CA, raising the following errors:

I.

THE TRIAL COURT ERRED IN ADJUDGING DEFENDANT-APPELLANT PNR LIABLE FOR THE DEATH OF RHONDA BRUNTY AND THE CONSEQUENT AWARD OF DAMAGES DUE THE HEIRS OF RHONDA BRUNTY.

II.

THE TRIAL COURT ERRED IN ADJUDGING DEFENDANT-APPELLANT PNR LIABLE FOR THE DAMAGES SUFFERED BY PLAINTIFF-APPELLEE’S MERCEDES BENZ IN THE AMOUNT OF SEVENTY-TWO THOUSAND SEVEN HUNDRED AND SIXTY PESOS (P72,760.00).

III.

THE LOWER COURT ERRED IN AWARDING ATTORNEY’S FEES TO THE PLAINTIFFS-APPELLEES.21

In its Brief, PNR insisted that the sole and proximate cause of the accident was the negligence and recklessness of Garcia and Mercelita.22 It insisted that it had provided adequate warning signals at the railroad crossing23 and had exercised due care in the selection and supervision of its employees.24 The RTC erred in awarding damages to Rhonda Brunty as she cannot be allowed to receive what she is not in a position to give, having been a non-resident alien who did not own a property in the Philippines.25 It likewise questioned the award of damages on the Mercedes Benz as well as the grant of attorney’s fees.26 At the very least, Mercelita was guilty of contributory negligence.27

For their part, appellees countered that appellant was grossly and recklessly negligent in not properly providing the necessary equipment at the railroad crossing in Rizal, Moncada, Tarlac;28 appellant was negligent in not exercising due diligence of a good father of a family in the supervision of its employees, particularly the train operator Alfonso Reyes;29 the car was driven in a careful and diligent manner, and at a moderate speed, with due regard to all traffic rules and regulations at that particular time;30 the doctrine of "last clear chance" is not applicable;31 Ethel Brunty is a non-resident alien who can rightfully file the instant case;32 and they are entitled to recover damages from appellant.33

The CA rendered the assailed Decision34 on August 15, 2005. The dispositive portion reads:

WHEREFORE, premises considered, the assailed decision is hereby AFFIRMED with PARTIAL MODIFICATIONS, increasing the death indemnity award from P30,000.00 to P50,000.00, and deleting the award for damages sustained by the Mercedes Benz.

SO ORDERED.35

The appellate court affirmed the findings of the RTC as to the negligence of the PNR. Considering the circumstances prevailing at the time of the fatal accident, it ruled that the alleged safety measures installed by the PNR at the railroad crossing were not merely inadequate – they did not satisfy the well-settled safety standards in transportation.36 However, the CA did not agree with the RTC’s findings on the contributory negligence of Mercelita, the driver of the Mercedes Benz. It held that Mercelita could not have foreseen the harm that would befall him and the two other passengers under the prevailing circumstances, thus, could not be considered guilty of contributory negligence.37

The PNR, now petitioner, comes before this Court in this Petition for Review on Certiorari on the following grounds:

I.

THE COURT OF APPEALS ERRED IN MANIFESTLY OVERLOOKING CERTAIN RELEVANT FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF PROPERLY CONSIDERED, WOULD JUSTIFY A DIFFERENT CONCLUSION SUCH AS:

THE RESPONDENTS’ DRIVER OVERTOOK ANOTHER VEHICLE BY ACCELERATING AT 70 KILOMETERS PER HOUR WITHIN JUST 50 YARDS AWAY FROM THE RAILROAD TRACKS.

II.

THE FINDINGS OF FACT OF THE COURT OF APPEALS ARE CONTRARY TO THOSE OF THE TRIAL COURT REGARDING CONTRIBUTORY NEGLIGENCE OF THE RESPONDENTS’ DRIVER.

III.

THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF LAST CLEAR CHANCE IN THE INSTANT CASE.38

Petitioner insists that the proximate cause of the mishap was Mercelita’s disregard of traffic rules and regulations. Had the court considered the fact that Mercelita had overtaken another vehicle a few yards before the railroad track, it would have reached a different conclusion.39 Moreover, petitioner asserts, considering that the decisions of the RTC and the CA vary as to whether or not Mercelita was guilty of contributory negligence, the findings of the RTC should prevail. Thus, Mercelita’s contributory negligence should not have been ignored.40 Lastly, petitioner avers that since there is freedom of control and greater maneuverability on the part of motor vehicles, it is obvious that in railroad crossings, they have the last clear chance to prevent or avoid an unwanted accident from taking place.41

In their Comment42 on the petition, respondents reiterate the findings of the RTC and the CA that the breach by petitioner of its legal duty to provide adequate and necessary public safety device and equipment within the area or scene of the accident was the proximate cause of the mishap.43 While it is true that as a general rule, the trial court is in the best position to evaluate and observe the conduct and demeanor of the witnesses presented during the trial, the CA, in the exercise of its appellate jurisdiction, has the vested right to modify, reject, or set aside the trial court’s evaluation and findings.44 As to the application of the doctrine of last clear chance, respondents claim that said issue is being raised for the first time in this petition.45 Lastly, respondents cite foreign jurisprudence stating that if the violation is one which gives rise to liability per se for any resulting injury, the defenses ordinarily available in actions for diligence are barred and the contributory negligence of the person injured is no defense.46

The Court is thus tasked to answer the following factual questions: (1) As between petitioner and Mercelita, whose negligence resulted in the unfortunate collision? (2) Is Mercelita (the driver of the Mercedes Benz) guilty of contributory negligence? Finally, the application in this case of the doctrine of last clear chance is likewise in question.

Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would not do.47 In Corliss v. Manila Railroad Company,48 this Court held that negligence is want of the care required by the circumstances. It is a relative or comparative, not an absolute, term and its application depends upon the situation of the parties and the degree of care and vigilance which the circumstances reasonably require.49 In determining whether or not there is negligence on the part of the parties in a given situation, jurisprudence50 has laid down the following test: Did defendant, in doing the alleged negligent act, use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, the person is guilty of negligence. The law, in effect, adopts the standard supposed to be supplied by the imaginary conduct of the discreet pater familias of the Roman law.

The issue of who, between the parties, was negligent was thoroughly discussed by both the RTC and the CA. In petitions for review under Rule 45 of the Revised Rules of Court, only questions of law may be put into issue, and questions of fact as a general rule, cannot be entertained. The finding of negligence by the RTC, as affirmed by the CA, is a question of fact which this Court cannot pass upon as it would entail going into factual matters on which the finding of negligence was based.51 The established rule is that factual findings of the CA affirming those of the trial court are conclusive and binding on this Court.52

The records of the instant case show that both the RTC and the CA carefully examined the factual circumstances surrounding the case, and we find no cogent reason to disturb the same. It is, however, worthy to emphasize that petitioner was found negligent because of its failure to provide the necessary safety device to ensure the safety of motorists in crossing the railroad track. As such, it is liable for damages for violating the provisions of Article 2176 of the New Civil Code, viz:

Article 2176. Whoever, by act or omission, causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

In a long line of cases, the Court held that in order to sustain a claim based on quasi-delict, the following requisites must concur: (1) damage to plaintiff; (2) negligence, by act or omission, of which defendant, or some person for whose acts he must respond was guilty; and (3) connection of cause and effect between such negligence and damage.53 Applying the foregoing requisites, the CA correctly made the following conclusions:

It was clearly established that plaintiffs-appellees (respondents herein) sustained damage or injury as a result of the collision. That there was negligence on the part of PNR is, likewise, beyond cavil. Considering the circumstances prevailing at the time of the fatal accident, the alleged safety measures installed by the PNR at the railroad crossing is not only inadequate but does not satisfy well-settled safety standards in transportation. x x x

x x x x

x x x An examination of the photographs of the railroad crossing at Moncada, Tarlac presented as evidence by PNR itself would yield the following: (1.) absence of flagbars or safety railroad bars; (2.) inadequacy of the installed warning signals; and (3.) lack of proper lighting within the area. Thus, even if there was a flagman stationed at the site as claimed by PNR (petitioner), it would still be impossible to know or see that there is a railroad crossing/tracks ahead, or that there is an approaching train from the Moncada side of the road since one’s view would be blocked by a cockpit arena. x x x54

Moreover, the CA held that a vehicle coming from the Moncada side would have difficulty in knowing that there is an approaching train because of the slight curve, more so, at an unholy hour as 2:00 a.m. Thus, it is imperative on the part of the PNR to provide adequate safety equipment in the area.55

It may broadly be stated that railroad companies owe to the public a duty of exercising a reasonable degree of care to avoid injury to persons and property at railroad crossings, which duties pertain both in the operation of trains and in the maintenance of the crossings.56 Moreover, every corporation constructing or operating a railway shall make and construct at all points where such railway crosses any public road, good, sufficient, and safe crossings and erect at such points, at a sufficient elevation from such road as to admit a free passage of vehicles of every kind, a sign with large and distinct letters placed thereon, to give notice of the proximity of the railway, and warn persons of the necessity of looking out for trains.57

This Court has previously determined the liability of the PNR for damages for its failure to put a cross bar, or signal light, flagman or switchman, or semaphores. Such failure is evidence of negligence and disregard of the safety of the public, even if there is no law or ordinance requiring it because public safety demands that said device or equipment be installed.58

In view of the foregoing, we affirm the factual findings of the CA as well as its conclusion on petitioner’s negligence.

As to whether or not Mercelita was guilty of contributory negligence, we agree with petitioner. Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection.59 To hold a person as having contributed to his injuries, it must be shown that he performed an act that brought about his injuries in disregard of warning or signs of an impending danger to health and body.60 To prove contributory negligence, it is still necessary to establish a causal link, although not proximate, between the negligence of the party and the succeeding injury. In a legal sense, negligence is contributory only when it contributes proximately to the injury, and not simply a condition for its occurrence.61

The court below found that there was a slight curve before approaching the tracks; the place was not properly illuminated; one’s view was blocked by a cockpit arena; and Mercelita was not familiar with the road. Yet, it was also established that Mercelita was then driving the Mercedes Benz at a speed of 70 km/hr and, in fact, had overtaken a vehicle a few yards before reaching the railroad track. Mercelita should not have driven the car the way he did. However, while his acts contributed to the collision, they nevertheless do not negate petitioner’s liability. Pursuant to Article 217962 of the New Civil Code, the only effect such contributory negligence could have is to mitigate liability, which, however, is not applicable in this case, as will be discussed later.1âwphi1

As to whether or not the doctrine of last clear chance is applicable, we rule in the negative. The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss. Stated differently, the antecedent negligence of plaintiff does not preclude him from recovering damages caused by the supervening negligence of defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence.63 The proximate cause of the injury having been established to be the negligence of petitioner, we hold that the above doctrine finds no application in the instant case.

We note that the damages awarded by the appellate court consist of (1) P50,000.00 as indemnity for the death of Rhonda Brunty; (2) P1,000,000.00 as actual and moral damages due the heirs of Rhonda Brunty; and (3) P50,000.00 as and by way of attorney’s fees. No damages, however, were awarded for the injuries suffered by Garcia, yet, the latter never interposed an appeal before the CA nor even before this Court. The record is, likewise, bereft of any allegation and proof as to the relationship between Mercelita (the driver) and Rhonda Brunty. Hence, the earlier finding of contributory negligence on the part of Mercelita, which generally has the effect of mitigation of liability, does not apply.

As to the amount of damages awarded, a modification of the same is in order, specifically on the award of actual and moral damages in the aggregate amount of P1,000,000.00.

Actual or compensatory damages are those awarded in order to compensate a party for an injury or loss he suffered. They arise out of a sense of natural justice, aimed at repairing the wrong done. To be recoverable, they must be duly 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.64 Respondents, however, failed to present evidence for such damages; hence, the award of actual damages cannot be sustained. However, as the heirs of Rhonda Brunty undeniably incurred expenses for the wake and burial of the latter, we deem it proper to award temperate damages in the amount of P25,000.00 pursuant to prevailing jurisprudence.65 This is in lieu of actual damages as it would be unfair for the victim’s heirs to get nothing, despite the death of their kin, for the reason alone that they cannot produce receipts.66

The relatives of the victim who incurred physical injuries in a quasi-delict are not proscribed from recovering moral damages in meritorious cases.67 We, therefore, sustain the award of moral damages in favor of the heirs of Rhonda Brunty.

Moral damages are not punitive in nature, but are designed to compensate and alleviate in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused a person. Although incapable of pecuniary computation, moral damages must nevertheless be somehow proportional to and in approximation of the suffering inflicted.68 In the instant case, the moral suffering of the heirs of Rhonda Brunty was sufficiently established by Ethel Brunty in her deposition,69 viz:

Q: What have you felt as a result of the death of Rhonda?

A: I felt earnest anguish and mixed feelings of anger and extreme sorrow because she died so far away and alone, and because her death could so easily be prevented if there had been adequate and appropriate warning signals at the railroad crossing and it is just an unbearable and irreparable loss. In so many ways, she was my life. It seemed to me that losing her was just like losing my own life, or worst, and even now, there is no end to our bereavement. I am still on constant medication to be able to sleep and to be able to perform my duties effectively in my job but it does not take away the pain of loss.70

In People v. Teehankee, Jr.,71 and in Metro Manila Transit Corporation v. Court of Appeals,72 we awarded moral damages in the amount of P1,000,000.00 to the heirs of the deceased. In Victory Liner, Inc. v. Heirs of Malecdan,73 the award of P100,000.00 as moral damages was held in keeping with the purpose of the law, while in Macalinao v. Ong,74 the amount of P50,000.00 was held sufficient.1âwphi1

Considering the circumstances attendant in this case, we find that an award of P500,000.00 as moral damages to the heirs of Rhonda Brunty is proper. In view of recent jurisprudence, indemnity of P50,000.00 for the death of Rhonda Brunty and attorney’s fees amounting to P50,000.00 is likewise proper.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated August 15, 2005 is AFFIRMED WITH MODIFICATIONS. The award of actual damages is deleted, and in lieu thereof, temperate damages of P25,000.00 is awarded to the heirs of Rhonda Brunty. The award of moral damages is reduced to P500,000.00.

SO ORDERED.

THIRD DIVISION

R.S. TOMAS, INC.,

Petitioner,

- versus -

RIZAL CEMENT COMPANY, INC.,

Respondent.

G.R. No. 173155

Present:

VELASCO, JR., J., Chairperson,

PERALTA,

ABAD,

MENDOZA, and

PERLAS-BERNABE, JJ.

Promulgated:

March 21, 2012

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

D E C I S I O N

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner R.S. Tomas, Inc. against respondent Rizal Cement Company, Inc. assailing the Court of Appeals (CA) Decision[1] dated December 19, 2005 and Resolution[2] dated June 6, 2006 in CA-G.R. CV No. 61049. The assailed decision reversed and set aside the Regional Trial Court[3] (RTC) Decision[4] dated June 5, 1998 in Civil Case No. 92-1562.

The facts of the case, as culled from the records, are as follows:

On December 28, 1990, respondent and petitioner entered into a Contract[5] for the supply of labor, materials, and technical supervision of the following projects:

1. J.O. #P-90-212 – Wiring and installation of primary and secondary lines system.

2. J.O. #P-90-213 – Supply and installation of primary protection and disconnecting switch.

3. J.O. #P-90-214 – Rewinding and conversion of one (1) unit 3125 KVA, 34.5 KV/2.4 KV, 3ø Transformer to 4000 KVA, 34.5 KV/480V, 3ø Delta Primary, Wye with neutral secondary.[6]

Petitioner agreed to perform the above-mentioned job orders. Specifically, it undertook to supply the labor, equipment, supervision, and materials as specified in the detailed scope of work.[7] For its part, respondent agreed to pay the total sum of P2,944,000.00 in consideration of the performance of the job orders. Petitioner undertook to complete the projects within one hundred twenty (120) days from the effectivity of the contract.[8] It was agreed upon that petitioner would be liable to respondent for liquidated damages in the amount of P29,440.00 per day of delay in the completion of the projects which shall be limited to 10% of the project cost.[9] To secure the full and faithful performance of all its obligations and responsibilities under the contract, petitioner obtained from Times Surety & Insurance Co. Inc. (Times Insurance) a performance bond[10] in an amount equivalent to fifty percent (50%) of the contract price or P1,458,618.18. Pursuant to the terms of the contract, respondent made an initial payment of P1,458,618.18 on January 8, 1991.[11]

In a letter[12] dated March 9, 1991, petitioner requested for an extension of seventy-five (75) days within which to complete the projects because of the need to import some of the materials needed. In the same letter, it also asked for a price adjustment of P255,000.00 to cover the higher cost of materials.[13] In another letter[14] dated March 27, 1991, petitioner requested for another 75 days extension for the completion of the transformer portion of the projects for failure of its supplier to deliver the materials.

On June 14, 1991,[15] petitioner manifested its desire to complete the project as soon as possible to prevent further losses and maintain goodwill between the companies. Petitioner requested for respondent’s assistance by facilitating the acquisition of materials and supplies needed to complete J.O. #P-90-212 and J.O. #P-90-213 by directly paying the suppliers. It further sought that it be allowed to back out from J.O. #P-90-214 covering the rewinding and conversion of the damaged transformer.

In response[16] to petitioner’s requests, respondent, through counsel, manifested its observation that petitioner’s financial status showed that it could no longer complete the projects as agreed upon. Respondent also informed petitioner that it was already in default having failed to complete the projects within 120 days from the effectivity of the contract. Respondent further notified petitioner that the former was terminating the contract. It also demanded for the refund of the amount already paid to petitioner, otherwise, the necessary action would be instituted. Respondent sent another demand letter[17] to Times Insurance for the payment of P1,472,000.00 pursuant to the performance bond it issued.

On November 14, 1991,[18] respondent entered into two contracts with Geostar Philippines, Inc. (Geostar) for the completion of the projects commenced but not completed by petitioner for a total consideration of P3,435,000.00.

On December 14, 1991, petitioner reiterated its desire to complete J.O. #P-90-212 and J.O. #P-90-213 and to exclude J.O. #P-90-214,[19] but the same was denied by respondent in a letter[20] dated January 14, 1992. In the same letter, respondent pointed out that amicable settlement is impossible. Hence, the Complaint for Sum of Money[21] filed by respondent against petitioner and Times Surety & Insurance Co., Inc. praying for the payment of the following: P493,695.00 representing the amount which they owed respondent from the downpayment and advances made by the latter vis-à-vis the work accomplishment; P2,550,945.87 representing the amount incurred in excess of the cost of the projects as agreed upon; P294,000.00 as liquidated damages; plus interest and attorney’s fees.[22]

Times Insurance did not file any pleading nor appeared in court. For its part, petitioner denied[23] liability and claimed instead that it failed to complete the projects due to respondent’s fault. It explained that it relied in good faith on respondent’s representation that the transformer subject of the contract could still be rewound and converted but upon dismantling the core-coil assembly, it discovered that the coils were already badly damaged and the primary bushing broken. This discovery allegedly entailed price adjustment. Petitioner thus requested respondent for additional time within which to complete the project and additional amount to finance the same. Petitioner also insisted that the proximate cause of the delay is the misrepresentation of the respondent on the extent of the defect of the transformer.

After the presentation of the parties’ respective evidence, the RTC rendered a decision on June 5, 1998 in favor of petitioner, the dispositive portion of which reads:

Wherefore, finding defendant-contractor’s evidence more preponderant than that of the plaintiff, judgment is hereby rendered in favor of the defendant-contractor against the plaintiff and hereby orders:

(1) that the instant case be DISMISSED;

(2) that plaintiff pays defendant the amount of P4,000,000.00; for moral and exemplary & other damages;

(3) P100,000.00 for attorney’s fees and cost of suit.

SO ORDERED.[24]

The RTC held that the failure of petitioner to complete the projects was not solely due to its fault but more on respondent’s misrepresentation and bad faith.[25] Therefore, the Court dismissed respondent’s complaint. Since respondent was found to have committed deceit in its dealings with petitioner, the court awarded damages in favor of the latter.[26]

Respondent, however, successfully obtained a favorable decision when its appeal was granted by the CA. The appellate court reversed and set aside the RTC decision and awarded respondent P493,695.34 for the excess payment made to petitioner, P508,510.00 for the amount spent in contracting Geostar and P294,400.00 as liquidated damages.[27]

Contrary to the conclusion of the RTC, the CA found that petitioner failed to prove that respondent made fraudulent misrepresentation to induce the former to enter into the contract. It further held that petitioner was given the opportunity to inspect the transformer before offering its bid. [28] This being so, the CA added that petitioner’s failure to avail of such opportunity is inexcusable, considering that it is a company engaged in the electrical business and the contract involved a sizable amount of money.[29] As to the condition of the subject transformer unit, the appellate court found the testimony of petitioner’s president insufficient to prove that the same could no longer be rewound or converted.[30] Considering that advance payments had been made to petitioner, the court deemed it necessary to require it to return to respondent the excess amounts, vis-à-vis its actual accomplishment.[31] In addition to the refund of the excess payment, the CA also ordered the reimbursement of what respondent paid to Geostar for the unfinished projects of petitioner as well as the payment of liquidated damages as stipulated in the contract.[32]

Aggrieved, petitioner comes before the Court in this petition for review on certiorari under Rule 45 of the Rules of Court raising the following issues: (1) whether or not respondent was guilty of fraud or misrepresentation as to the actual condition of the transformer subject of the contract;[33] (2) whether or not the evidence presented by petitioner adequately established the true nature and condition of the subject transformer;[34] (3) whether or not petitioner is guilty of inexcusable delay in the completion of the projects;[35] (4) whether or not petitioner is liable for liquidated damages;[36] and (5) whether or not petitioner is liable for the cost of the contract between respondent and Geostar.[37]

The petition is without merit.

The case stemmed from an action for sum of money or damages arising from breach of contract. The contract involved in this case refers to the rewinding and conversion of one unit of transformer to be installed and energized to supply respondent’s power requirements.[38] This project was embodied in three (3) job orders, all of which were awarded to petitioner who represented itself to be capable, competent, and duly licensed to handle the projects.[39] Petitioner, however, failed to complete the projects within the agreed period allegedly because of misrepresentation and fraud committed by respondent as to the true nature of the subject transformer. The trial court found that respondent indeed failed to inform petitioner of the true condition of the transformer which amounted to fraud thereby justifying the latter’s failure to complete the projects. The CA, however, had a different conclusion and decided in favor of respondent. Ultimately, the issue before us is whether or not there was breach of contract which essentially is a factual matter not usually reviewable in a petition filed under Rule 45.[40]

In resolving the issues, the Court inquires into the probative value of the evidence presented before the trial court.[41] Petitioner, indeed, endeavors to convince us to determine once again the weight, credence, and probative value of the evidence presented before the trial court.[42] While in general, the findings of fact of the CA are final and conclusive and cannot be reviewed on appeal to the Court because it is not a trier of facts,[43] there are recognized exceptions[44] as when the findings of fact are conflicting, which is obtaining in this case. The conflicting conclusions of the trial and appellate courts impel us to re-examine the evidence presented.

After a thorough review of the records of the case, we find no reason to depart from the conclusions of the CA.

It is undisputed that petitioner and respondent entered into a contract for the supply of labor, materials, and technical supervision primarily for the rewinding and conversion of one (1) unit of transformer and related works aimed at providing the power needs of respondent. As agreed upon by the parties, the projects were to be completed within 120 days from the effectivity of the contract. Admittedly, however, respondent failed, not only to perform its part of the contract on time but, in fact, to complete the projects. Petitioner tried to exempt itself from the consequences of said

breach by passing the fault to respondent. It explained that its failure to complete the project was due to the misrepresentation of the respondent. It claimed that more time and money were needed, because the condition of the subject transformer was worse than the representations of respondent. Is this defense tenable?

We answer in the negative.

Records show that petitioner indeed asked for price adjustment and extension of time within which to complete the projects. In its letter[45] dated March 9, 1991, petitioner anchored its request for extension on the following grounds:

1. To maximize the existing 3125 KVA to 4000 KVA capacity using the same core, we will replace the secondary windings from rectangular type to copper sheet which is more accurate in winding to the required number of turns than using parallel rectangular or circular type of copper magnet wires. However, these copper sheets are not readily available locally in volume quantities, and therefore, we will be importing this material and it will take 60 days minimum time for its delivery.

2. We also find it difficult to source locally the replacement for the damaged high voltage bushing.

3. The delivery of power cable no. 2/0 will also be delayed. This will take 90 days to deliver from January 1991.[46]

Also in its letter[47] dated March 27, 1991, petitioner informed respondent that the projects would be completed within the contract time table but explained that the delivery of the transformer would only be delayed. The reasons advanced by petitioner to justify the delay are as follows:

1. Our supplier for copper sheets cannot complete the delivery until April 30, 1991.

2. Importation of HV Bushing will take approximately 45 days delivery per advice of our supplier. x x x[48]

Clearly, in the above letters, petitioner justified its inability to complete the projects within the stipulated period on the alleged unavailability of the materials to be used to perform the projects as stated in the job orders. Nowhere in said letters did petitioner claim that it could not finish the projects, particularly the conversion of the transformer unit because the defects were worse than the representation of respondent. In other words, there was no allegation of fraud, bad faith, concealment or misrepresentation on the part of respondent as to the true condition of the subject transformer. Even in its letter[49] dated May 25, 1991, petitioner only requested respondent that payment to the first progress billing be released as soon as possible and without deduction. It further proposed that respondent make a direct payment to petitioner’s suppliers.

It was only in its June 14, 1991 letter[50] when petitioner raised its observations that the subject transformer needed more repairs than what it knew during the bidding. [51] In the same letter, however, petitioner repeated its request that direct payment be made by respondent to petitioner’s suppliers.[52] More importantly, petitioner admitted that it made a judgment error when it quoted for only P440,770.00 for the contract relating to J.O. #P-90-214 based on limited information.

It can be inferred from the foregoing facts that there was not only a delay but a failure to complete the projects as stated in the contract; that petitioner could not complete the projects because it did not have the materials needed; and that it is in need of financial assistance.

As the Court sees it, the bid submitted by petitioner may have been sufficient to be declared the winner but it failed to anticipate all expenses necessary to complete the projects. [53] When it incurred expenses it failed to foresee, it began requesting for price adjustment to cover the cost of high voltage bushing and difference in cost of copper sheet and rectangular wire.[54] However, the scope of work presented by respondent specifically stated that the wires to be used shall be pure copper and that there was a need to supply new bushings for the complete rewinding and conversion of 3125 KVA to 4 MVA Transformer.[55] In other words, petitioner was aware that there was a need for complete replacement of windings to copper and of secondary bushings. [56] It is, therefore, improper for petitioner to ask for additional amount to answer for the expenses that were already part and parcel of the undertaking it was bound to perform. For petitioner, the contract entered into may have turned out to be an unwise investment, but there is no one to blame but petitioner for plunging into an undertaking without fully studying it in its entirety.[57]

The Court likewise notes that petitioner repeatedly asked for extension allegedly because it needed to import the materials and that the same could not be delivered on time. Petitioner also repeatedly requested that respondent make a direct payment to the suppliers notwithstanding the fact that it contracted with respondent for the supply of labor, materials, and technical supervision. It is, therefore, expected that petitioner would be responsible in paying its suppliers because respondent is not privy to their (petitioner and its suppliers) contract. This is especially true in this case since respondent had already made advance payments to petitioner. It appears, therefore, that in offering its bid, the source and cost of materials were not seriously taken into consideration. It appears, further, that petitioner had a hard time in fulfilling its obligations under the contract that is why it asked for financial assistance from respondent. This is contrary to petitioner’s representation that it was capable, competent, and duly licensed to handle the projects.

As to the alleged damaged condition of the subject transformer, we quote with approval the CA conclusion in this wise:

In the same vein, We cannot readily accept the testimony of Tomas that the transformer unit was severely damaged and was beyond repair as it was not substantiated with any other evidence. R.S. Tomas could have presented an independent expert witness whose opinion may corroborate its stance that the transformer unit was indeed incapable of being restored. To our mind, the testimony of Tomas is self-serving as it is easy to concoct, yet difficult to verify.[58]

This lack of evidence, coupled with petitioner’s failure to raise the same at the earliest opportunity, belies petitioner’s claim that it could not complete the projects because the subject transformer could no longer be repaired.

Assuming for the sake of argument that the subject transformer was indeed in a damaged condition even before the bidding which makes it impossible for petitioner to perform its obligations under the contract, we also agree with the CA that petitioner failed to prove that respondent was guilty of bad faith, fraud, deceit or misrepresentation.

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.[59] Fraud has been defined to include an inducement through insidious machination. Insidious machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals or omits to state material facts and, by reason of such omission or concealment, the other party was induced to give consent that would not otherwise have been given.[60] These are allegations of fact that demand clear and convincing proof. They are serious accusations that can be so conveniently and casually invoked, and that is why they are never presumed.[61] In this case, the evidence presented is insufficient to prove that respondent acted in bad faith or fraudulently in dealing with petitioner.

Petitioner in fact admitted that its representatives were given the opportunity to inspect the subject transformer before it offered its bid. If indeed the transformer was completely sealed, it should have demanded that the same be opened if it found it necessary before it offered its bid. As contractor, petitioner had been remiss in its obligation to obtain as much information as possible on the actual condition of the subject transformer or at least it should have provided a qualification in its bid so as to make clear its right to claim contract price and time adjustment.[62] As aptly held by the CA, considering that petitioner is a company engaged in the electrical business and the contract it had entered into involved a sizable amount of money, its failure to conduct an inspection of the subject transformer is inexcusable.[63]

In sum, the evidence presented by the parties lead to the following conclusions: (1) that the projects were not completed by petitioner; (2) that petitioner was given the opportunity to inspect the subject transformer; (3) that petitioner failed to thoroughly study the entirety of the projects before it offered its bid; (4) that petitioner failed to complete the projects because of the unavailability of the required materials and that petitioner needed financial assistance; (5) that the evidence presented by petitioner were inadequate to prove that the subject transformer could no longer be repaired; and (6) that there was no evidence to show that respondent was in bad faith, acted fraudulently, or guilty of deceit and misrepresentation in dealing with petitioner.

In view of the foregoing disquisitions, we find that there was not only delay but non-completion of the projects undertaken by petitioner without justifiable ground. Undoubtedly, petitioner is guilty of breach of contract. Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the failure, without legal excuse, to perform any promise which forms the whole or part of the contract.[64] In the present case, petitioner did not complete the projects. This gives respondent the right to terminate the contract by serving petitioner a written notice. The contract specifically stated that it may be terminated for any of the following causes:

1. Violation by Contractor of the terms and conditions of this Contract;

2. Non-completion of the Work within the time agreed upon, or upon the expiration of extension agreed upon;

3. Institution of insolvency or receivership proceedings involving Contractor; and

4. Other causes provided by law applicable to this contract.[65]

Consequently, and pursuant to the agreement of the parties,[66] petitioner is liable for liquidated damages in the amount of P29,440.00 per day of delay, which shall be limited to a maximum of 10% of the project cost or P294,400.00. In this case, petitioner bound itself to complete the projects within 120 days from December 29, 1990. However, petitioner failed to fulfill the same prompting respondent to engage the services of another contractor on November 14, 1991. Thus, despite the lapse of eleven months from the time of the effectivity of the contract entered into between respondent and petitioner, the latter had not completed the projects. Undoubtedly, petitioner may be held to answer for liquidated damages in its maximum amount which is 10% of the contract price. While we have reduced the amount of liquidated damages in some cases,[67] because of partial fulfillment of the contract and/or the amount is unconscionable, we do not find the same to be applicable in this case. It must be recalled that the contract entered into by petitioner consists of three projects, all of which were not completed by petitioner. Moreover, the percentage of work accomplishment was not adequately shown by petitioner. Hence, we apply the general rule not 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.[68] Thus, as agreed upon by the parties, we apply the 10% liquidated damages.

Considering that petitioner was already in delay and in breach of contract, it is liable for damages that are the natural and probable consequences of its breach of obligation.[69] Since advanced payments had been made by respondent, petitioner is bound to return the excess vis-à-vis its work accomplishments. In order to finish the projects, respondent had to contract the services of another contractor. We, therefore, find no reason to depart from the CA conclusion requiring the return of the excess payments as well as the payment of the cost of contracting Geostar, in addition to liquidated damages.[70]

WHEREFORE, premises considered, the petition is hereby DENIED. The Court of Appeals Decision dated December 19, 2005 and Resolution dated June 6, 2006 in CA-G.R. CV No. 61049 are AFFIRMED.