DAMAGES

A. DAMAGES

Kinds of Damages: (MENTAL)

MORAL
EXEMPLARY
NOMINAL
TEMPERATE
ACTUAL
LIQUIDATED

1. ACTUAL/COMPENSATORY- adequate compensation for

a) The value of loss suffered
b) Profits which obligee failed to obtain

Exception:

a. provided by law
b. by stipulation

WHAT MUST BE DONE TO COLLECT ACTUAL DAMAGES:

1.) Plead or allege the loss

GENERAL DAMAGE- natural, necessary and logical consequences of a

particular wrongful act which result in injury; need not be specifically pleaded
because the law itself implies or presumes that they resulted from the wrongful
act

SPECIAL DAMAGES- damages which are the natural, but not the necessary
and inevitable result of the wrongful act; need to be pleaded

2.) Pray for the relief that claim for loss be granted
3.) Prove the loss

WHEN LOSS NEED NOT BE PROVED:

1.) Liquidated damages previously agreed upon, liquidated damages

take the place of actual damages except when additional damages
incurred
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 2.) If damages other than what are actually are sought
3.) Loss is presumed (ex: loss of a child or spouse)
4.) Forfeiture of bonds in favor of the government for the purpose of
promoting public interest or policy (ex: bond for temporary stay of
alien)

CONTRACTS AND QUASI CONTRACTS

1. Damages in case of good faith-
a. Natural and probable consequence of breach of obligation and
b. Parties have foreseen or could have reasonably foreseen at time obligation
was constituted
2. Damages in case of bad faith
a. It is sufficient that damages may be reasonably attributed to the non-
performance of the obligation

CRIMES AND QUASI CRIMES

 Defendant is liable for all damages that are natural and probable
consequence of the act/omission complained of
 Not necessary that damages have been foreseen or could have been reasonably
foreseen

a) VALUE OF LOSS SUFFERED- destruction of things, fines or penalties,

medical and hospital bills, attorney’s fees, interests, cost of ligation

DAMAGES RECOVERABLE:
1.) Medical and hospital bills

2.) Loss or impairment of earning capacity (in case of physical disability)

3.) Damages for death

a) Minimum amount: P50,000
b) Loss of earning capacity unless deceased had permanent physical
disability not caused by defendant so that deceased had no earning
capacity at time of death
c) Support, if deceased was obliged to give support (for period not more
than 5 years)
d) Moral damages

4.) Attorney’s fees- as a general rule, attorney’s fees (other than judicial
costs) are NOT RECOVERABLE, except:

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 a) Stipulation between parties
b) When exemplary damages are awarded
c) When defendant’s act/omission compelled plaintiff to litigate with
3rd persons or incur expenses to protect his interest
d) Malicious prosecution
e) Clearly unfounded civil action or proceeding against plaintiff
f) Defendant acted in gross and evident bad faith in refusing to
satisfy plaintiff’s just and demandable claim
g) Legal support actions
h) Recovery of wages of household helpers, laborers and skilled
workers
i) Actions for indemnity under workmen’s compensation and
employer liability laws
j) Separate civil action to recover civil liability arising from crime
k) When double judicial costs are awarded
5.) Judicial costs
6.) Interest- discretionary on part of the court

WHEN DAMAGES MITIGATED:

1.) Contributory negligence
2.) In contracts, quasi-contracts and quasi-delict-
a. Plaintiff has contravened the terms of contract
b. Plaintiff derived some benefit as result of contract
c. In case where exemplary damages are to be awarded, that the
defendant acted upon the advice of counsel
d. That the loss would have resulted in any event
e. That since the filing of action, the defendant has done his best to
lessen the plaintiff’s loss or injury

2. MORAL DAMAGES-(PBMF-MWSS) ]
a. Physical suffering
b. Besmirched reputation
c. Mental anguish
d. Fright
e. Moral shock
f. Wounded feelings
g. Social humiliation
h. Serious anxiety

Notes:
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  Sentimental value of real or personal property may be considered
in adjudicating moral damages
 The social and economic/financial standing of the offender and the
offended party should be taken into consideration in the computation of
moral damages
 Moral damages is awarded only to enable the injured party to
obtain means, diversions or amusements that will serve to alleviate
the moral suffering he has undergone, by reason of defendant’s culpable
action and not intended to enrich a complainant at the expense of
defendant

IN WHAT CASES MAY MORAL DAMAGES BE RECOVERED (enumeration not

exclusive):

a. Criminal offense resulting in physical injuries

b. Quasi-delicts causing physical injuries
c. Seduction, abduction, rape or other acts of lasciviousness
d. The parents of the female seduced , abducted, raped or abused
e. Adultery and concubinage
f. Illegal or arbitrary detention or arrest
g. Illegal search
h. Libel, slander or other forms of defamation
i. Malicious prosecution
j. Acts mentioned in art 309 of the RPC relating to disrespect of the dead
and interference with the funeral
k. Spouse, descendants, ascendants and brother and sisters for acts
mentioned in art 309 – any person who shows disrespect to the dead, or
wrongfully interferes with a funeral shall be liable to the family of the
deceased for damages, material and moral.
l. Acts and actions referred to in arts 21,26, 27, 28, 29, 30, 32, 34, and 35
m. Art 2220- in cases of willful injury to property or breaches of contract
where defendant acted fraudulently or in bad faith

3. NOMINAL DAMAGES- adjudicated in order that a right of the plaintiff, which

has been violated or invaded by the defendant, may be vindicated or recognized,
and not for the purpose of indemnifying the plaintiff for any loss suffered by him

ELEMENTS:
a. Plaintiff has a right
b. Right of plaintiff is violated
c. Purpose is not to indemnify but vindicate or recognize right violated
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4. TEMPERATE OR MODERATE DAMAGES-more than nominal but less than
compensatory where some pecuniary loss has been suffered but its amount can’t be
proved with certainty due to the nature of the case

REQUISITES:

a. Some pecuniary loss

b. Loss is incapable of pecuniary estimation
c. Must be reasonable

5. LIQUIDATED DAMAGES- those agreed upon by the parties to a contract, to

be paid in case of breach thereof

WHEN LIQUIDATED DAMAGES MAY BE EQUITABLY REDUCED:

a. Iniquitous or unconscionable
b. Partial or irregular performance

6. EXEMPLARY OR CORRECTIVE DAMAGE- imposed by way example or

correction for the public good, in addition to the moral, temperate, liquidated to
compensatory damages.

ARTICLE 2196 – 2210

2462. In case of conflict between the Civil Code and Special Laws insofar as
damages are concerned, which should prevail?

The provision of the Civil Code on damages shall prevail ( Art. 2196 CC).

2463. What are the exceptions?

Compensation for workmen and other employees in case of death, injury or

illness regulated under special laws shall prevail over the provisions of the Civil Code
insofar as damages are concerned ( Art. 2196 CC).

2464. Captain Virgilio Tolosa ( husband of Evelyn Tolosa) was master of the
vessel M/V Donna owned by Quana-Kaiun, and was hired through its managing
agent, Asia Bulk Transport Phils.,Inc. (Asia Bulk). During channeling activities
upon the vessel’s departure from Yokohama on November 6, 1992, Capt. Tolosa
was drenched with rainwater. Subsequently, he contracted fever on November 11
which was later on accompanied by loose bowel movement for the succeeding 12
days. His condition was reported to Asia Bulk and the US Coast Guard
Headquarters in Hawaii on November 15. However, before he could not be
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evacuated, he died on November 18, 1992. Evelyn Tolosa, the widow, filed a
complaint before the POEA for damages against Pedro Garate, Chief Mate of the
vessel, Mario Asis, Second Mate, Asia Bulk and Quana-Kaiun. The case was
transferred to the NLRC. The Labor Arbiter ruled in favor of the widow, awarding
ACTUAL DAMAGES PLUS LEGAL INTEREST, AS WELL AS MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY’S FEES. On appeal to the NLRC, the
decision of the Labor Arbiter was vacated and the complaint was dismissed for
lack of jurisdiction over the subject matter of the action pursuant to the
provisions of the Labor Code, as amended. Sustaining the NLRC, the CA ruled
that the labor commission had no jurisdiction over the subject matter of the
action filed by petitioner. Her cause did not arise from an employer-employee
relation, but from a quasi-delict or tort. Under Article 217 (a)(4) of the Labor Code
which allows an award of damages incident to an employer-employee relation,
the damages awarded were not proper as she is not an employee, but merely the
wife of an employee.

Do the Labor Arbiter and the NLRC have jurisdiction over petitioner’s action?

The Court affirmed that the claim for damages was filed not for claiming
damages under the Labor Code but under the Civil Code. The Court was convinced that
the allegations were based on a quasi-delict or tort. Also, she had claimed for actual
damages for loss of earning capacity based on a life expectancy of 65 years, which is
cognizable under the Civil Code and can be recovered in an action based on a quasi-
delict. Though damages under a quasi-delict may be recoverable under the jurisdiction
of labor arbiters and the NLRC, the relief must be based on an action that has
reasonable casual connection with the Labor Code, labor statutes or CBA’s. It must be
noted that a worker’s loss of earning capacity and backlisting are not to be equated with
wages, overtime compensation or separation pay, and other labor benefits that are
generally cognized in labor disputes. The loss of earning capacity is a relief or claim
resulting from a quasi-delict or a similar cause within the realm of Civil Law. In the
present case, Evelyn Tolosa’s claim for damages is not related to any other claim under
Article 217, other labor statutes, or CBA’s. She cannot anchor her claim for damages to
Article 161 of the Labor Code, which does not grant or specify a claim or relief. This
provision is only a safety and health standard under Book IV of the same Code. The
enforcement of this labor standard rests with the labor secretary. It is not the NLRC
but the regular courts that have jurisdiction over action for damages, in which the
employer-employee relation is merely incidental, and in which the cause of action
proceeds from a different source of obligation such as a tort. (2) On the finality of
the award, the Court ruled that issues not raised in the court below cannot be raised for
the first time on appeal. Thus, the issue being not brought to the attention of the Court

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of Appeals first, this cannot be considered by the Supreme Court. It would be
tantamount to denial of the right to due process against the respondents to do so.
(Evelyn Talosa v. NLRC, G.R. No. 149578 April 10, 2003)

2466. What

is the FUNDAMENTAL RULE ON DAMAGES?

The fundamental principle of the law of damages is that one injured by a

breach of a contract or by a wrongful or negligent act or omission shall have fair
and just compensation commensurate with the loss sustained in consequence of
the defendant’s act, which gives rise to the action. Hence, actual pecuniary
compensation is the general rule, whether the action is on contract or in tort, except
where the circumstances warrant the allowance of exemplary damages. In general, the
damages awarded should be equal to, and precisely commensurate with, the
injury sustained.

2467. DEFINE “DAMAGES”.

Damages may be defined as a sum of money which the law awards or imposes
as pecuniary compensation, recompense, or satisfaction for an injury done or a wrong
sustained as a consequence of the breach of some duty or violation of some right
(People vs. Ballesteros, GR No. 120921, January 29, 1998). Damages are the
pecuniary consequences which the law imposes for the breach of some duty or the
violation of some right.

2468. DEFINE “DAMAGE”

“Damage” is the detriment, injury or loss which is occasioned by reason of

fault of another in the property or person.

INJURY – There is a material distinction between damages and injury. Injury is

the illegal invasion of a legal right; damage is the loss, hurt, or harm which results from
the injury; and damages are the recompense or compensation awarded for the damage
suffered.

2469. Distinguish damages from injury.

Damages (from the latin “damnum” or “demo””- to take away) refers to the harm
done and what may be recovered, while injury refers to the wrongful or unlawful or
tortuous act.

The former is the measure of recovery, while the latter is the legal wrong to be
redressed.
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 There may be damages without injury, and an injury without damages.

There can be damage without injury in those instances in which the loss or harm was
not the result of a violation of a legal duty. This is what is called damnum absque
injuria. In order that the law will give redress for an act causing damage, that act must
not be only hurtful, but wrongful. There must be DAMNUM ET INJURIA.

2470. What is the principle of “DAMNUM ABSQUE INJURIA”?

“Damnum Absque Injuria” means damage without injury. A person may have
suffered physical hurt or injury, but for as long as no legal injury or wrong has been
done, there is no liability.

2471. Give examples illustrating “damnum absque injuria”.

Where the government exercised a contractual right to cancel an agency,

although by such cancellation, the agent would suffer damages (De la Rama Steamship
Co., Inc. vs. Judge Tan and the NDC (99 Phil 1034).

Where one complies with a government-promulgated rule cannot be held liable

for damages that may be caused to other persons. (Janda vs. Lepanto Cons.-Mining
Co., May 25, 1956).

2472. What are the different kinds of damages recoverable under the Civil Code?
Define each of them.

The various kinds of damages differ as to the necessity of proof of pecuniary loss, the
purpose of and grounds for their award and the need for stipulation. The rule is that, in
every case, the trial courts must specify the award of each item of damages and make a
finding thereon in the body of the decision.

The different kind of damages recoverable under the Civil Code are: (Art. 2179)

1. Actual or compensatory damages, or the compensation awarded to a

person for such pecuniary loss suffered by him as he has duly proved;

2. Moral damages, or the compensation awarded to a person for physical

suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury;

3. Nominal Damages, or an amount awarded to a person in order that his right,

which had been violated or invaded, may be vindicated or recognized;

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 4. Temperate or moderate damages, or the compensation which is more than
nominal but less than compensatory damages, awarded to a person when the court
finds that he has suffered some pecuniary loss, but its amount cannot, from the nature
of the case, be proved with certainty;

5. Liquidated damages, or that agreed upon by the parties to a contract, to be

paid in case of breach thereof; and

6. Exemplary or corrective damages, or that imposed by way of example or

correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.

2473. What is the nature of a complaint for damages?

A complaint for damages is a PERSONAL ACTION.

2474. What is the implication of Art. 2198 of the Civil Code?

It is clear that the general law on damages as adopted under the Civil Code
should not run in conflict with the latter, otherwise, it is the Civil Code that prevails.

2475. What is meant by “the principles of the general law on damages” referred to
in Art. 2198?

The basic provisions on damages of the present Civil Code are based on the
Spanish Civil Code. However, some principles of the American Law on damages, such
as those on moral and temperate damages have been adopted and incorporated in the
Civil Code. It is reasonable to believe that “the principles of the general law on
damages” referred to in the above legal provisions are those principles which are
generally recognized and accepted in Anglo-American and Spanish law.

2476. What is meant by ACTUAL OR COMPENSATORY DAMAGES?

Art. 2199 provides “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.

Actual or compensatory damages represent the adequate compensation for pecuniary

loss suffered and for profits the obligee failed to obtain.

They are aimed at repairing the wrong done. Pertaining as they do to such injuries or
losses that are actually sustained and susceptible of measurement, they are intended to
put the injured party in the position in which he was before he was injured.

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They are those recoverable because of pecuniary loss (in business, trade, property,
profession, job, or occupation). ( Algara v. Sandejas, 27 Phil. 284)

Adequate compensation for the value of LOSS SUFFERED OR PROFITS which

obligee failed to obtain.

2477. What are the kinds of actual or compensatory damages and the
requirements?

KINDS OF ACTUAL OR COMPENSATORY DAMAGES

Art. 2200 CC, Two components to actual or compensatory damages -

indemnification for damages shall comprehend not only the value of the loss suffered, or
actual damages (“damnum emergens”) but also that of the profits which the obligee
failed to obtain, or compensatory damages (“lucrum cessans”)

a. General Damage - natural, necessary and logical consequences of a

particular wrongful act which result in injury; need not be specifically pleaded because
the law itself implies or presumes that they resulted from the wrongful act

b. Special Damages - damages which are the natural, but not the necessary
and inevitable result of the wrongful act. (i.e., attorney’s fees)

REQUIREMENTS:

There must be pleading and proof of actual damages suffered for the same to be
recovered. In addition to the fact that the amount of loss must be capable of proof, it
must also be actually proven with a reasonable degree of certainty, premised upon
competent proof or the best evidence obtainable. The burden of proof of the damage
suffered, is imposed on the party claiming the same who should adduce the best
evidence available in support thereof, like sales and delivery receipts, cash and check
vouchers and other pieces of documentary evidence of the same nature. In the absence
of corroborative evidence, self-serving statements of account are not sufficient basis for
an award of actual damages.

Claim for actual damages cannot be predicated on flimsy, remote, speculative,

and insubstantial proof, courts, are, likewise, required to state the factual bases of the
award.

i. Need to be pleaded

ii. Pray for the relief that claim for loss be granted

iii. Prove the loss

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2478. What are the two (2) specific kinds of actual or compensatory damages?
Define each of them

They are: “DANO EMERGENTE, OR DAMNO VITANDO”- the value of the loss
suffered.

The following are some examples of “dano emergente”:

1. destruction of the things;

2. fines or penalties that had to be paid;

3. medical and hospitalization expenses; and

4. rents and agricultural products not received in an agricultural lease (J.M.

Tuason, Inc. vs. Santiago, et al.. July 31, 1956).

AND “LUCRO CESANTE, LUCRO CAPTANDO, OR LUCRUM CESSANS” refers to

the profits which the obligee failed to obtain.

The following are some examples of “lucro cesante”:

1. profits that could have been earned had there been no interruption in the
plaintiff’s business as evidenced by the reduced receipts of the enterprise.
(Algarra vs. Sandejas, 27 Phil. 284);

2. profits because of a proposed future re-sale of the property being purchased—

if the existence of a contract there was known to the delinquent seller. (Enriquez
de la cavoda vs. Diaz, 37 Phil. 982); and

3. interest on rentals that were not paid. (Here, the interest undeniably forms
profits which could have been realized had the rents been given. (J.M. Tuason,
Inc. vs. Santiago, et al.. July 31, 1956).

2479. Because of a breach of contract on the part of the sellers of materials, the
buyers were not able to construct the house they had intended to build (at a
certain estimated cost). Can they recover said cost from the delinquent party?

No, they are not entitled to be awarded said estimated costs because after all
they did not lose this amount. The amount was an expense, not expected income that
had been lost. (Bert Osmena and Associates vs. Court of Appeals, Jan 28, 1983).

2480. Is it necessary to plead and pray for actual damages before it can be
awarded?

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 To be recoverable, actual damages must be specifically pleaded or prayed for.
However, when a prayer mentions only exemplary damages, moral damages, and
attorney’s fees and “such further relief as the Court may deem just and equitable,” the
phrase “such further relief” may include “actual damages” if and when they are proved.
(Heirs of Justiva vs. CA, Jan 31, 1963).

2481. Aside from specifically pleading actual damages, what other things must be
done in order that it may be awarded?

Actual damages must be proved and the amount of damages must possess
at least some degree of certainty. (Chua Teck Hee vs. Phil. Publishing Co., 34 Phil
447). If there is no proof of loss, or if the proof is flimsy and unsubstantial, no damages
will be given. The Court cannot rely on its own speculations as to the fact and amount of
damages, but must depend on ACTUAL PROOF that damage had been suffered and
actual proof of the amount. (Suntay Tanjangco vs. Jovellanos, June 30 1960).

2482. What if an attorney fails to perfect an appeal in a civil case, should he be

held liable for the damages that could have possibly been recovered from that
unperfected appeal?

No. The damages are highly speculative. Actual damages must be proved and
the amount must at least possess some degree of certainty. A court cannot rely on
speculation, conjecture, or guesswork as to the fact and amount of damages but must
depend on competent proof that they have suffered, and on evidence of the actual
amount thereof. (Phil. Nat’l Railways vs. Ethel Brunty and Juan Manuel Garcia,
November 2, 2006).

2483. May the parents of an unborn foetus recover actual damages in case of an
accident where the mother had miscarriage? Why?

No, because that would be speculation, as the parents cannot yet expect help,
support or service from an unborn child. They can, however recover moral damages for
the illegal arrest of the normal development of the foetus. (Geliz vs. CA, July 20, 1061)

2484. May the Court in awarding actual damages, also award nominal damages?

No. If there be an award of compensatory damages, there can be no award

of nominal damages. The reason is that the purpose of nominal damages is to
vindicate or recognize a right that has been violated, in order to preclude further
cost thereon, and “not for the purpose of indemnifying the plaintiff for any loss
suffered by him”. (Medina, et al. vs. Cresencia, et al., July 11, 1956).

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2485. The general rule is that actual damages must be proved with reasonable
degree of certainty, give the exceptions.

The following are the exceptions:

1. When a penalty clause have been agreed upon (Art. 1226);

2. When liquidated damages have been agreed upon (Art 2226);

3. When the loss is presumed as when a child or spouse dies as a result of the
act or omission of a person ( Manzanares vs. Moreta 38 Phil 821);

4. Forfeiture of bonds in favor of the government for the purpose of promoting

public policy or interest ( Far eastern Surety and Insurance Co. vs. Ca, 104 Phil 702);
and

5. “Damages for death caused by a crime or delict” which can be awarded

forthwith to the heirs of the victim by proof of such fact of death.

2486. May actual damages be recovered on the basis of mere testimony?

In the case of Fuentes vs. CA (253 SCRA 430), the Court held that as there is no
tangible document upon which the actual damages is based, actual damages cannot
be recovered on the basis of mere testimony. Actual damages to be awarded must
be proven by clear evidence.

MEASURE OF DAMAGES:

In general: Indemnification for damages comprehends not only the loss suffered, that is
the actual damages, but also profits which the obligee failed to obtain (compensatory
damages. DAMAGES MAY BE RECOVERED –

1. For loss or impairment of earning capacity in cases of temporary or permanent

injury;

2. For injury to the plaintiff’s business standing or commercial credit;

2487. What may comprise indemnification for damages?

Under Art. 2200 of the Civil Code it provides that “Indemnification for damages
shall comprehend not only the value of the loss suffered, but also that of the
profits which the obligee failed to obtain.”

2490. Jojo wanted to send a telegram message, “No truck available”, but the
telegram company sent “truck available”. Can Jojo recover damages?
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 Yes. It has been held that where defendant erroneously transmitted plaintiff’s
telegram reading “No truck available” as “truck available”, the plaintiff was allowed to
recover not only its actual loss but also loss of goodwill and customers. (Radio
Communications of the Philippines vs. Court of Appeals, 103 SCRA 359).

2491. In contracts and quasi- contracts, what is the extent of liability of the
obligor in case of breach of his obligation?

a.) If breach is in good faith and damages resulted thereto, he is liable for the
natural and probable consequences of the obligation; and to those which he foresaw or
could have reasonably foreseen at the time the obligation was constituted.

b.) If breach is in bad faith and damages resulted thereto, he is liable for all
damages which may be reasonably attributed to non-performance of the obligation. In
here, the relation of cause and effect is enough.

2492. What is the fundamental difference between the first paragraph and the
second paragraph of Art. 2201?

Art. 2201. In contracts and quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-performance
of the obligation.

In the first paragraph, the breach of obligation was due to mere carelessness,
while in the second paragraph, there was a deliberate or wanton wrongdoings.

2493. How are damages measured?

The damages resulting from a tort are measured in the same manner as those
due from a contractual debtor in bad faith, since he must answer for such damages
whether he had foreseen them or not, just as he must indemnify not only for damnum
emergens but also for lucrum cesans as required by Article 1106.

2494. Teodorica Endencia obligated herself to sell a parcel of land to the plaintiff.
It was agreed that the final deed of sale will be executed when the land was
registered in Endencia’s name. Subsequently, the Torrens Title for the land was
issued in her favor but in the course of the proceedings for registration it was
found that the land involved in the sale contained a greater area than what

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Endencia originally thought and she became reluctant to consummate the sale of
the land to the plaintiff. This reluctance was due to the advice of the defendant
corporation which exercised a great moral influence over her. However, in
advising Endencia that she was not bound by her contract with the plaintiff, the
defendant was not actuated with improper motives but did so in good faith
believing that, under the circumstances, Endencia was not really bound by her
contract with the plaintiff. In view of Endencia’s refusal to make the conveyance,
the plaintiff instituted a complaint for specific performance against her. May the
defendant be held liable?

Yes. The most that can be said with reference to the conduct of Teodorica
Endencia is that she refused to carry out a contract for the sale of certain land and
resisted to the last action for specific performance in court. The result was that the
plaintiff was prevented during a period of several years from exerting that control over
the property which he was entitled to exert and was meanwhile unable to dispose of the
property advantageously.

The defendant was liable to the plaintiff for the use and occupation of the land in
question and condemned the defendant to pay the plaintiff Pesos 2,497.00 as damages.
(Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587)

2495. What is the measure of damages for the wrongful detention of real property
by the vendor after the time has come for him to place the purchaser in
possession?

The extent of the liability for the breach of a contract must be determined in the
light of the situation in existence at the time the contract is made; and the damages
ordinarily recoverable in all events limited to such as might be reasonably foreseen
in the light of the facts then known to the contracting parties. Where the purchaser
desires to protect himself, in the contingency of the failure of the vendor promptly to give
possession, from the possibility of incurring other damages than such as are incident to
the normal value of the use and occupation, he should cause to be inserted in the
contract a clause providing for stipulated amount to be paid upon failure of the vendor to
give possession; and no case has been called to our attention where, in the absence of
such a stipulation, damages have been held to be recoverable by the purchase in
excess of the normal value of use and occupation. On the contrary, the most
fundamental conceptions of the law relative to the assessment of damages are
inconsistent with such idea. (Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39
Phil. 587)

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2496. Plaintiff seeks damages amounting to P500,000.00 pesos for plaintiff’s
failure to sell the land in question to a sugar growing and milling enterprise.
Should this prayer be granted by the court?

The said damages could not be recovered from the defendant, first, because the
damages in question are special damages which were not within contemplation of the
parties when the contract was made, and secondly, because said damages are too
remote to be subject of recovery. This conclusion is also necessarily fatal to the right of
the plaintiff to recover such damages from the defendant corporation for, as already
suggested, by advising Teodorica Endencia not to perform the contract, said
corporation could in no event render itself more extensively liable than the principal in
the contract. (Daywalt vs. Corporacion de PP. Agustinos Recoletos, 39 Phil. 587)

2497. Mendoza was the owner of a theater in Naga, Camarines Sur. The fiesta of
the City held on Sept. 17 and 18 yearly was usually attended by many people
mostly from the Bicol region. Mendoza, as a good businessman, taking
advantage of these circumstances, decided to exhibit a film which would fit the
occasion and have a special attraction and significance to the people attending
said fiesta. A month before the holiday, he contracted with the LVN Pictures, Inc.
for the showing of a Tagalog film entitled “Himala ng Birhen” in his theater and
advertised it by means of posters and newspaper announcements. The
advertisements stated that the film would be exhibited in his theater on Sept. 18th
and 19th. On Sept. 17, 1948, the LVN Pictures, Inc. delivered the said film in
Manila to the Phil. Air Lines, in a can containing the film was loaded in the
defendant’s plane but due to the fault of employees of the defendant it was not
unloaded from the plane when it arrived at the airport and it was brought back to
Manila. After several inquiries, the film was located in Manila on September 18th
and was shipped on Sept. 20th. Plaintiff received the film on the same day and
exhibited in his theater but he failed to realize the profits which he expected
because the people who attended the fiesta had already returned to their towns.
An action was brought by Mendoza to recover damages for Pesos 3,000.00
representing the profits which he claimed he failed to earn. Should the action
prosper?

Under Art. 2201 of the Civil Code, a debtor in good faith like the defendant
herein, may be held liable only for damages that were foreseen or might have
been foreseen at the time the contract of transportation was entered into. The trial
court correctly found that the defendant company could not have foreseen the damages
that would be suffered by Mendoza upon failure to deliver the can of film on the 17th of
Sept. 1948 for the reason that the plans of Mendoza to exhibit that film during the town

16
fiesta and his preparations, especially the announcement of said exhibition by posters
and advertisement in the newspaper, were not called to the defendant’s attention.

2498. What is the DOCTRINE FORESEEABLE OR ANTICIPATED

CONSEQUENCES?

The doctrine states that only those injuries which could have been
reasonably foreseen by the parties at the time the contract was entered into are
recoverable contract damages.

2499. “A” a fourth year medical student at the University of Santo Tomas, was
severely injured in an accident while he was a passenger in a bus operated by the
Laguna-Tayabas Bus Co. As a result of the accident, he became virtually an
invalid both physically and mentally, and as a consequence, he was unable to
continue with his studies. Subsequently, he and his parents brought an action for
damages against the bus company. The record show that at the time of the
accident, “A” was a professional student, being supported by his parents; and
the proximate cause of the accident was the negligence of the driver of the bus;
and that the defendant company had exercised due diligence in the selection and
supervision of its employees. In case defendant company is liable, is “A” entitled
to recover the income which he could have earned had he finished his medical
course?

Yes. The fact that “A” is a fourth year student and could have earned income had
he finished his medical course is not only a natural and probable consequence of
the accident but also could have been reasonably foreseen by the parties at the
time “A” boarded the bus of the defendant. It can very well be assumed that he could
have finished the course in said reputable university and would have passed the board
examination in due time. As regards the income that he could have possibly earned as
a medical practitioner, the amount of P300 could be easily be expected as his minimum
income had he finished his studies. Using this as basis, a total award of P25,000.00
compensatory damages, including medical and hospitalization expenses would be fair.
(Cariaga vs. Laguna tayabas Bus Co., 110 Phil 346).

NOTE: Defense of diligence in the selection of employees does not apply to

obligations arising from quasi-contract. It applies only in Quasi-delicts. In this case, the
bus company is liable under culpa contractual. (Contract of carriage).

2500. In crimes and quasi-delicts, what is the extent of liability of the defendant?

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
17
that such damages have been foreseen or could have reasonably been foreseen
by the defendant. (Art. 2202)

2501. If a taxi driver should kill his passenger, what is the basis of the civil
liability of the driver? Of the taxicab owner?

As to the taxi driver, his civil liability is based on his having committed a crime. As
to the taxicab owner, his civil liability for damages is based on culpa contractual or the
contract of carriage. (Maranan vs. Perez, June 26, 1967)

2502. In a tort or quasi-delict suit, what must the victim prove?

The victim must prove the following:

1. a causal connection between the tort and the injury; and

2. the amount and extent of injury.

2503. What does “NATURAL AND PROBABLE CONSEQUENCES” imply?

“Natural and probable” consequences implies that the damage would not have
resulted without the fault or negligence of the defendant (or accused) and that the fault
of the defendant (or accused) would normally or ordinarily result in the damage suffered
by the injured or offended party.

2504. What is the responsibility of a party suffering loss or injury because of the
act or omission of another?

The party suffering loss or injury must exercise the diligence of a good father
of a family to minimize the damages resulting from the act or omission in question.
(Art. 2203)

2505. Who has the burden of proving the exercise of diligence under Art. 2203?

The person sued has the burden of proving that the victim could have mitigated
the damage. (Lemoine vs. Alkan, 33 Phil. 162)

2506. A, in order to minimize the injuries he suffered from the tortuous act of B,
went to the United States to have a plastic surgery. However, the same could
have been also performed into the Philippines. Can A recover the cost of surgery
performed in the United States?

A victim cannot recover the cost of plastic surgery in the United States if it is
proved that the operation could have been completely performed in the Philippines by
local practitioners. (Araneta, et al., vs. Arreglado, et al., 104 Phil 529).
18
2507. Defendant owner of a public garage in the town of San Fernando, La Union,
undertook to take plaintiffs from San Fernando to Currimao, Ilocos Norte. On
leaving San Fernando, the automobile was operated by a licensed chauffeur but
later the chauffeur allowed his assistant, who had no driving license but who had
some experience in driving, to drive. After crossing the Abra River in Tagudin, the
car zigzagged for about half a kilometer, left the road and went down an
embankment. The car overturned and the plaintiffs were pinned down under it.
Lasam escaped with a few contusions but his wife received serious injuries,
among which was compound fracture of one of the bones in her left wrist. There
is a conflict of evidence as to the cause of the accident, plaintiffs claiming that it
was due to the reckless driving of the driver’s assistant and the defendant
claiming that it was due to a defect in the steering gear. The lower court granted
the plaintiff Pesos 1,254.10 as damages. From this decision, plaintiffs appealed
claiming that they are entitled to Pesos 7,832.80 damages.

Should the appeal be granted?

No, the defendant should not be charged with these expenses.

There can be no doubt that the expenses incurred by the plaintiffs as a result of
the accident greatly exceeded the amount of the damages awarded. But bearing in
mind that in determining the extent of the liability for losses for damages resulting from
negligence in the fulfillment of a contractual obligation, the courts have a “discretionary
power to moderate the liability according to the circumstances”. As pointed out by that
court in its well-reasoned and well-considered decision, by far the greater part of the
damages claimed by the plaintiffs resulted from the fracture of a bone in the left wrist of
Joaquina Sanchez (plaintiff’s wife) and from her objections to having a decaying splinter
of the bone removed by a surgical operation. As a consequence of infections ensued
and which required constant and expensive medical treatment for several years.

2508. Can DAMAGES IN CRIMES be increased or lessened?

Yes. Article 2204 of the Civil Code provides: “In crimes, the damages to be
adjudicated may be respectively increased or lessened according to the
aggravating or mitigating circumstances.”

2509. In obligations arising from crimes, are the mitigating and aggravating
circumstances important?

Yes. In crimes, the damages to be adjudicated may be respectively increased or

decreased according to the aggravating or mitigating circumstances. (Art. 2204)

2510. What is the rule in damages for loss or impairment of earning capacity?
19
 One who is injured in his person may recover for any resulting LOSS OF
TIME AND CONSEQUENT LOSS OF EARNINGS CAPACITY. Art. 2205 of the Civil
Code provides that: “Damages may be recovered: (1) For loss or impairment of
earning capacity in case of temporary or permanent personal injury.”

Such damages covers the loss sustained by the dependents or heirs of the deceased,
consisting of the support they would have received from him had he not died because of
the negligent act of another.

ONLY NET EARNINGS CONSIDERED. The loss is not equivalent to the entire earnings
of the deceased, but only that portion that he would have used to support his
dependents or heirs.

Hence, deduct from his gross earnings the necessary expenses supposed to be used
by the deceased for his own needs.

The amount recoverable by the heirs of a victim of a tort is not the loss of the entire
earnings, but rather the loss of that portion of the earnings which the beneficiary would
have received. In other words, only net earnings, not gross earnings, are to be
considered, that is, the total of the earnings less expenses necessary in the creation of
such earnings or income and minus living and other incidental expenses.

Villa Rey Transit, Inc. vs. CA (31 SCRA 511; 1970):”x x x the award of damages for loss
of earning capacity is concerned with the determination of the losses or damages
sustained by the private respondents, as dependents and intestate heirs of the
deceased, and that said damages consist not of the full amount of his earnings, but of
the support they received or would have received from him had he not died in
consequence of the negligence of petitioner’s agent. In fixing the amount of that
support, we must reckon with the ‘necessary expenses of his own living,’ which should
be deducted from his earnings.

Earning capacity, as an element of damages to one’s estate for his death by wrongful
act is necessarily his NET earning capacity or his capacity to acquire money, ‘less the
necessary expense for his own living.’ The amount recoverable is not loss of the entire
earning but rather the loss of that portion of the earnings which the beneficiary would
have received. Only net earnings, not gross earning are to be considered, the total of
the earnings less expenses necessary in the creation of such earnings or income and
less living and other incidental expenses.

FORMULA FOR COMPUTATION OF LOSS OF EARNING CAPACITY:

20
Another factor considered in determining the award of loss of earning capacity is the
LIFE EXPECTANCY of the deceased which takes into account his work, life-style,
age and state of health prior to the accident.

Capacity = Life expectancy x Gross annual Income – Living Expenses.

Life Expectancy is determined as follows: 2/3 x [80- age of deceased] (Adopted in the
American Expectancy Table of Mortality or the Actuarial of Combined Experience Table
of Mortality)

As to the amount of living expenses that should be deducted from the deceased’s gross
annual income, more recent jurisprudence shows that the Court consistently pegged the
amount at 50% of the gross annual income.

Smith Bell Dodwell Shipping Agency Corp v. Borja (383 SCRA 341; 2002 – when there
is no showing that the living expenses constituted a smaller percentage of the gross
income, the living expenses must be fixed at half of the gross income, thus: “only net
earnings, not gross earning, are to be considered; that is, the total of the earnings less
expenses necessary in the creation of such earnings or income, less expenses
necessary in the creation of such earnings or income, less living and other incidental
expenses. When there is no showing that the living expenses constituted a smaller
percentage of the gross income, we fix the living expenses at half of the gross income.
To hold that one would have used only a small part of the income, with the larger part
going to the support of one’s children, would be conjectural and unreasonable.”

NEED FOR DOCUMENTARY EVIDENCE; As a rule, documentary evidence should be

presented to substantiate the claim for damages for loss of earning capacity.
EXCEPTION: damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when:

1. the deceased is self-employed and earning less than the minimum wage
under current labor laws, in which case, judicial notice may be taken of the fact that in
the deceased’s line of work, no documentary evidence is available or

2. the deceased is employed as a daily wage worker earning less than the
minimum wage under current labor laws.

2511. Can plaintiff recover damages because of INJURY SUFFERED BY ITS

BUSINESS STANDING OR CREDIT?

Under 2205 of the Civil Code, damages may be recovered for:

21
 1. loss or impairment of earning capacity in cases of temporary or permanent
personal injury; and

2. injury to the plaintiff’s business standing or commercial credit.

The financial credit of a businessman is a prized and valuable asset, it being a

significant part of the foundation of his business. Any adverse reflection thereon
constitutes some material loss to him. Hence, the same is compensable. “Business
reputation or business standing”, “loss of goodwill and loss of customers or shippers
who shifted their patronage to competitors.
The grant thereof is proper under Art. 2205 which provides that damages may be
recovered “for injury to the plaintiff’s business standing or commercial credit.” And even
if not recoverable as compensatory damages, they may still be awarded in the concept
of temperate or moderate damages. There are cases were from the nature of the case,
definite proof of pecuniary loss cannot be offered, although the court is convinced that
there has been such loss. For instance, injury to one’s commercial credit or to the
goodwill of the business firm is often hard to show with certainty in terms of money.
Should damages be denied for this reason? The judge should be empowered to
calculate moderate damages in such cases, rather than that the plaintiff should suffer,
without redress from the defendant’s wrongful act.

2512. How may LOSS OF PROFITS be determined?

LOSS OF PROFITS (Lucrum Cessans) may be determined by considering the

average profit for the preceding years multiplied by the number of years during
which the business was affected by the wrongful act or breach.

2513. Distinguish LOSS OF EARNINGS FROM LOSS OF PROFITS.

It should be borne in mind that loss of earnings is distinct from loss of profits the
difference being that EARNINGS are the fruit or reward of labor, the price of
services performed, while PROFITS represent the net gain made from an
investment or from the prosecution of some business after the payment of all
expenses incurred. The injured person is entitled to compensation for loss of
earnings derived from personal effort, skill or ability or for the destruction or
impairment of his ability to perform labor or render service which is essentially
and fundamentally personal in character. Generally, in either case, compensation
is limited to earnings which are the result of personal effort.

2514. How may FUTURE EARNINGS BE RECOVERED?

Generally, a recovery may also be had for loss of future earnings, provided
they are shown with reasonable certainty and are not merely speculative in
22
character. The plaintiff, however, cannot recover for the value of his time to his family.
One who is injured in his person by the wrongful act of another may recover for any loss
sustained thru being temporarily deprived of this capacity to perform his ordinary
business; that is, he may recover for a loss of time and consequent loss of
earnings.

2515. What is the MEASURE OF DAMAGES FOR LOSS OF TIME?

The measure of damages for loss of time is the value of the plaintiff’s time while
prevented from working by reason of the fault or negligence of the defendant, the true
test being what his services might be worth to him in his ordinary employment or
business. The plaintiff must establish a reasonable probability that his injury did bring
about a loss of earnings, must afford a basis for a reasonable estimate of the amount of
that loss, and to this end must prove both the amount of time lost and its value. He
may show what he was making at the time of, or before, the injury.

2516. What is required in the process of ascertaining the amount of

compensation to be awarded for impairment of the capacity to work?

The process of ascertaining the amount of compensation to be awarded for

impairment of the capacity to work requires (1) the determination of the extent to which
such capacity has been diminished; and (2) the fixing of the amount of money which will
compensate for the determined extent of impairment. The extent of the diminution or
impairment of earning capacity is generally to be arrived at by comparing what the
injured party was capable of earning at or before the time of the injury with what he was
capable of earning after it occurred. The nature and extent of the plaintiff’s business,
profession or employment, his skill and ability in his occupation or profession, the loss
or diminution of capacity to follow it as a consequence of the injury, and the damages
he has suffered by reason of such loss or diminution may be shown and taken into
consideration. The extent and seriousness of the plaintiff’s injury may be shown, and as
a basis for comparison, proof as to his condition since the injury is admissible.

2517. May compensation for injury to one engaged in business include the value
of his services in such business? On what should it depend?

The compensation for injury to one engaged in business may include the value of
his services in such business and must depend upon the nature and extent of the
business, the amount of his personal direction and labor in connection with the
business, and the amount of capital invested and labor employed. One may recover any
pecuniary loss sustained by reason of the suspension of his personal direction of, and
attention to, his business during his absence on account of his injuries, and because of
his decreased ability to give such direction and attention after he returned to work and in
23
the future. If the business could not be continued with the same success after his
injury, as before, a fair compensation may be made for loss of his earning power
if it can be fairly and approximately measured. This compensation should not
exceed the amount usually paid to persons performing similar services for others,
and care must be taken not to make the responsible party an insurer of prospective
profits.

2518. In the case of a person engaged in business, what evidence is required in

order to recover damages?

In the case of a person engaged in business, from the very nature of the
situation, the amount of loss cannot be proved with exactitude, and all that can be
required is that the evidence, with such certainty as the nature of the particular case
may permit, lay a foundation which will enable the investigator of facts to make a
reasonable estimate. It is competent and proper to show the nature and extent of the
business and the part the plaintiff transacted therein, the pecuniary loss sustained by
reason of the partial or total absence of his personal attention and labor, and what his
services in the business were worth, the compensation paid to persons doing such
business for him and, under some circumstances, what the injured person’s services
were worth if employed under like circumstances by another in a similar capacity. The
plaintiff may also show the amount of his daily earnings and, in some cases, state the
profits of the business and taken into consideration. In further proof of his personal
incapacity but not as an independent element of recovery, the plaintiff may show that he
was compelled to employ servants to work done by himself but, according to some of
the courts, not the amount paid for such services.

2519. In the case of a PROFESSIONAL MAN, what is the proper MEASURE OF

DAMAGES for loss of time?

In the case of a professional man, the proper measure of damages for loss
of time is the amount he would have earned by the practice of his profession. In
order to recover for loss of time, a professional man must prove the amount he would
have earned in the practice of his profession during the time in question, and the court
should consider the probability of his being employed during the period for which he
seeks to recover. Testimony as to what he had been previously receiving for his
services is admissible, and he may show his actual earnings during the period of the
previous year corresponding to that in which he was injured. If he was not engaged in
the practice of his profession immediately thereafter, it is proper to show what he
earned thereafter, not as establishing in itself the value of his time, but as evidence to
aid the court in fixing it.

24
2520. Aside from damages for loss or impairment of earning capacity, Art. 2205 of
the Civil Code also provides that damages may be recovered for injury to
PLAINTIFF’S BUSINESS STANDING OR COMMERCIAL CREDIT. Is this kind of
damage easy to prove?

By its very nature, this kind of damage is often hard to prove in terms of money.
That should not, however, prevent the court from allowing such damages for Arts. 2224
and 2225 of the Civil Code which precisely provides for the award of temperate
damages in cases where it is proven that plaintiff has suffered some pecuniary
loss but its amount cannot, from the nature of the case, be proven with certainty.
In cases like this the court will fix the amount of the damage taking into account the
circumstances of the case.

2521. How much is the AMOUNT OF DAMAGES RECOVERABLE FOR DEATH

CAUSED BY A CRIME OR QUASI-DELICT?

The amount of damages for death caused by a crime or quasi-delict shall be at least
P3,000 even though there may have been mitigating circumstances. In addition: (now
P50,000.00)

1. The defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter, such indemnity shall
in every case be assessed and awarded by the court, unless the deceased on account
of permanent disability not caused by the defendant, had no earning capacity at the
time of his death;

2. If the deceased was obliged to give support according to law, the recipient
who is not an heir called to the decedent’s inheritance by the law of estate or intestate
succession, may demand support from the person causing the death, for a period
not exceeding five (5) years, the exact duration to be fixed by the court;

3. the spouse, legitimate and illegitimate descendants and ascendants of the

deceased may demand moral damages for mental anguish by reason of the death
of the deceased. (Art. 2206 of Civil Code).

2522. What is meant by “at least Pesos 3,000.00, even though there may have
been mitigating circumstances” in Art. 2206 of the Civil Code?

“When the first paragraph says “at least Pesos 3,000.00, even though there may
have been mitigating circumstances, it is meant that the Court must not stop after
awarding Pesos 3,000.00, because the life of a captain of industry, scientist, inventor,
a great writer or statesman is materially more valuable to the family and to the
community than that of an ordinary man. Moreover, aggravating circumstances
25
should cause exemplary damages to be awarded. The court must, therefore, in
certain cases, allow much more than Pesos 3,000.00 . In addition, indemnity for the loss
of earning capacity must in every case be assessed and awarded, except in the case
mentioned in No. 1 of the said Article.

2523. According to Art. 2206 of the NCC, in determining the amount recoverable
in case of death caused by a crime or a quasi-delict, the defendant can be held
liable, among others, for the loss of earning capacity of the deceased which will
be paid to the heirs of the latter. How do we determine the amount of such loss of
earning capacity?

In Villa Rey Transit, Inc. vs. CA (31 SCRA 511), the SC held that the
determination of the amount depends upon two (2) factors, namely: 1) the number of
years on the basis of which the damages shall be computed; and 2) the rate at
which the losses sustained by plaintiff’s should be fixed.

Formula:

{2/3 x (80-age of deceased at the time of death)} x monthly earnings x 12

Variables considered are:

1. Life expectancy computed as:

{2/3 x ( 80-age at the time death)}

2. Net income/earnings- the total of the earnings less expenses necessary for
the creation of such earnings and less living or other incidental expenses.

2524. A son was convicted for having killed his father. May he be required to
indemnify the victim’s heirs (the defendant’s mother, brothers, and sisters) even
they had testified in his favor?

Yes, for they have suffered, even if their natural impulses compelled them to
exoneration of the guilty son. (People vs. Santiago Manos. Dec. 24, 1970).

2525. What are the rights granted to an insurer who indemnifies a person injured
or suffered losses arising out of the act or omission of another person?

If the plaintiff’s property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of

26
the insured against the wrongdoer or the person who has violated the contract. (Art.
2207 of the Civil Code).

2526. What if the amount paid by the insurance company does not fully cover the
injury or loss suffered by the plaintiff?

If the amount paid by the insurance company does not fully cover the injury or
loss, the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury. (Art 2207 of the Civil Code).

2527. What is the concept of “attorney’s fees” as damages?

The attorney’s fees do not refer to the duty of a client to pay his own attorney.
Such payment generally involves only the client and his attorney. The concept of
“attorney’s fees” as damages apply rather to instances when a client may recover
from the other party the fees which the former may pay the former’s attorney.
(Tan Ti vs. Alvear, (26 Phil 566).

2528. Is a pauper litigant exempt from the payment of attorney’s fees?

While a pauper litigant is exempt from the payment of legal fees and filing an
appeal bond, a printed record on appeal, and a printed brief, he is not exempt from
the payment of attorney’s fees. An award of attorney’s fees whether in favor of or
against a pauper litigant is thus proper. (Luz G. Cristobal vs. Employee’s
Compensation Commission, Feb. 26, 1981).

2529. Who are entitled to “attorney’s fees” as provided under Art. 2208 of the Civil
Code?

The Court’s award of attorney’s fees is an indemnity to the party and not to
counsel, and the fact that the contract between the client and his counsel was on
a contingent basis does not affect the client’s right to counsel fees. A litigant who
improvidently stipulated higher counsel fees than those to which he is lawfully entitled,
does not for that reason earn the right for a larger indemnity, but by parity of reasoning
he should not be deprived of counsel fees if by law he is entitled to recover. (Necesito,
et al., vs. Paras, et al., 104 Phil 75).

2530. When are ATTORNEY’S FEES and expenses of litigation recoverable as

damages?

In the absence of stipulation, attorney's fees and expenses of litigation,

other than judicial costs, cannot be recovered except:
27
 (1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff's plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and
skilled workers;

(8) In actions for indemnity under workmen's compensation and employer's

liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's
fees and expenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.
(Art. 2208 of the Civil Code)

2531. If the obligation consists in the payment of a sum of money, is the rule on
Art. 1169 of the Civil Code relating to delay applicable? ( to put a debtor in delay
there must be judicial or extrajudicial demand made on him)

No. Art. 1169 of the Civil Code is applicable only when the obligation is to give
something other than money, otherwise Art. 2209 shall apply.

Art. 2209. If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six per cent per annum.

2532. What is the indemnity for damages in case the obligor incurs in delay in an
obligation to give a sum of money?

28
 If the obligation consists in the payment of a sum of money, and the debtor incurs
in delay, the indemnity for damages, there being no stipulation to the contrary, shall be
the payment of the interest agreed upon, and in the absence of stipulation, the legal
interest, which is six per cent per annum. (Art. 2209 of the Civil Code).

2533. Jay sues Joy for (a) collection on a promissory note for a loan, with no
agreement on interest, on which Joy defaulted, and (b) damages caused by Joy
on Jay’s priceless Michaelangelo painting on which Joy accidentally spilled acid
while transporting it. The court finds Joy liable on the promissory note and
awards damages to Jay for the damaged painting, with interest for both awards.
What rates of interest may the court impose with respect to both awards?

On the award for payment of the loan, there being no agreement on interest, the
rate of interest should be 6% per annum. On the award for damages, the rate of interest
should be 6% per annum. The legal rate of interest on monetary obligations not
arising from loans or forbearance of money of credits or goods is 6% per annum
in the absence of stipulations to the contrary.

2534. From what moment does interest run?

In the absence of stipulation, interest (as damages) runs from default (after a
judicial or extrajudicial demand, except when demand is not necessary). If there is no
evidence of extrajudicial demand, the period starts from the judicial demand, which
naturally is in the form of a complaint in court.

2535. Under Art. 1956 of the Civil Code, interest can only be demanded when
there is a stipulation in writing, give an exception to this rule.

Interest by way of damages or penalty as provided under Art. 2209 may be

demanded even if there is no stipulation to that effect. (Zobel vs. City of Manila 47 Phil.
169)

2536. If the term of payment was left to the will of the debtor, when should the
interest run and from when should it be counted?

If the term of the payment was left to the will of the debtor, the interest should not
run from the time the action was commenced in court, but only from default of
payment AFTER the period was fixed by the Court pursuant to Art. 1180 and 1197 of
the Civil code. Tiglao vs. Manila Railroad Co. Jan 2, 1956).

A partnership borrowed some P20,000 from a warehousing company at clearly

usurious rate from 2% to 2-1/2% per month. The partnership paid said interest.

29
2537. Can the creditor recover the principal debt despite alleged usurious
interest?

Yes, the creditor can recover the principal debt. The contract of loan with a
usurious interest is valid as to the principal loan and void only with respect to the
interest.

2538. Can the debtor recover the interest paid?

Since the interest is void, the debtor may recover what he has paid.

2539. When does actual damages given by the court in a breach of contract earn
legal interest?

Actual damages given by the court in a breach of contract shall earn legal
interest, not from the date of the filing of the complaint but from the date the judgment
of the trial court is rendered. (Soberano vs. Manila Railroad Co., Nov. 23, 1966).

2540. A judgment from the RTC ordering payment of a sum of money with interest
was appealed to the CA on the question of prescription. The CA affirmed the RTC
judgment but neglected to give interest. In executing the judgment, should
interest be also given?

Yes, despite the silence of the CA judgment. The reason is the CA decided
merely the issue of prescription. Interest was not discussed in the CA judgment. Its
affirmance of the RTC decision can only mean affirmance also of the grant of interest.

ARTICLE 2211 – 2225

2541. In a criminal action, the court rendered its judgment finding Pedro guilty
and also ordered him to pay interest as a part of the damages. Pedro questioned
the decision of the court contending that an interest cannot be a part of damages.
Is Pedro correct?

No, Pedro is not correct.

Under Article 2211 of the Civil Code, it provides that in crimes and quasi-
delicts, interest as a part of damages may, in a proper case, be adjudicated in the
discretion of the court.

In the given problem, the court exercised its discretion by appropriately imposing
interest as part of the damages. Therefore, Pedro’s contention is improper.

30
2542. Article 2211 of the Civil Code, provides that in crimes and quasi-delicts,
interest as a part of damages may, in a proper case, be adjudicated in the
discretion of the court. What is the basis of the interest?

The basis of the interest is the legal rate which is 6% per annum.

2543. What kind of interest is due in an obligation?

This is better known as “ACCRUED INTEREST.”

2544. Pongkach, a businessman, bought 1000 kilos worth Php 30,000 from
Sibuma Sugar Co. to be paid on Dec.31, 2010. In the contract, it did not mention
about interest on the obligation. Pongkach failed to pay his obligation and
despite repeated demands from the sugar co, still he was not able to pay. The
Sugar Co., brought an action to the court and on its decision, the court awarded
legal interest on the obligation. Pongkach argues that there should be no legal
interest because it is not even stipulated in the contract. Who is correct? Explain
briefly.

The court is correct in awarding legal interest.

Under the Art.2212 of the Civil Code, it provides that interest due shall earn
legal interest from the time it is judicially demanded, although the obligation is
silent on this point.

As a rule, accrued interest earns legal interest from the time of judicial
demand and not from default. In the given problem, the filing of the complaint or
bringing of the action already constitutes judicial demand by the Sugar Co. and
therefore imposition of legal interest is proper and such interest is earned even if the
obligation did not mention it on the contract.

2545. What is the effect of absence of stipulation to pay interest?

If no interest had been stipulated in the contract of the parties, there would be no
compounding of interest.

2546. When shall it be proper to IMPOSE INTEREST UPON INTEREST?

Interest upon interest shall be applicable only to obligations containing a

stipulation for payment of interest.

2547. When shall an accrued interest earn legal interest?

31
 Accrued interest earns legal interest from the time of judicial demand and not
from default.

2548. Can an interest be imposed from unliquidated claims or damages? Explain

briefly your answer.

No because unliquidated claims are not fixed or predetermined unlike liquidated

damages which are fixed by the parties to a contract. Consequently, for not being fixed
or determined, no interests can be imposed or collected from unliquidated damages for
lack of basis until their amounts had been established with reasonable certainty.

2549. What is the reckoning time when legal interest may be collected from
unliquidated damages?

Interest on unliquidated damages should start from the date of the decision of
the trial court as it is only then that the claims or damages are definitively ascertained.

2550. Lex, a businessman ordered certain equipment and paid downpaynment.

Because of some alleged violations of warranties, he refused to pay the balance
to the seller, Lana. Instead of tendering payment of said balance, Lex sought to
have the sale rescinded on account of the alleged breach of warranty. The alleged
warranty was not however, proved. Should the buyer, Lex pay the interest on the
balance?

No, Lex is not liable to pay the interest on the balance. The price of the
equipment under their contract of sale was not determined and known, hence,
unliquidated.

The law provides that interest cannot be recovered upon unliquidated claims
or damages, except when the damage can be established with reasonable
certainty.

Consequently, for not being fixed or determined, no interests can be imposed or

collected from unliquidated damages for lack of basis until their amounts had been
established with reasonable certainty

2551. What are LIQUIDATED DAMAGES?

Liquidated damages are those agreed upon by the parties to a contract, to be

paid in case of breach thereof.

2552. What is the effect of contributory negligence of Plaintiff?

32
 The contributory negligence of the plaintiff has the effect of reducing or
mitigating the damages he can recover from the defendant.

2553. Jose is driving his car. Late for work, he rushes towards his place of work.
Suddenly, a driving mishap took place between Jose and another driver Wally.
Both of their cars collided because neither of them put on the breaks when they
were at the intersection. Wally admitted he was texting while driving when the
incident happened while Jose admits that he was driving fast because he was
already late for work. Can the court award the recovery of full damages in favor of
Jose?

No. Under the law, the contributory negligence of the plaintiff has the effect
of reducing or mitigating the damages he can recover from the defendant.

In the given problem, Jose admits his contributory negligence of driving fast
although the immediate and proximate cause of his damage is still mainly the
negligence or omission of the defendant because Wally was texting while driving and
such is a negligent act on his part.

Furthermore, in the given situation, it is mitigating because the loss would have
resulted in any event because of the negligence or omission of another, and where such
negligence or omission is the immediate and proximate cause of the damage or injury.
Therefore, the court should mitigate the award of damages to Jose because of his
contributory negligence.

2554. What is the reason why the law allows mitigation in damages in quasi-
delicts? Explain briefly.

The reason for the MITIGATION OF DAMAGES IN QUASI-DELICT is the

contributory negligence of the plaintiff although the immediate and proximate cause of
his damage is still mainly the negligence or omission of the defendant. His partial
contribution to his injury justifies the reduction of the damages claimed.

2555. Give instances of grounds for MITIGATION OF DAMAGES FOR

CONTRACTS:

(1) Violation of terms of the contract by the plaintiff himself;

(2) Retention or enjoyment of benefit under the contract by the plaintiff himself;
(3) Defendant acted upon the advice of counsel in cases where exemplary damages
are to be awarded;
(4) Defendant has done his best to lessen plaintiff’s injury or loss.

33
2556. Give instances of grounds for MITIGATION OF DAMAGES FOR QUASI-
CONTRACTS:

(1) In cases where exemplary damages are to be awarded;

(2) Defendant has done his best to lessen the plaintiff’s injury or loss.

2557. Give instances of grounds for mitigation of damages for quasi-delicts:

(1) That the loss would have resulted in any event because of the negligence or
omission of another, and where such negligence or omission is the immediate
and proximate cause of the damage or injury;
(2) Defendant has done his best to lessen the plaintiff’s injury or loss.

2558. Manny, a carpenter was hired by Freddie to paint the roof of his house.
Under their contract, Manny should finish the painting of the roof within five days.
On the fifth day, Freddie asked Manny to paint the dog house of Abu, his beloved
pet. Manny complained that it was not part of their contract. Freddie told Manny
that he would not pay him if he would not comply. Manny painted the dog house
but he was so mad because the dog almost bit him while painting. Manny was so
fumed that he did not return on the 6 th day because the contract was only for 5
days while Freddie argued that Manny agreed to paint the dog’s house not
knowing it was against the latter’s will. Freddie sued for full recovery of damages
against Manny. Decide.

Manny is liable for not finishing his work under the terms of the contract.
Likewise, Freddie is also liable for violating the terms of the contract wherein it
exclusively says that only the roof of the house is the cause of the obligation and
nothing else. Because of these circumstances, the court may equitably mitigate the
damages on the grounds that Plaintiff himself contravened the terms of the contract and
he has derived some benefit as a result of the contract by asking Manny to paint his dog
house without an additional payment.

2559. In a judgment of a case, the court denied the prayer for moral, nominal and
exemplary damages on the ground that there was no pecuniary loss proven. Is
the court correct? Explain briefly.

No, the court is not correct.

The law provides that no proof of pecuniary loss is necessary or required in

order that moral, nominal, temperate, liquidated or exemplary damages may be

34
adjudicated. What is essential is that there be a clear showing of the facts giving
rise to such damage.

2560. Aside from actual or compensatory, what are the other kinds of damages?

The other kinds of damages are the following:

(a) Moral
(b) Nominal
(c) Temperate
(d) Liquidated
(e) Exemplary or corrective.

2561. Among the other kinds of damages above-mentioned, which of these does
not require proof of pecuniary loss?

Only liquidated damages.

2562. What is the nature of Moral damages?

Moral damages, though incapable of pecuniary estimation, are in the

category of an award designed to compensate the claimant for actual injury
suffered and not to impose a penalty on the wrongdoer. Moral damages are
emphatically not intended to enrich a complainant at the expense of the defendant.

2563. WHEN MORAL DAMAGES ARE RECOVERABLE?

First, it must first be established that the act or omission of the defendant is the
proximate cause of the damage or injury suffered by the plaintiff.

Moral damages cannot be recovered in the absence of wrongful act or omission

or fraud or bad faith. Thus, it is essential that they sprung from a wrongful act or
omission, fraud, malice, or bad faith was the proximate cause thereof.

2564. What are Moral damages?

Moral damages includes :

1.) Physical suffering;

2.) Mental suffering;
3.) Mental anguish
4.) Fright
5.) Serious anxiety;

35
 6.) Besmirched reputation;
7.) Moral shock; and
8.) Social humiliation

2565. Juanita and Erik, were celebrating their first anniversary so they decided to
dine at Good Taste Restaurant. Juanita wore her best dress on that occasion. The
couple ordered their favorite food which is “crispy pata” served with ice tea as
their drinks. As the waiter was ready to serve their order, he accidentally lost grip
of the tray spilling the ice tea over Juanita. Other customers drew their attention
to them as Juanita’s dress was dripping with ice tea. Juanita filed a complaint for
recovery of moral damages on the ground that she was embarrassed that night.
Decide.

In a long line decision of the Supreme Court, it ruled that simple

embarrassment is not a ground for grant of moral damages. The embarrassment
allegedly suffered by Juanita when the waiter accidentally lost his grip on the tray
containing the glass of ice tea falling on her is a very shallow reason in granting moral
damages.

2566. What damage/ damages is/are recoverable in an EJECTMENT SUIT?

The only damages recoverable in an ejectment suit is the full rental value or
reasonable compensation for the use or occupation of the realty and attorney’s
fees (Sparrevohn vs. Fischer, 2 Phil.266)

2567. Give some instances when MORAL DAMAGES WERE NOT GRANTED:

1. The feelings which are products of sensitiveness do not justify grant of moral
damages.
2. The worries and anxieties of a defendant in a litigation that was not maliciously
instituted are not the grounds for moral damages as contemplated in the law.
3. Moral damages cannot be recovered from a person who has filed a complaint
against another in good faith, or without malice or bad faith.
4. When the complaint filed was found reasonable to a certain extent, moral
damages cannot be recovered.
5. The husband or next of kin is not entitled to moral damages for the physical
injuries suffered by the wife.

2568. IN ADJUDICATION OF MORAL DAMAGES, WHAT OTHER THINGS MAY BE

CONSIDERED?

Article 2218 provides that in the adjudication of moral damages, the sentimental
value of property, real or personal may be considered.
36
2569. What is the concept of SENTIMENTAL VALUE of property in adjudication of
moral damages? Discuss.

Sentimental value of a property is the value placed by the owner on the said
property which is more than its actual value by reason of some sentiments of
longing, desire, affection to the property, or respect and honor to its grantor.

2570. What is the effect of the presence of sentimental value in awarding moral
damages?

When by reason of a crime or quasi-delict, a property is attached some

sentimental value on the part of the owner, in the adjudication of moral damages, the
same may be favorably considered. The presence of sentimental value when properly
established will have the persuasive effect of justifying an increase in the amount of
moral damages payable to the owner.

2571. Give examples of properties having sentimental values

Personal things like jewelry donated by special people; medals and trophies of
honor; plaques of merits or achievements; certificates of appreciation; antiquated
religious images or icons, family bibles, portraits, by their nature do carry sentimental
value to the owner.

2572. Distinguished SENTIMENTAL VALUE FROM GOOD WILL

Sentimental value is different from goodwill. The former is the personal

attachment of the owner to the property. The latter refers to the public patronage to
one’s business like a shop, resort, hotel, restaurant, commercial establishment, etc.
which enhances its public image, attraction and reputation.

2573. Enumerate specific cases or instances where moral damages may be

recovered.

Moral damages may be recovered in the following and analogous cases:

1. A criminal offense resulting in physical injuries;

2. Quasi-delicts causing physical injuries;
3. Seduction, abduction, rape, or other lascivious acts;
4. Adultery or concubinage;
5. Illegal search;
6. Illegal or arbitrary detention or arrest;
7. Libel, slander or any ,other form of defamation;
8. Malicious prosecution;

37
 9. Acts mentioned in Article 309
10. Acts and actions referred to in Articles 21, 26,27,28,29,30,32,34 and 35.

2574. What is the purpose of Moral damages?

It is settled that moral damages are not intended to enrich the complainant
but to serve to obviate his/her spiritual suffering by reason of the culpable action of
the defendant.

2575. As a general rule, moral damages must not be presumed and proof is
necessary, what is the exception?

It is basic that moral damages to be awarded, the claimant must satisfactorily

prove the factual basis and casual connection thereof with the respondent’s acts.

However, in rape cases it has been held that moral damages is automatically made
without need of proof for it is assumed that the complainant has sustained mental,
physical and psychological sufferings.

2576. Is civil indemnity in rape the same as moral damages?

No, it is distinct from each other. Civil is mandatory upon the finding of the fact of
rape; it is distinct from and should not be denominated as moral damages which are
based on different jural foundations and assessed by the court in the exercise of sound
discretion.

2577. What are the REQUISITES for recovery of MORAL DAMAGES?

To recover moral damages, the following must be established:

1. There must be physical suffering, mental anguish, fright, serious anxiety,

etc. personally suffered by the plaintiff which must be proved by
testimonial evidence, among others.
2. As not all sufferings justify moral damages, the case must be one of those
enumerated or included in Articles 2219 and 2220.
3. There must be bad faith or wrongful act or omission.

2578. IS PROOF OF SUFFERING NECESSARY/ REQUIRED IN RAPE CASES?

In rape cases, proof of mental and physical sufferings can be dispensed with
because it is recognized that the victim’s injury is concomitant with and necessarily
results from the odious crime of rape to warrant per se the award of moral damages.

38
2579. What is the effect of UNSUCCESSFUL SUITS in relation to the award of
moral damages?

The mere filing of a suit does not render the plaintiff liable for malicious
prosecution should he be unsuccessful. Persons should have free resort to the
courts.

Furthermore, the worries and anxieties of a defendant in a litigation that was not
maliciously instituted are not the grounds for moral damages as contemplated in the
law.

Moral damages cannot be recovered from a person who has filed complaint
against another in good faith, or without malice or bad faith.

2580. May moral damages be automatically assessed against unsuccessful

plaintiffs?

If there was no bad faith in the filing of the plaintiff’s complaint, its dismissal does
not necessarily make him as losing party automatically liable for moral damages to the
defendant.

The law could not have meant to impose a penalty on the right to litigate.

2581. Juan Tamad is the mortal enemy of Pedro Masipag. The long feud between
them starts way back during their childhood and is carried on until now. The
object of their animosity is their rivalry over Pepita, their most beautiful neighbor.
When they were young, Juan gave a pendant to Pepita, which the latter gave to
Pedro. When Juan saw Pedro wearing the pendant, Juan boxed him and cursed
him to death. Pedro retaliated by poisoning Juan’s dog. More confrontations
happened between them. Enraged, Juan religiously visits his church praying
Pedro would die. Until one day, Juan learned that Pedro has committed suicide.
During the funeral of Pedro, Juan interfered by lighting fireworks and even firing
his gun to show his joy, however such interference had caused the dispersal of
the people attending the funeral rite. Infuriated, the family of Pedro filed
complaint against Juan for the damages they suffered. Is Juan liable?

Yes, Juan is liable.

Under the law, any person who shows disrespect to the dead or wrongfully
interferes with a funeral shall be liable to the family of the deceased for damages.

39
In the problem given, Juan’s unjustifiable acts of causing boisterous disturbance by
firing his gun to disperse people attending the funeral rites are wrongful interferences.
They are actionable wrongs and therefore Juan is liable.

2583. In the problem given, who are allowed by law to file the action for damages
against the offenders?

The following, in the order named, may file the action for damages:

a. Spouse;
b. Descendants;
c. Ascendants; and
d. Brothers and sisters.

2584. What is the yardstick or guideline in granting moral damages?

The yardstick for moral damages should be that the amount awarded is not
palpably and scandalously excessive so as to indicate that it was the result of passion,
prejudice, or corruption on the part of the trial court.

2585. What factors are to be taken into account in assessing moral damages?

They are the following:

a. Professional;
b. Social;
c. Political; and
d. Financial standing of the offended parties on one hand; and
e. Business and financial position of the other.

2586. Can a bank be held liable for moral damages?

Yes. Even if the negligence of the bank is not attended with malice or bad faith,
moral damages may be granted.

2587. Prudential Bank dishonored the check issued by private respondent who
turned out to have sufficient funds with petitioner. The Bank’s negligence was
the result of lack of due care and caution required of managers and employees of
a firm engaged in so sensitive and demanding business as banking. Is the bank
liable for damages?

The bank is liable for moral and exemplary damages. The law allows the grant of
exemplary damages by way of example for the public good. The public relies on the

40
bank’s sworn profession of diligence and meticulousness in giving irreproachable
service.

2588. May a CORPORATION WHICH IS AN ARTIFICIAL PERSON SUFFER MORAL

DAMAGES?

It depends on the specific basis relied upon.

If the corporation bases its claims for moral damages on physical sufferings or
mental anguish, fright, serious anxiety, wounded feelings, mental shock, social
humiliation and similar internal injury, the corporation cannot be awarded with moral
damages for obvious reason that an artificial person cannot suffer such internal feelings
for lack of a nervous system.

However, if the corporation is basing its claim for moral damages, on sufferance
of besmirched reputation, then it is entitled to moral damages if warranted by the
evidence. It is essential that the corporation enjoys a good reputation.

2589. Is willful injury to one’s property a basis for granting moral damages?
Explain.

Yes. Willful injury to the property of another entitles the latter to an award
of moral damages. Malicious mischief and arsons under the Revised Penal Code
are instances of willful injury to property. The civil aspects of these crimes are deemed
instituted with the criminal actions unless reservation is made to prosecute them
independently of the criminal actions or are file ahead of the criminal actions.

2590. Can moral damages be recoverable to breaches of contracts?

Breaches of contracts do not justify moral damages unless it is proved that the
defendant has acted fraudulently or in bad faith.

2591. What is the meaning of bad faith in breaches of contracts under Article
2220?

Malice or bad faith implies a conscious or intentional design to do a wrongful act

for a dishonest purpose or moral obliquity. Bad faith in Article 2220, includes gross, but
not simple negligence.

2592. On December 24, 1983, spouses Bendita Agua and Ben Tambling sent a
telegram of condolence to their cousins, Mr. Mrs. Bitoy Tabo, through RCPI, to
convey their deepest sympathy for the recent death of the mother-in-law of Bitoy
Tabo. The condolence telegram was correctly transmitted. However, the message
was typewritten in a “Birthday Card” and placed inside a “Christmasgram
41
envelope.” Believing that such transmittal was done intentionally and with gross
breach of contract resulting to ridicule, contempt and humiliation, Spouses
Tambling filed a complaint for damages. The agent contends good faith on his
part. Are the spouses Tambling entitled to recover damages?

Yes, spouses Tambling.

Defendant did not comply with its contract as intended by the parties and instead
of transmitting the condolence message in an ordinary form, in accordance with its
guidelines, placed the condolence expressing sadness and sorrow in forms conveying
joy and happiness.

Defendant’s contention of good faith cannot be accepted. Gross negligence or

carelessness is evident in the problem. Knowing that the letter was improperly placed
and entering into a contract for the transmission of messages in such forms, defendant
committed acts of bad faith, fraud and malice.

2593. Telefast failed to send a cable to the relatives of the deceased residing in
the U.S. Because of such failure, only the sender of the cable, the decedent’s
daughter, was able to attend the funeral. Is Telefast liable for damages?

Yes, as the Supreme Court properly observed:

“Who can seriously dispute the shock, the sorrow that the overseas children must
have suffered upon learning of the death of their mother after she had already been
interred, without being given the opportunity to even make a choice on whether they
wanted to pay her their last respects? There is no doubt that these emotional sufferings
were proximately caused by the Telefast’s omission and substantive law provides for
the justification for the award of moral damages.”

2594. Is an employee subjected to sexual harassment entitled to damages?

Yes. An employer is liable to pay moral damages to an employee subjected to sexual

harassment, for the anxiety, the seen and unseen hurt that she suffered.

2595. What is the nature and purpose of NOMINAL DAMAGES?

Nominal damages are not for indemnification of loss but for vindication of a
right violated.

2596. May the Plaintiff provide assessment for the award of nominal damages?

No. The assessment of nominal damages is left to the sound discretion of the
court in accordance with the circumstances of each case.
42
2597. In a judgment of a case, the judge awarded compensatory and exemplary
plus nominal damages. Was the decision proper? Explain.

Nominal damages cannot be awarded together with compensatory

damages. Where the court has already awarded compensatory and exemplary
damages that is already a juridical recognition that plaintiff’s right was violated. Hence,
the award of nominal damages is unnecessary and improper.

2598. Pepito, a private employee, borrowed a loan of Php 50,000 from SSS for the
repair of his house. Pedring, mortgaged his 50sq.m lot as a security for payment
of the loan. He regularly pays his obligation. However, SSS employees attempted
to foreclose mistakenly his mortgaged property. Pepito filed a case against them
and asked the court in his prayers for moral and nominal damages. Is SSS liable?
May the court grant such reliefs?

Yes, employees of the Social Security System shall be held liable for their
attempt to foreclose mistakenly the mortgage of the borrower who was not delinquent at
all.

The court held SSS liable for nominal damages and attorney’s fees only. No
moral damages may be awarded

2599. What sources of obligations may give rise to nominal damages?

The five sources of obligation enumerated in Article 1157. The court may award
nominal damages in any obligation arising from said sources. (5 sources of an
obligation)

2600. Aside from the five sources of obligations, what other source/sources may
give rise to nominal damages?

In addition to the five sources of an obligation, nominal damages may be

awarded where any property right has been invaded such as in trespass upon
property.

2601. What are those sources enumerated in Article 1157?

Article 1157 states that obligations arise from:

a. Law;
b. Contracts;
c. Quasi-contracts;
d. Acts or omissions punished by law;
e. Quasi-delicts
43
2602. What is the effect of granting nominal damages?

The effect of granting nominal damages is Res Judicata. After the final
adjudication of nominal damages by the court, there shall be no further contests upon
the right involved as well as accessory questions as between parties or their respective
heirs or assigns.

2603. What is the concept of TEMPERATE OR MODERATE DAMAGES?

These are the damages, the amount of which is left to the sound discretion of
the court, but it is necessary that there be some injury or pecuniary loss
established, the exact amount of which, could not be determined by the plaintiff by
reason of the nature of the case.

2604. What are the REQUISITES TO JUSTIFY AWARD OF TEMPERATE OR

MODERATE Damages?

To justify the award of temperate or moderate damages:

a. It is essential that “some pecuniary loss” had been suffered;

b. It’s exact amount cannot be proved with certainty; and
c. The court is allowed to calculate the amount.

2605. Pangito was charged with and convicted of the crime rape with homicide by
the RTC of Baguio. He was sentenced to suffer the penalty of death. In addition,
he was further ordered to indemnify the heirs of the deceased the sum of P20,000
representing funeral expenses, the exact amount of which was not proved. Can
the trial court award the heirs of the deceased an additional amount of P20,000
representing funeral expenses?

The list of expenses incurred for the wake, funeral and burial of the victim
amounting to P20,000 submitted by the victim’s father is self-serving and not proved.

However, under Article 2224 of the Civil Code, temperate damages may be
recovered if it is shown that such party suffered some pecuniary loss but the
amount cannot, from the nature of the case, be proved with certainty. As there is
no doubt that the heirs of the victim incurred funeral expenses, although the amount
thereof has not been proved, it is appropriate to award P15,000 by way of temperate
damages to the heirs of the victim.

2606. What does ARTICLE 2225 provides?

ARTICLE 2225 provides that temperate damages must be reasonable under the
circumstances.
44
2607. What is the reasonableness of temperate damages?

What is reasonable will depend upon the circumstances of each particular case.
Generally, what is reasonable is one which is neither excessive nor very low in the
estimation of men of ordinary intelligence and discretion.

2608. May the plaintiff dictate the amount of temperate damages upon himself?

No. In the determination thereof, the court must use its sound discretion.

2609. What is the guideline of the court in determining temperate damages?

Whims and caprices should never be used as the swaying factors but it must be
the honest-to-goodness estimation based on sound reason of the court.

ARTICLE 2226 – 2240

2610. What are LIQUIDATED DAMAGES?

Liquidated damages are those agreed upon by the parties to a contract, to be

paid in case of breach thereof. (Article 2226)

2611. What is the nature of liquidated damages?

Liquidated damages are fixed damages previously agreed by the parties to

the contract and payable to the innocent party in case of breach. (Torts and
Damages Annotated-Pineda—2004 Edition—page 230)

2612. What is the purpose of liquidated damages?

The purpose of liquidated damages is to prevent breaches of obligations

between the contracting parties. (Civil Law Reviewer-Albano-1998 Revised Ed.
p.706)

2613. Distinguish PENALTY FROM LIQUIDATED DAMAGES.

As distinguished from liquidated damages, a “PENALTY” is a sum inserted in a

contract, not a measure of compensation for its breach, but rather as a punishment for
default, or by way of security for actual damages which may be sustained by
reason of non-performance, and it involves the idea of punishment. A penalty is an
agreement to pay a stipulated sum on breach of contract, irrespective of the damages
sustained. Its essence is a payment of money stipulated as a terrorem of the offending
party, while the essence OF LIQUIDATED DAMAGES is a genuine covenanted pre-
estimate of damages. The amount is fixed and not subject to change; however, if
the stipulated sum is deemed to be a penalty, it is not enforceable and the non-
45
defaulting party is left to recover such actual damages as he can prove. (22 Am. Jur. 2d,
298-299; cited in Sangco’s Torts and Damages, 2 Vol. II 1026-1027).

2614. What is/are the similarity/similarities between “liquidated damages” and

“penalty”?

In effect, “liquidated damages” and “penalty” are the same. Neither requires
proof of actual damages. (Lambert vs. Fox—26 Phil. 588). It is so because the parties
had already agreed on the amount of damages to be paid in case of breach of the
contract. (Torts and Damages Annotated-Pineda—2004 Edition—page 231)

2615. What is the nature of ATTORNEY’S FEES expressly provided in contracts

recoverable as damages against the other party?

Attorney’s fees expressly provided in contracts recoverable as damages against

the other party are in the nature of liquidated damages and the stipulation may be
aptly called a penal clause. (Polytrade Corp.; vs. Blanco—30 SCRA 187; SSS vs.
Almeda—168 SCRA 474)

2616. How to determine the character of the stipulation?

The question of whether a stipulated sum is a penalty or for liquidated damages

is answered by the application of one or more aspects of the following rule; stipulated
sum is for liquidated damages only (a) where the damages which the parties
might reasonably anticipate are difficult to ascertain because of their
indefiniteness or uncertainty, and (b) where the amount stipulated is either a
reasonable estimate of the damages which would probably be caused by a
breach or is reasonably proportionate to the damages which have actually been
caused by the breach. (Philippine Law on Torts and Damages—J. Sangco)

2618. What is the purpose in permitting a stipulation for damages?

It is settled that parties may stipulate, in advance, the amount to be paid as

compensation for the loss or injury which may result in the event of a breach, and a
stipulated sum which is determined to be liquidated damages rather than a penalty, is
enforceable. The purpose of permitting a stipulation for damages as
compensation is to render certain and definite that which appears to be uncertain
and not easily susceptible of proof. (Philippine Law on Torts and Damages—J.
Cezar S. Sangco—p. 563)

2619. Does the uncertainty in a provision for liquidated damages invalidate the
entire contract?
46
 No. A provision for liquidated damages is not involved where the contract
provides for a recovery of such damages by the party only. Nor does uncertainty in a
provision for liquidated damages invalidate the entire contract. (Philippine Law on Torts
and Damages—J. Cezar S. Sangco—p. 563)

2620. Is the amount of liquidated damages subject to change?

No. The essence of liquidated damages is genuine consented pre-estimate

of damages. The parties are bound by a stipulation of liquidated damages. The
amount is fixed and is not subject to change. If the stipulated sum is deemed to be a
penalty, it is not enforceable and the non-defaulting party is left to recover such actual
damages as he can prove. (Notes on Torts and Damages-2004 Ed. Judge Gonzalez-
Decano-p. 250)

2621. When may the stipulated sum be REGARDED AS A PENALTY?

Ordinarily, a stipulated sum will be regarded as a penalty where it is evident that

the sum was fixed to evade the usury laws, or any other statute, or to cloak oppression.
Additionally, a stipulated sum will be regarded as a penalty where the defaulting party is
rendered liable for the same amount whether the breach is total or partial, or where the
sum is set without regard to the extent of performance where, in the nature of the
promises, the extent of the performance would be important in determining the amount
of actual damages which would result. Where the contract provides for the payment of a
fine in addition to the amount of any damage caused by a breach, such fine cannot be
considered as liquidated damages but must be regarded as a penalty which cannot be
recovered. (Philippine Law on torts and Damages-J. Cezar Sangco)

2622. Defendant Basilio Gonzales entered into an agreement with Plaintiff Messrs.
Yu Tek and Co. whereby defendant acknowledged the receipt of the sum of
P3,000 Philippine currency from Messrs. Yu Tek and Co., and that in
consideration of said sum he obligated himself to deliver to the said Yu Tek and
Co., 600 piculs of sugar of the first and second grade, according to the result of
the polarization, within the period of three months, beginning on the 1st day of
January, 1912, and ending on the 31st day of March of the same year, 1912.
Defendant agreed that in case he does not deliver to Messrs. Yu Tek and Co. the
600 piculs of sugar within the period of three months, as agreed upon the
contract will be rescinded and defendant will then be obligated to return to
Messrs. Yu Tek and Co. the P3,000 received and also the sum of P1,200 by way of
indemnity for loss and damages. The court below held that the portion in the
contract stating that the amount of P1,200 was simply a limitation upon the
amount of damages which could be recovered and not liquidated damages as

47
contemplated by the law. The plaintiff has appealed from the judgment of the trial
court on the ground that it is entitled to recover the additional sum of P1, 200. Is
the trial court correct?

No. The Court held: “We think it is a clear case of liquidated damages. The
contract plainly states that if the defendant fails to deliver the 600 piculs of sugar within
the time agreed on, the contract will be rescinded and he will be obliged to return the
P3,000 and pay the sum of P1,200 by way of indemnity for loss and damages. There
cannot be the slightest doubt about the meaning of this language or the intention of the
parties. There is no room for either interpretation or construction. Under the provisions
of article 1255 of the Civil Code contracting parties are free to execute the contracts that
they may consider suitable, provided they are not in contravention of law, morals, or
public order. In our opinion there is nothing in the contract under consideration which is
opposed to any of these principles.” (Yu Tek and Co., vs. Gonzales--G.R. No. L-
9935;February 1, 1915)

2623. On September 4, 1961, the plaintiff [herein respondent Social Security

System] and the defendants [herein petitioners] Lirag Textile Mills, Inc. and
Basilio Lirag entered into a Purchase Agreement under which the plaintiff agreed
to purchase from the said defendant preferred shares of stock worth ONE
MILLION PESOS [P1,000,000. In the Purchase Agreement it provides for the
repurchase by the Lirag Textile Mills, Inc. of the shares of stock at regular
intervals of one year beginning with the 4th year following the date of issue. The
Purchase Agreement provides further that should the Lirag Textile Mills, Inc. fail
to effect any of the redemptions stipulated therein, the entire obligation shall
immediately become due and demandable and the Lirag Textile Mills, Inc., shall
be liable to the plaintiff in an amount equivalent to twelve per cent [12%] of the
amount then outstanding as liquidated damages. Lirag Textile Mills was not able
to redeem the stock certificates. The failure of the Lirag Textile Mills, Inc. to
redeem the certificates of stock and pay dividends thereon were due to financial
reverses. Is Lirag Textile Mills liable for liquidated damages?

Yes. The Purchase Agreement provided that failure on the part of petitioner to
repurchase the preferred shares on the scheduled due dates renders the entire
obligation due and demandable, with petitioner in such eventuality liable to pay 12% of
the then outstanding obligation as liquidated damages.

xxx

Petitioners' contention that it is beyond the power and competence of petitioner

corporation to redeem the preferred shares or pay the accrued dividends due to

48
financial reverses cannot serve as legal justification for their failure to perform under the
Purchase Agreement. The Purchase Agreement constitutes the law between the parties
and obligations arising ex contractu must be fulfilled in accordance with the stipulations.
(LIRAG TEXTILE MILLS, INC., and BASILIO L. LIRAG vs. SOCIAL SECURITY
SYSTEM, and HON. PACIFICO DE CASTRO- G.R. No. L-33205 August 31, 1987).

2624. May LIQUIDATED DAMAGES be TEMPERED?

Yes. Liquidated damages, whether intended as an indemnity or penalty, shall

be equitably reduced if they are iniquitous or unconscionable. (Article 2227)

2625. Where there is a partial or irregular performance in a contract providing for

liquidated damages, may the court mitigate the sum stipulated therein?

Yes. Where there is a partial or irregular performance in a contract

providing for liquidated damages, the court may mitigate the sum stipulated
therein since it is to be presumed that the parties only contemplated a total
breach of the contract. And this is usually so because of the difficulty or sometimes
inability of the parties to ascertain or gauge beforehand, the amount of indemnity in
case of a partial breach, just as it is equally perplexing to foresee the extent of a partial
or irregular performance. And so it has been held that a stipulation for liquidated
damages in case of a total breach of the contract cannot be enforced if the party has
accepted a partial performance thereof. (Tanembaum Son & Co. vs. Drumbor Bingle
Co., C.C.A. Pa.47 F. 2d 1009, certiorari denied, 52 S. St. 7; U.S. 619, 76 L. Ed. 588,
cited 25 C.J.S. 695.)

2626. What is the reason for the equitable reduction of iniquitous or

unconscionable liquidated damages?

The reason is that, in both, the stipulation is contra bonos mores. It is a mere
technicality to refuse to lessen the damages to their just amount simply because the
stipulation is nonetheless immoral because it is called an indemnity. (Report of the
Code Commission, p. 75)

2627. A filed a complaint against R for collection of sum of money. The complaint
alleged that R, defendant, obtained from A, plaintiff, six (6) separate loans for
which the former executed in favor of the latter six (6) separate promissory notes
and issued several checks as guarantee for payment. When the said loans
became overdue and unpaid, especially when the defendant’s checks were
dishonored, plaintiff made repeated oral and written demands for payment.

On the other hand, defendant claims that she was extended loans by the plaintiff
on several occasions, i.e., from November 13, 1987 to January 13, 1988, in the
49
total sum of P320,000.00 at the rate of sixteen percent (16%) per month. The notes
mature[d] every four (4) months with unearned interest compounding every four
(4) months if the loan [was] not fully paid.

The Promissory Note carried a stipulation for attorney’s fees of 25 percent of the
principal amount and accrued interests. The trial court reduced the stipulated
penalty charge. Is the trial court justified?

Yes. Article 1229 of the Civil Code states thus: "The judge shall equitably
reduce the penalty when the principal obligation has been partly or irregularly
complied with by the debtor. Even if there has been no performance, the penalty
may also be reduced by the courts if it is iniquitous or unconscionable."

In exercising this power to determine what is iniquitous and unconscionable,

courts must consider the circumstances of each case. What may be iniquitous and
unconscionable in one may be totally just and equitable in another. In the present case,
iniquitous and unconscionable was the parties’ stipulated penalty charge of 5 percent
per month or 60 percent per annum, in addition to regular interests and attorney’s fees.
Also, there was partial performance by petitioner when she remitted P116,540 as partial
payment of her principal obligation of P320,000. Under the circumstances, the trial court
was justified in reducing the stipulated penalty charge to the more equitable rate of 14
percent per annum.

The Promissory Note carried a stipulation for attorney’s fees of 25 percent of the
principal amount and accrued interests. Strictly speaking, this covenant on attorney’s
fees is different from that mentioned in and regulated by the Rules of Court. 18 "Rather,
the attorney’s fees here are in the nature of liquidated damages and the stipulation
therefor is aptly called a penal clause." So long as the stipulation does not contravene
the law, morals, public order or public policy, it is binding upon the obligor. (Imperial vs.
Jaucian--G.R. No. 14900; April 14, 2004)

2628. Petitioners, the spouses Newton and Salvacion Jison, entered into a
Contract to Sell with private respondent, Robert O. Phillips & Sons, Inc., whereby
the latter agreed to sell to the former a lot at the Victoria Valley Subdivision in
Antipolo, Rizal for the agreed price of P55,000.00, with interest at 8,1965 per
annum, payable on an installment basis. The spouses failed to pay 10 monthly
installments in the years 1966 and 1967. Thus in a letter dated April 6, 1967,
private respondent returned petitioners' check and informed them that the
contract was cancelled.

On January 9, 1969, the trial court rendered judgment in favor of private

respondent, dismissing the complaint and declaring the contract cancelled and
50
all payments already made by petitioner forfeited. Decide on the legality of the
rescission and forfeiture.

In the case of Jison vs. CA—G.R. No. L-45349-August 15, 1988, with similar
facts, the Supreme Court ruled: “While the resolution of the contract and the forfeiture of
the amounts already paid are valid and binding upon petitioners, the Court is convinced
that the forfeiture of the amount of P47,312.64 although it includes the accumulated
fines for petitioners' failure to construct a house as required by the contract, is clearly
iniquitous considering that the contract price is only P55,000. The forfeiture of fifty
percent (50%) of the amount already paid, or P23,656.64 appears to be a fair
settlement. In arriving at this amount the Court gives weight to the fact that although
petitioners have been delinquent in paying their amortizations several times to the
prejudice of private respondent, with the cancellation of the contract the possession of
the lot review.... to private respondent who is free to resell it to another party. Also, had
R.A. No. 65856, been applicable to the instant case, the same percentage of the
amount already paid would have been forfeited. The Court's decision to reduce the
amount forfeited finds support in the Civil Code. As stated in paragraph 3 of the
contract, in case the contract is cancelled, the amounts already paid shall be forfeited in
favor of the vendor as liquidated damages. The Code provides that liquidated damages,
whether intended as an indemnity or a penalty, shall be equitably reduced if they are
iniquitous or unconscionable [Art. 2227.]

Further, in obligations with a penal clause, the judge shall equitably reduce the
penalty when the principal obligation has been partly or irregularly complied with by the
debtor [Art. 1229; Hodges v. Javellana, G.R. No. L-17247, April 28, 1962, 4 SCRA
1228]. In this connection, the Court said:

It follows that, in any case wherein there has been a partial or irregular
compliance with the provisions in a contract for special indemnification in the event of
failure to comply with its terms, courts will rigidly apply the doctrine of strict construction
and against the enforcement in its entirety of the industry.' where it is clear from the
terms of the contract that the amount or character of the indemnity is fixed without
regard to the probable damages which might be anticipated as a result of a breach of
the terms of the contract; or, in other words, where the indemnity provided for is
essentially a mere penalty having for its principal object the enforcement of compliance
with the corporations; (Laureano v. Kilayco, 32 Phil. 194 (1943).”

2629. What is the rule if the breach committed by the defendant was not
contemplated in the agreement on liquidated damages?

51
 The rule is that when the breach of the contract committed by the defendant is
not the one contemplated by the parties in agreeing upon the liquidated damages, the
law shall determine the measure of damages, and not the stipulation. (Article
2228)

2630. What are EXEMPLARY OR CORRECTIVE DAMAGES?

Exemplary or corrective damages are those damages imposed by way of example

or correction for the public good.(Article 2229)

2631. May exemplary or corrective damages be granted in the absence of other

kinds of damages?

No. In the absence of moral, temperate, liquidated, or compensatory

damages, no exemplary damages can be granted, for exemplary damages are
allowed only in addition to the four kinds of damages mentioned. (Article 2229--;
Ventanilla vs. Centeno—L-14333—January 28, 1961)

2632. X Corporation persisted in oppressively invading another’s right despite

“cease and desist orders” from the Public Service Commission and as such the
corporation was held liable for exemplary damages. Was the imposition correct?

Yes. Exemplary damages was correctly imposed against a corporation which

persisted in oppressively invading another’s rights despite “cease and desist orders” by
the Public Service Commission. The imposition of the exemplary damages would be a
reminder that the economic power will never justify a reckless disregard of the rights of
others. (Castro, et al. vs. Ice Cold Storage Industries, et al.—L-10147—December 27,
1958)

2633. If the amount of exemplary damages is not specified, up to what amount

can the court grant?

If the amount of the exemplary damages is not specified, the court can grant
the same only in an amount that should not exceed its jurisdiction. (Singson et al.
vs. Aragon et al—92 Phil. 514)

2634. An overseer of a mango store abused the confidence of a female customer

by subjecting her to indignities. May that overseer be held liable for exemplary
damages?

52
 Yes. According to the Court, this bespeaks of a perverse nature, dangerous to
the community. Thus exemplary damages may be awarded in this case. (Domingding
and Aranas vs, Ng, et al—103 Phil. 111)

2635. What is the nature or character of exemplary damages?

Exemplary damages are penal in character. The motive authorizing their

infliction will not be imposed by the presumption to the principal when the act is
committed by an agent or servant. Inasmuch as they are granted not by way of
compensation, but as a punishment to the offender and as a warning to others,
they can only be awarded against one who has participated in the offense and the
principal cannot be held liable for them merely by reason of wanton, oppressive,
or malicious intent on the part of the agent. (Rotea vs. Halili-- L-1203-September 30,
1960)

Exemplary damages are mere accessories to other forms of damages

except nominal damages. They are mere additions to actual, moral, temperate,
and liquidated damages which may or may not be granted at all depending upon
the necessity of setting an example for the public good as a form of deterrent to
the repetition of the same act by one. (Torts and Damages—Pineda—2004 Ed-page
234-235)

2636. If a victim was shot in the jaw by a minor with the use of his father’s gun, is
the victim entitled for exemplary damages?

Yes. The Court said that this will remind licensed possessors of firearms of their
peremptory duty to adequately safeguard such dangerous weapons at all times, and to
take all requisite measures to prevent minors and other unauthorized parties from
having access thereto. (Araneta, et al. vs. Arreglado, et al.—104 Phil. 529)

2637. May EXEMPLARY DAMAGES AND NOMINAL DAMAGES be awarded

simultaneously?

No. If exemplary damages are granted, nominal damages cannot be given.

(Medina,et al. vs. Crecsencia—L-8194—July 11,1956.)

2638. When MORAL DAMAGES ARE AWARDED, MAY EXEMPLARY DAMAGES be

also decreed or awarded?

Yes. When moral damages are awarded, exemplary damages may also be
decreed. Exemplary damages are imposed by way of example or correction for the
public good, in addition to moral, temperate, liquidated or compensatory
damages. (De Guzman vs. NLRC –G.R. No. 90856—July 23, 1992)
53
2639. Does the unjustified refusal to grant academic honors justify the grant of
exemplary damages?

Yes. Unjustified refusal to grant academic honors justifies exemplary damages.

Exemplary damages were imposed upon the President of the West Visayan College (a
government college) who through neglect of duty and moral callousness, did not award
Violeta Delmo the academic honors of “magna cum laude” which the latter deserved.
(Ledesma vs. CA---160 SCRA 449).

2640. Are exemplary damages recoverable in damage actions predicated on a

BREACH OF PROMISE TO MARRY?

No. Exemplary damages are not recoverable in damage actions predicated on a

breach of promise to marry. The reason for this is clear. The mere breach of promise to
marry is not actionable. Not being actionable, there can be no possible basis for an
award for damages, whether moral or exemplary. (Hermosisima vs. CA, 109 Phil. 629;
Estopa vs. Pinsay, 109 Phil. 640; Galang vs. CA, 4 SCRA 55)

2641. X borrowed money from Y, executing a real estate mortgage over his house
and lot as security for the payment of his obligation. The obligation bears interest
at the rate of 24% per annum. When the obligation became due and demandable,
X failed to pay his obligation hence, Y foreclosed the mortgage. This resulted in
protracted litigation, where several cases were filed by X resulting in the delay of
the payment for more than 20 years. Can the debtor X and his lawyer be held
liable for damages? Why?

Yes. In Syjuco Co., vs. Castro, July 7, 1989, the Supreme Court said that X and
his lawyer can be held liable for the damages jointly and severally because of bad faith
and the manifest intent to defraud, as shown by the piecemeal filing of cases,
interposing defenses to the foreclosure which were available from the beginning. These
delayed the liquidation of the debt for more than 20 years.

The lawyer could be held liable with the client because of the abuse of process, a
trifling with the courts which could be attributed to him, for the client could not have
succeeded in delaying the course of justice without his aid and advice, and his tireless
espousal of the claim of his client and pretentions made in the advocacy of cases
concluded in a series of cases filed in court.

2642. May exemplary damages be imposed in criminal offenses?

Yes. In criminal offenses, exemplary damages may be awarded as part of the

civil liability. (Article 2230

54
2643. When may exemplary damages be imposed in criminal offenses?

Exemplary damages may be imposed as a part of civil liability in criminal offenses

when the crime was committed with one or more aggravating circumstances.
(Article 2230)

2644. How shall such damages be treated?

Such damages shall be treated as separate and distinct from fines and shall be
paid to the offended party. (Article 2230)

2645. In a criminal case, if a driver is convicted and made civilly liable, but
exemplary damages are NOT imposed, may the employer be held liable for
exemplary damages in a subsequent case brought to recover subsidiary civil
liability against him?

No. As Justice JBL Reyes pointed out—“No such damages were imposed on the
driver, and the master, as the person subsidiarily liable, cannot incur greater civil liability
then his convicted employee, any more than a guarantor can be held responsible for
more than the principal debtor.” (Bantoto, et al., vs. Bobis, et al., and Vallejo—L-18966-
November 22, 1966)

2646. If dwelling, as an aggravating circumstance, was not alleged in the

information, may it still be considered for the purpose of determining liability for
exemplary damages?

Yes. The Supreme Court in the case of “People of the Philippines vs. Rafael
Caloza, Jr. alias June Caloza,” G.R. Nos. 138404-06, January 28, 2003 , citing People
vs. Catubig, 363 SCRA 621 (2001), held:

“x x x
As to damages, although dwelling was not alleged in the information, it may
nonetheless be considered for the purpose of determining liability of Rafael
for exemplary damages since it was proved by the prosecution. The heirs of
all the victims are entitled to exemplary damages in the total amount of
P75,000.00 pursuant to Article 2230 of the Civil Code. x x x”.

2647. May exemplary or punitive damages still be recovered without violation of

the constitutional guaranty that no person shall be twice put in jeopardy for the
same offense of the wrongful act upon which the action is based may be or has
been punished criminally?

In some jurisdictions, recovery of exemplary damages for an injury received in

consequence of an act punishable under the criminal law is denied. The reason given
55
for this view is that the defendant might otherwise be twice punished for the same
offense. The fact that a criminal proceeding may never be instituted does not change
the rule or affect the principle involved.

In many other jurisdictions, however, the recovery of exemplary or punitive

damages will not be denied, merely because the wrongful act upon which the action is
based may be or has been punished criminally. The courts take the position that the
allowance of punitive damages in such cases does not violate constitutional guaranties
that no person shall be twice put in jeopardy for the same offense, or deprived of his
property without due process of law; this is so even though such damages are
recoverable by the State. In support of this rule, it has been said that exemplary
damages in a civil action are not awarded in lieu of criminal or penal punishment and
have no necessary relation to the penalty incurred for wrong done to the public. Even
though exemplary damages are considered as strictly punitive, they are allowed for the
punishment of the private tort rather than of the public crime, against the State and an
offense, in the sense of crime, against the State and an offense in the sense of a tort,
against a private person, thus giving to the public and the person aggrieved each a
distinct and concurrent remedy. It follows, where such is the rule, that a judgment in one
case is no bar to a prosecution of the other. (Philippine Law on Torts and Damages-J.
Cezar S. Sangco p. 573, citing 22 Am. Jur 2d 338-39)

2648. On December 8, 1996, at around 8:00 o’clock in the evening, J was alone in
the house watching television when A arrived. Visibly drunk, he approached J,
pointed a bolo at her breast and ordered her to follow him to the room. Extremely
scared he might kill her, J followed him. Once inside the room, A commanded her
to remove her clothes and to lie down on the bed. Still afraid, J obliged. A then
hurriedly removed his short pants and brief and placed himself on top of her, with
his right hand holding the bolo still pointed at her. In an Information for rape
against A, the prosecution alleged that the crime was committed with the use of a
bolo. May A be held liable for exemplary damages?

Yes. In the case of People vs. Manambay ( 422 SCRA 73- G.R. No.
130684;February 5, 2004) with similar facts, the Supreme Court held that: “With respect
to appellant’s civil liability, we observed that the trial court awarded the victim only moral
damages of P50,000.00 for each count of rape. While such award is correct, the victim
is also entitled to P50,000.00 as indemnity ex delicto in each case. Such award is
mandatory upon the finding of the fact of rape.

Additionally, we award the victim exemplary damages because the rapes were
committed with the use of a deadly weapon. In People vs. Silverio Montemayor, we
declared: "x x x exemplary damages are justified under Article 2230 of the Civil Code if
56
there is an aggravating circumstance, whether ordinary or qualifying." Since the
qualifying circumstance of the use of a deadly weapon was present in the commission
of the rapes subject of these cases, exemplary damages in the amount of P25,000.00
may be awarded to the offended party in each case.”

2649. J killed N. J was charged of murder based on the following Information:

“That on or about the 14th day of November, 1994, at nighttime which was
purposely sought, in the Municipality of Catbalogan, Province of Samar,
Philippines, and within the jurisdiction of this Honorable Court, accused J, armed
with a handgun, with deliberate intent to kill, with treachery and evident
premeditation, did then and there willfully, unlawfully and feloniously attack,
assault and shoot one N with the use of said handgun with which the said
accused had conveniently provided himself for the purpose, thereby hitting and
inflicting upon said N gunshot wounds on his body and head, which wounds on
his body and head, which directly caused his instantaneous death.

CONTRARY TO LAW.” In this case, is J liable for exemplary damages?

Yes. In the case of People vs. Malinao (423 SCRA 34-G.R. No. 128148;
February 16, 2004) with similar facts, the Supreme Court held that: “ Finally, the Court
awards exemplary damages in the amount of P25,000.00, inasmuch as the qualifying
circumstance of treachery attended in the killing of Nestor. In People vs. Catubig, we
emphasized that insofar as the civil aspect of the crime is concerned, exemplary
damages in the amount of P25,000.00 is recoverable if there is present an aggravating
circumstance, whether qualifying or ordinary, in the commission of the crime. ”

2650. Olipio Machete, overseer of respondent Atty. Gabino Velasquez, testified

that petitioner (Mahinay) uttered the following malicious and insulting statement
against respondent: "Your master, a candidate for Congressman, Ben Velasquez,
is a land grabber." Machete informed respondent of what petitioner said about
him. This impelled the respondent to file a complaint for damages against
petitioner. The trial court ruled in favor of respondent on the sole basis of the
testimony of Machete and awarded to respondent moral damages in the amount
of P100,000 and exemplary damages in the amount of P50,000. Is the court
correct in awarding moral and exemplary damages to despite his failure to take
the witness stand?

No. In order that moral damages may be awarded, there must be pleading and
proof of moral suffering, mental anguish, fright and the like. 5 While respondent alleged
in his complaint that he suffered mental anguish, serious anxiety, wounded feelings and
moral shock, he failed to prove them during the trial. Indeed, respondent should have

57
taken the witness stand and should have testified on the mental anguish, serious
anxiety, wounded feelings and other emotional and mental suffering he purportedly
suffered to sustain his claim for moral damages. Mere allegations do not suffice; they
must be substantiated by clear and convincing proof. No other person could have
proven such damages except the respondent himself as they were extremely personal
to him.

Neither is respondent entitled to exemplary damages. "If the court has no proof
or evidence upon which the claim for moral damages could be based, such indemnity
could not be outrightly awarded. The same holds true with respect to the award of
exemplary damages where it must be shown that the party acted in a wanton,
oppressive or malevolent manner." Furthermore, this specie of damages is allowed only
in addition to moral damages such that no exemplary damages can be awarded unless
the claimant first establishes his clear right to moral damages. (Mahinay vs. Velasquez-
419 SCRA 118)

2651. L was charged of rape based on the following Information: "That sometime
in March 1998, in the Municipality of Camiling, Province of Tarlac, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused did
then and there wilfully, unlawfully and feloniously by means of force and
intimidation succeed in having sexual intercourse with A, a 7-year old minor." The
trial court found L guilty and was sentenced to suffer reclurion perpetua and
further ordered him to pay P50,000 as moral damages and P25,000 as exemplary
damages. On appeal, the award of exemplary damages was deleted by the
appellate court. Was the appellate court correct in deleting the award of
exemplary damages?

Yes. In the case of People vs. Cachapero (428 SCRA 773;G.R. No. 153008;
May 20, 2004) with similar facts, the Supreme Court held that: “The award of exemplary
damages was improper.The trial court’s award of P25,000 for exemplary damages
should be deleted. Such damages may be given only when one or more aggravating
circumstances are alleged in the information and proved during the trial. In the present
case, there are no such circumstances.

2652. In Quasi-delicts, may exemplary damages be awarded/granted?

Yes. In quasi-delicts, exemplary damages may be granted if the defendant

acted with gross negligence. (Article 2231)

2653. In quasi-delicts what must be shown by the plaintiff to justify the grant of
exemplary damages?

58
 In quasi-delicts, gross negligence must be shown on the part of the defendant to
justify grant of exemplary damages to the plaintiff. (Palisoc vs. Brillantes, 41 SCRA 548)

2654. Distinguish fraudulent, oppressive and malevolent manner.

If the act is tainted with deception or injurious misrepresentation of which the plaintiff
is unaware, the act is considered fraudulent. If it is arbitrary or compulsive, it is
considered oppressive. If it is done in bad faith, it is considered malevolent. (Torts and
Damages Annotated-Pineda 2004 Ed. Page-240)

2655. May exemplary damages be awarded if the deceased was chargeable of

contributory negligence?

No. In the case of Philippine National Railways vs. CA and Rosario Tupang, G.R.
No. 55374, Oct. 4, 1985, the Supreme Court held:

“But while the petitioner failed to exercise extraordinary diligence as required

by law, it appears that the deceased was chargeable with contributory
negligence. Since he opted to sit on the platform between the coaches of the
train, he should have held tightly and tenaciously to the upright metal bar
found at the side of said platform to avoid falling off from the speeding train;
such contributory negligence, while not exempting the PNR from liability,
nevertheless justified the deletion of amount adjudicated as moral damages.
By the same token, the award of exemplary damages must be set aside.
Exemplary damages may be allowed only in cases where the defendant
acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. ”
(Vitug, p. 615)

2656. In contracts, may the court award exemplary damages?

Yes. The court may award exemplary damages in contracts. (Article 2232)

2657. What about in quasi-contracts, can the court award exemplary damages?

Yes. The court may award exemplary damages in quasi-contracts. (Article 2232)

2658. When may a defendant be held liable for exemplary damages in contracts
and quasi-contracts?

A defendant may be held liable for exemplary damages in contracts and

quasi-contracts if he acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner. (Article 2232)

59
2659. A driver of a jeepney was found recklessly negligent in causing injuries to
his passenger. Is the owner-operator of the jeepney liable for exemplary damages
in addition to other kinds of damages?

Not necessarily. A principal or master can be held liable for exemplary or punitive
damages based upon the wrongful act of his agent or servant only when he participated
in the doing of such wrongful act or has previously authorized or subsequently ratified it,
with full knowledge of the facts. Exemplary damages punish the intent—and this cannot
be presumed on the part of the employer merely because of the wanton, oppressive, or
malicious intent on the part of the agent. (Munsayac vs. De Lara—L-21151—June 26,
1968)

2660. The driver of a common carrier, thru gross or reckless negligence caused
injury to some of the passengers. May exemplary or corrective damages be
awarded?

Yes, exemplary damages may be awarded in contracts and quasi-contracts if the

defendant company, thru its driver, acted in a “wanton, fraudulent, reckless, oppressive,
or malevolent manner.” (Marchan and Philippine Rabbit Bus Co., Inc. vs. Mendoza, et
al., L-24471, January 31, 1969; See also Laguna-Tayabas Bus Co. vs. Diasanta, L-
19882, June 30, 1964)

2661. If an employee commits a wrongful act, may his employer be required to

pay exemplary damages?

No insofar as said employer had not participated in or ratified the act. The rule is
that exemplary damages are imposed primarily on the wrongdoer as a deterrent
in the commission of similar acts in the future. (Rotea vs. Halili-L-1203-September
30, 1960)

2662. Plaintiff Senator Lopez who was then Senate President Pro-Tempore, his
wife, daughter and son-in-law made first class reservations with the defendant
air-carrier in its Tokyo-San Francisco flight. Through mistake, defendant’s agents
cancelled the reservations. Expecting that some cancellations of booking would
be made before the flight time, the reservations supervisor withheld from the
plaintiffs the information that their reservations had been cancelled. Upon arrival
in Tokyo, defendant informed plaintiffs that there was no accommodation for
them in the first class stating that they could not go unless they take the tourist
class. Due to pressing engagements in the US, plaintiffs were constrained to take
the flight as tourist passengers, but they did so under protest. Subsequently, they
brought this action against the defendant for moral damages, exemplary
damages and attorney’s fees. Defendant, however, contends that since the basis
60
of the action is breach of contract and since there was no bad faith of defendant,
assuming that there was a breach of contract, therefore, there can be no basis for
an award of moral and exemplary damages. Decide the case.

Actually, the above facts are identical to the factual backdrop of the case of
Lopez vs. Pan American World Airways (16 SCRA 431). In this case, the SC held
that in misleading plaintiffs into purchasing first class tickets in the conviction that they
had confirmed reservations to the same, when in fact they had none, defendant willfully
and knowingly placed itself into the position of having to breach its aforesaid contracts
with the plaintiffs should there be no last-minute cancellations by the other passengers
before the flight time, as it turned out in this case. Such actuation of defendant may
indeed have been promoted by nothing more than the promotion of its self-interest in
holding on to plaintiffs as passengers in its flight and foreclosing their chances to seek
the services of other airlines that may have been able to afford them the first class
accommodations. All the same, the in the legal contemplation, such conduct already
amounts to action in bad faith. This is so because bad faith means a breach of a known
duty through some motive of interest or ill-will. Self enrichment or fraternal interest, and
not personal ill-will, may have been the motive, but it is malice nevertheless.

As a proximate result of defendant’s breach in bad faith of its contracts with plaintiffs,
the latter suffered social humiliation, wounded feelings, serious anxiety and mental
anguish. For plaintiffs were traveling with first class tickets issued by the defendant and
yet they were given only the tourist class. At stopovers, they were expected to be
among the first class passengers by those awaiting to welcome them, only to be found
among the tourist passengers. It may not be humiliating to travel as a tourist
passengers; it is humiliating to be compelled to travel as such, contrary to what is
rightfully to be expected from the contractual undertaking.

Therefore, pursuant to the provisions on the Civil Code on moral damages (Arts.
2217,2220), plaintiffs are given an award of P200,000 moral damages to be divided
thus: P100,000 for Senator Lopez; P50,000 for his wife; P25,000 for his daughter and
P25,000 for his son-in-law. In the case of exemplary damages, as the name implies,
its purpose is to provide an example for the public good. In view of its nature, it
should be imposed in such amount as to sufficiently and effectively deter similar
breach of contracts in the future by the defendant or other airlines. Therefore,
since the defendant had breached its contracts in bad faith, and award of P75,
000 of exemplary damages, applying Arts. 2229 and 2232 of the Civil Code is
reasonable. In the case of attorney’s fees, considering the prominence of Atty. Vicente
Francisco, counsel for the plaintiffs, in the legal profession and the work that he has
done in this case, an award of P50, 000 is also reasonable.
61
2663. Felicitas Sipe, remitted to her sister-in-law the amount of P3,000.00 to pay
for her tuition fee at U.P., Quezon City. When Felicitas went to PT & T to claim it,
she was advised that nothing was sent to her. Eventually, however, she was
informed that the money was sent to her. PT & T tried to deliver it to her at her
dormitory but failed to do so because she was not around. Finally, when the
check was delivered, she was not able to encash it as there was no clearance
from PT & T. She filed an action for damages, aggrieved by the delay, where the
RTC held PT & T liable for actual, moral and exemplary damages. The CA affirmed
on appeal. It deleted the award of actual damages finding no proof of pecuniary
loss but sustained the award of moral and exemplary damages. Is the decision of
the CA correct?

Yes. The deletion of the award of actual damages is correct. If there is no

evidence of pecuniary loss, there can be no award of actual damages. The award of
actual damages can be done only when proof of pecuniary loss in action based on
culpa contractual is essential. (PT & T Corp., vs. CA—September 3, 2002)

As to moral damages, the same cannot be awarded in the absence of any clear
indication of bad faith or gross negligence amounting to bad faith. It would be an error to
award moral damages merely because the defendant was unable to effect immediate
delivery of the money sent through money orders. The rationale for the rule is that,
recovery of moral damages is more of an exception rather than the rule. (Expert Travel
and Tours, Inc. vs. CA 309 SCRA 141)

As to exemplary damages, the same cannot likewise be awarded. Although such

damages need not be proved, plaintiff must first show that he is entitled to moral,
temperate, or compensatory damages before a court can favorably consider an award
of exemplary damages. (Article 2234, PNB vs. CA, 266 SCRA 136). The defendant
might have been remiss in the prompt delivery of the sums sent through it to
respondent, however, it would be hard put to say that such delay under the facts
obtaining can be described as being wanton, fraudulent, reckless, or oppressive in
character.

2664. When the plaintiffs placed an order for transmission of their social
condolence telegram, defendant did not inform the plaintiffs of the exhaustion of
such social condolence forms. Defendant-appellant accepted through its
authorized agent or agency the order and received the corresponding
compensation therefor. Defendant did not comply with its contract as intended by
the parties and instead of transmitting the condolence message in an ordinary
form, in accordance with its guidelines, placed the condolence message

62
expressing sadness and sorrow in forms conveying joy and happiness. May the
defendant be held liable for exemplary damages?

Yes. In the case of Radio Communications Philippines inc., vs. CA et al., G.R.
No. 79578, March 13, 1991, the Supreme Court found the findings of the respondent
Court to be persuasive. The SC ruled that:

“We cannot accept the defendant’s plea of good faith predicated on such
exhaustion of social condolence forms. Gross negligence or carelessness can
be attributed to defendant-appellant in not supplying its various stations with
such sufficient and adequate social condolence forms when it held out to the
public sometime in January, 1983, the availability of such social condolence
forms and accepted for a fee the transmission of messages on said forms.
Knowing that there are no such forms as testified too by its Material Control
Manager Mateo Atienza, and entering into a contract for the transmission of
messages in such forms, defendant-appellant committed acts of bad faith,
fraud or malice.x x x.

RCPI’s argument that it cannot be held liable for exemplary damages, being
penal or punitive in character (Petition 16; Rollo, 22), is without merit. We
have so held in many cases, and oddly, quite a number of them likewise
involved the herein petitioner as the transgressor.
xxx xx xxx
xxx In contracts and quasi-contracts, exemplary damages may be awarded if
the defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner. There was gross negligence on the part of RCPI
personnel in transmitting the wrong telegram, of which RCPI must be held
liable. Gross carelessness or negligence constitutes wanton misconduct.
xxx xx xxx
x x x punitive damages may be recovered for willful or wantonly negligent acts
in respect of messages, even though those acts are neither authorized or
ratified. (Arkansas & L. R. Co. v. Stroude, 91 SW 18; West vs. Western U.
Tel. Co., 17 P 807; Peterson vs. Western U. Tel. Co., 77 NW 985; Brown vs.
Western U. Tel. Co., 6 SE 146). Thus, punitive damages have been
recovered for mistakes in the transmission of telegrams (Pittman vs. Western
U. Tel. Co., 66 So 977; Painter vs. Western U. Tel. Co., 84 SE 293)”. (RCPI
vs. CA-No. 55194, February 26, 1981-103 SCRA 359.)

2665. C, a first class passenger in a plane operated by Air France, while already in
the first class compartment of the plane immediately before the start of the
Bangkok-Tehran flight, was forced out of his seat by the Bangkok Manager of the
airline and transferred to the tourist class compartment. His first class seat was
then given to a white man. Subsequently, when he came back to the Philippines,
63
he brought an action against Air France for moral damages, exemplary damages
and attorney’s fees. Defendant, however, contends that since the action is
predicated on breach of contract, there can be no basis for an award of moral
damages, exemplary damages and attorney’s fees. Decide the case?

In a case with identical facts, the SC held that the defendant is liable for moral
damages, exemplary damages, and attorney’s fees both from the view point tort and
from the view point of breach of contract. As a matter of fact, the Court awarded to the
plaintiff P25,000 as moral damages, P10,000 as exemplary damages, and P3,000 as
attorney’s fees. (Air France vs. Carrascoso-18 SCRA 155)

xxx
From the viewpoint of contract, it must be observed that a contract to
transport passengers is quite different in kind and degree from any other
contractual relation. And this, because of the relation which an air carrier
sustains with the public. Its business is with the travelling public. It invites
people to avail of the comforts and advantages it offers. The contract,
therefore, generates a relation attended with a public duty. Neglect or
malfeasance of the carrier’s employees, naturally, could give ground for an
action for damages.
Passengers do not contract merely for transportation. They have a right to be
treated by the carrier’s employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. So it is, that
any rude or discourteous conduct on the part of the employees towards a
passenger gives the latter an action for damages against the carrier.

Hence, since there was bad faith on the part of the defendant carrier, Arts.
2217, 2220, 2229, and 2232 of the Civil Code are applicable. In other words,
moral damages, exemplary damages and attorney’s fees are recoverable.
(Air France vs. Carrascoso-18 SCRA 155)

2666. May exemplary damages be recovered as a matter or right?

No. Exemplary damages cannot be recovered as a matter of right; the

court will decide whether or not they should be adjudicated. (Article 2233)

2667. Is the grant of exemplary damages automatic if there is gross negligence?

No. The grant of exemplary damages is not automatic. It is still subject to the
discretion of the court. (Torts and Damages Annotated-Pineda 2004 Ed. Page-239)

2668. Is there a need to prove the amount of exemplary damages?

There is no need. (Article 2234)

64
2669. Before the court may consider the question of whether or not exemplary
damages should be awarded, what must be shown by the plaintiff?

While the amount of 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.
(Article 2234)

2670. Before the court may consider the question of granting exemplary in
addition to liquidated damages, what must be shown by the plaintiff?

In case liquidated damages have been agreed upon, although no proof of loss is
necessary in order that such liquidated damages may be recovered, nevertheless,
before the court may consider the question of granting exemplary in addition to the
liquidated damages, the plaintiff must show that he would be entitled to moral,
temperate or compensatory damages were it not for the stipulation for liquidated
damages. (Article 2234)

2671. Is there still a need to plead in the complaint the amount of exemplary
damages?

None. The amount of exemplary damages need not be pleaded in the complaint
because the same cannot be predetermined. (Benguet Electric Cooperatice Inc., vs.
CA-321 SCRA 524). It is enough if compensatory, moral or temperate damages have
been established. (Torts and Damages Annotated—Pineda 2004 Ed.-page 243).

2672. What are the REQUIREMENTS FOR AWARD OF EXEMPLARY DAMAGES?

The requirements for an award of exemplary damages are: (1) they may be
imposed by way of example in addition to compensatory damages, and only after the
claimant’s right to them has been established; (2) that they cannot be recovered as a
matter or right, their determination depending upon the amount of compensatory
damages that may be awarded to the claimant; (3) the act must be accompanied by bad
faith or done in a wanton, fraudulent, oppressive and malevolent manner. (National
Steel Corporation vs. Regional Trial Court of Lanao Del Norte, Br. 2, Iligan City, 304
SCRA 597)

2673. How shall a stipulation whereby exemplary damages are renounced in

advance be treated?

A stipulation whereby exemplary damages are renounced in advance shall be

null and void. (Article 2235)

65
 END OF PROVISIONS ON DAMAGES

2674. Up to what extent may the debtor be held liable for the fulfillment of his obligation?

The debtor is liable with all his property, present and future, for the fulfillment of his
obligation, subject to the exemptions provided for by law. (Article 2236)

66
2675. If the debtor has no money, what can the creditor do to collect the credit?

To collect the credit, the creditor can do any of the following:

a. Attach properties not exempt from attachment, forced sale, or execution;

b. Exercise accion subrogatoria (the right to exercise all rights and actions
except those inherent in the person)
c. Exercise accion pauliana (impugn or rescind acts or contracts done by the
debtor to defraud the creditors). (Art. 1177; see Arts. 1380-1389).
d. In certain cases ask for datio in solutom, cession (assignment in favor of
the creditors), file insolvency proceedings (provided all the requisite
conditions are present)
e. Wait until the debtor has money or property in the future (after all, liability
is with present and future property) (Civil Code of the Philippines
Annotated-Vol. V--Edgardo L. Paras-p. 1361-1362)

2676. Give examples of properties that are exempt from attachment.

The following are properties which are exempt from attachment:

a. The family home, except in certain cases (Art. 155, Family Code)
b. The right to support, annuities, pensions (in certain instances)
c. Property in custodial egis (Springer vs. Odlin, 3 Phil. 348)
d. Properties of a municipal corporation used for government purposes.
(Viuda de Tan Toco vs. Municipal Council of Iloilo, 49 Phil. 52)
e. In certain cases, homesteads acquired under the Public Land Act (See
Beach vs. PCC & Sheriff, 49 Phil. 365)
f. Those mentioned in Rule 39, Section 13, Rules of Court
(Civil Code of the Philippines Annotated-Vol. V--Edgardo L. Paras-p.
1362)

2677. In insolvency, what law shall govern?

Insolvency shall be governed by special laws insofar as they are not inconsistent with
the Code. ( Article 2237)

67
2678. What does the term solvency mean?

Solvency refers to the ability to pay one’s obligations and not to the pre-disposition of the
debtor to pay, and covers a situation when the debtor has more assets then liabilities.
(Commercial Law Reviewer-Villanueva—2009 Ed. P. 1186)

2679. What does the term insolvency mean?

Insolvency is the relative condition of a debtor’s assets and liabilities that the former, if all
made immediately available, would not be sufficient to discharge the latter. (Commercial Law
Reviewer-Villanueva—2009 Ed. P. 1186)

2680. What are the primary purposes of the Insolvency Law?

The following are the primary purposes of Insolvency Law:

a. Equitable distribution of debtor’s properties among the creditors; and

b. To afford individual debtor in good faith a fresh start in life.
(Commercial Law Reviewer-Villanueva—2009 Ed. P. 1186)

2681. What are the two divisions of the Insolvency Law?

The following are the two divisions of the Insolvency Law:

a. Suspension of Payments- Spanish in origin and copied from provisions of

the Code of Commerce.
b. Insolvency Proceedings- Insolvency proceedings work under premise that
the debtor has neither cash nor property of sufficient value with which to
pay all his debts.
(Commercial Law Reviewer-Villanueva—2009 Ed. P. 1186-1187)
68
2682. What is/are the distinction/s between suspension of payments and insolvency
proceeding?

The following are the distinctions between suspension of payments and insolvency
proceedings:

a. The purpose of suspension of payments is to suspend or delay payments

of debts; while the purpose of insolvency proceedings is to compel
presentment of all debts, whether due or not due, and secure a complete
discharge from such debts;
b. In suspension, the debtor has sufficient property to cover his liabilities;
while in insolvency, debtor’s assets are not sufficient to cover his liabilities;
c. In suspension, amount of indebtedness is not affected, although
postponement of payment is declared while in insolvency, creditors
receive less than what they are entitled to, and in some cases, where
preferences are proper, some creditors receive nothing. (Commercial Law
Reviewer-Villanueva—2009 Ed. P. 1187)

2683. Distinguish voluntary from involuntary insolvency?

The following are the distinctions between voluntary and involuntary insolvency:

a. In voluntary proceedings, debtor is the petitioner, while in involuntary

proceedings, three (3) or more creditors are the petitioners;
b. In voluntary proceedings, debtor may have only one creditor while in
involuntary proceedings, debtor must have at least 3 creditors;
c. In voluntary proceedings, no requirements with respect to creditor while in
involuntary proceedings, creditors must be Philippine residents whose
credits accrued in the Philippines and none of them became a creditor by
assignment within 30 days prior to filing of petition;
d. In voluntary proceedings, no bond is required for the petition while in
involuntary proceedings, bond is required;
e. In voluntary proceedings, order of adjudication may be granted ex parte
while in involuntary proceedings, it is granted only after hearing;
f. In voluntary proceedings, debtor must not have committed an act of
insolvency to get discharge while in involuntary proceedings, debtor must

69
 have committed an act of insolvency as basis by which creditors file
petition; and
g. In voluntary proceedings, petition must be filed with the RTC where the
petitioner-debtor resided for 6 months prior to filing while inn involuntary
proceedings, length of residence is immaterial.
(Commercial Law Reviewer-Villanueva—2009 Ed. P. 1187)

2684. In case of conflict between the Civil Code and the Special law, what law shall
prevail?

The provisions of the Civil Code prevail in case of conflict. Insolvency shall be governed
by special laws insofar as they are not inconsistent with the Code. (Article 2237)

2685. In a petition for voluntary insolvency, what properties must be included in the
inventory?

All real and personal properties, estate, and effects of the debtor, whether exempt from
execution or not should be included in the inventory to be filed together with the petition.
(Section 16, Insolvency Law). Although properties exempt from execution must be included in
the inventory, said properties, however, will not be taken away from the debtor, as the purpose
of including such kind of properties in the inventory is merely to prevent the debtor from falsely
claiming exemption. (The Insurance Code and the Insolvency Law with Comments and
Annotations-Fifth Edition-2006-Hernando Perez-p. 463)

2686. What are the requisites of involuntary insolvency?

In order that a debtor may be adjudged insolvent in a proceeding for involuntary

insolvency, the following requisites must exist:

a. The debtor must have committed one or more acts of insolvency.

b. The petition must be filed three or more creditors, residents of the
Philippines, whose credits are in the aggregate not less than P1,000 and
none of said creditors has become a creditor by assignment within thirty
days prior to the filing of said petition.

70
 c. The petition must be accompanied by a bond conditioned to pay to the
debtor all costs, expenses, and damages occasioned by the proceedings,
in case said petition does not prosper. (The Insurance Code and the
Insolvency Law with Comments and Annotations-Fifth Edition-2006-
Hernando Perez-p. 466)

2687. May properties of the conjugal partnership or the absolute community be taken
possession by the assignee for the payment of the insolvent debtor’s obligations?

No. So long as the conjugal partnership or the absolute community subsists, its property
shall not be among the assets to be taken possession of by the assignee for the payment of the
insolvent debtor’s obligations. (Article 2238)

2688. What is/are the exception/s of the above rule, if any?

The exception is that when the debtor’s obligations have redounded to the benefit of the
family. (Article 2238)

2689. May the administration of the community property or the absolute community be
transferred?

Yes. If it is the husband who is insolvent, the administration of the conjugal partnership
or the absolute community may, by order of the court, be transferred to the wife or to a third
person other than the assignee. (Article 2238)

2690. What are the requirements in order that properties of the conjugal partnership or
the absolute community may be exempted?

The exemption applies provided that:

a. The conjugal partnership or the absolute community subsists; and

b. The obligation did not redound to the benefit of the family. (Article 2238)

71
2691. What is the rule in case of co-ownership?

The undivided share or interest shall be possessed by the assignee. (Civil Code of the
Philippines Annotated-Vol. V--Edgardo L. Paras-p. 1365)

2692. What is the nature of office of the assignee?

An in insolvency occupies a triple position. First, he is an officer of the court. Second, he

is the representative of the insolvent debtor and administrator of the property belonging to the
latter. Third, he is also a representative of the creditors especially in all actions and proceedings
to set aside preferences and fraudulent transactions entered into by the debtor. (The Insurance
Code and the Insolvency Law with Comments and Annotations-Fifth Edition-2006-Hernando
Perez-p. 469)

2693. How is the assignee chosen?

An assignee in insolvency is elected by the creditors of the insolvent at the meeting set
be the court. And as a rule, all the creditors of the insolvent are entitled to vote at the elections
of the assignee. (The Insurance Code and the Insolvency Law with Comments and Annotations-
Fifth Edition-2006-Hernando Perez-p. 469-- citing Sections 18, 19, 24, and 25 of the Insolvency
Law)

2694. As a rule, all the creditors of the insolvent are entitled to vote at the election of the
assignee. Is/are there exception/s?

Yes. As a rule, all the creditors of the insolvent are entitled to vote at the election of the
assignee except the following:

a. Those who did not file their claims in the office of the clerk of court in
which proceedings are pending at least two days prior to the time
appointed for such election. (Section 29, Insolvency Law).

72
 b. Those whose claims are barred by the statute of limitations. (Section 29,
Insolvency Law)
c. Those that hold any mortgage, pledge or lien of any kind whatever as
security for the payment of his claim. (Section 29, Insolvency Law)
d. Those whose claims are not provable against the estate in insolvency.
(Section 53, Insolvency Law)
(The Insurance Code and the Insolvency Law with Comments and
Annotations-Fifth Edition-2006-Hernando Perez-p. 469-470)

2695. How many votes are necessary to elect an assignee?

The majority of the creditors who have proven their claims, such majority being both in
number and amount, must concur for the election of an assignee. (The Insurance Code and the
Insolvency Law with Comments and Annotations-Fifth Edition-2006-Hernando Perez-p. 470-
citing Section 30 of the Insolvency Law)

2696. When can the court appoint an assignee?

Ordinarily, the assignee in insolvency is elected by the creditors of the insolvent.

However, if, on the day appointed for the meeting, the creditors do not attend, or fail or refuse to
elect an assignee, or if, after election, the assignee shall fail to qualify, or if vacancy occurs by
death or otherwise, the court shall appoint an assignee. (The Insurance Code and the
Insolvency Law with Comments and Annotations-Fifth Edition-2006-Hernando Perez-p. 470-
citing Section 31 of the Insolvency Law)

2697. What are the properties which will not pass to the assignee?

As a rule, all properties of the insolvent debtor shall be assigned and transferred to the
assignee in insolvency. (Section 32, Insolvency Law). However, the following properties will not
pass to the assignee in insolvency:

a. After-acquired property.
b. Property exempt from execution.
c. Property held in trust.
d. Right of action for personal injury to the insolvent.
73
 e. Expectancy to inherit.
f. Encumbered property.
g. Life insurance policy even if the proceeds are payable to the insolvent
himself or his legal representative, if it has no cash surrender value at the
time of the commencement of the proceedings in insolvency.
(The Insurance Code and the Insolvency Law with Comments and Annotations-Fifth
Edition-2006-Hernando Perez-p. 471)

2698. What are the duties of an assignee?

An assignee in an insolvency has the following duties:

a. To register the assignment within one month after the making thereof.
(Section 34, Insolvency Law)
b. To prepare and file the schedule and inventory if the same have not been
filed by the creditor. (Section 34, Insolvency Law)
c. To convert the estate, real and personal, into money. (Section 39,
Insolvency Law)
d. To keep a regular account of all money received by him as assignee.
(Section 39, Insolvency Law)
e. To distribute the funds of the estate to the creditors. (Sections 44 and 47,
Insolvency Law)
f. To file his final account within one year from the date of order of
adjudication. (Section 43, Insolvency Law)
(The Insurance Code and the Insolvency Law with Comments and Annotations-Fifth
Edition-2006-Hernando Perez-p. 471-472)

2699. Can the assignee redeem mortgages and conditional contracts?

Yes. Under Section 36 of the Insolvency Law, one of the powers of the assignee in to
redeem all valid mortgages and conditional contracts, and all valid pledges of personal property,
and to satisfy any judgment which may be an encumbrance on any property sold by him. (The
Insurance Code and the Insolvency Law with Comments and Annotations-Fifth Edition-2006-
Hernando Perez-p. 472)

2700. When may the assignee be discharged by the court?

74
 An assignee may be discharged by the court in any of the following instances:

a. When the assignee refuses or neglects to render his accounts.

b. When the assignee refuses or neglects to pay over a dividend when he
has sufficient funds for that purpose.
c. When the assignee neglects or mismanages the estate.
d. When the assignee violates any provision of the Insolvency Law.

(The Insurance Code and the Insolvency Law with Comments and Annotations-
Fifth Edition-2006-Hernando Perez-p. 473- citing Section 36 of the Insolvency
Law)

2701. May properties held by the insolvent debtor as trustee be included in the
insolvency proceedings?

No. Property held by the insolvent debtor as a trustee of an express or implied trust,
shall be excluded in the insolvency proceedings. (Article 2240)

2702. What is the reason for the exemption?

The reason for the exemption is that the trustee is not the owner of the property held.
Hence, it should not respond for the insolvent trustee’s obligations. (Civil Code of the Philippines
Annotated-Vol. V--Edgardo L. Paras-p. 1365)

ARTICLE 2241 – 2255

2703. In relation to art.2241, what is the rule if a person becomes insolvent and there are
two or more credits with respect to his specific movable property?

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 If there are two or more credits with respect to the same specific movable property, they
shall be satisfied pro rata, after the payments of duties, taxes and fees due the state or any
subdivision thereof.

2704. Although art. 2241 states that the claims or lien shall be preferred, does this mean
that the claim of credits therein be given preference according to its order?

No, there is no preference in the order mentioned in art.2241: there is only a

concurrence. Hence, for example, if a person becomes insolvent and he incurs debts to two or
more persons, it shall be paid pro rata but the state shall be paid first the taxes and fees
incurred by the debtor.

2705. What is the nature of the claims or credits enumerated in art.2241?

The claims or credits enumerated in Art. 2241 are considered: (a) pledges of personal
property; (b) or liens within the purview of legal provisions governing insolvency.

2706. Are liens mentioned in Art.2241 possessory liens?

No, Generally, unless otherwise stated, they are not possessory liens with the right of
retention. As liens, they are considered charges.

2707. What is the remedy of the creditor if the movables to which the lien or preference is
attaches have been wrongfully taken?

If the movables to which the lien or preference is attaches have been wrongfully taken,
the creditor may demand them from any possessor, within thirty days from the unlawful taking.

2708. Duma’s car was subject to mortgage. On October 15.2010, the car was overhauled
by Donaire.Duma did not pay the repair of the car. Latter, the car was foreclosed so
Pedro, the mortgagee, went to Donaire to take the car. Has Donaire have the right to
refuse surrender of the car until payment of the value his services?

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 Yes, a person who has made repairs upon an automobile at the request of the owner is
entitled to retain the it until he has been paid the price of the work executed. This lien of
mechanic or repairer on the car is superior to the right of the chattel mortgage, and the latter
cannot take possession of the thing without first satisfying the claim of the former for the value
of his service.

2709. Are the owner of the hotel has the right to retain in pledge the clothing’s of
boarders’ until he has paid the rent therein?

Yes, this is supported under art.2241 par. 10,which provides that credits for lodging and
supplies furnished to travelers by hotel keepers, on the movable belonging to the to the guest as
long as the movables are in the hotel, may retain by the owner of the hotel until he is paid the
rent.

2710. What are the requisites in order for an unpaid vendor mentioned in Art. 2241 to be
entitled as a preferred creditor?

For an unpaid vendor to entitle as a preferred creditor, he must prove that (1) the money
claimed must be due to him as the selling price of the property from which it proceeds; (2) the
property must be capable of identification and must be identified as the same property whose
selling price is unpaid and; (3) the property upon which the selling price was due must be found
in the possession o the debtor.

2711. Mario mortgaged has properly to Dallo. During the time of the mortgage, Mario
barrowed money to Binay for the cultivation of the Copra. Mario did not pay his loan, the
property then was foreclosed. Dallo was not satisfied with the proceeds of the property.
He then asked the court to levy the ungathered crops but Binay opposed contending that
he has preferred claim over the crops. Is the contention of Binay correct?

Yes, because under Article 2241, credits advanced to the debtor for expenses of
cultivation and harvesting are preferred lien on the proceeds of the crop and this is preferred to
those liens created by mortgage over the land. (Kabangkalan Sugar Co. vs. rubin, 54 Phil. 645)

77
2712. Binay, however, invoked preference over the land of Mario in the foreclosure
proceeding in case the latter does not pay his debt?

No, because the mortgage is prefers over the land of Mario. Such being as immovable
property. The mortgagee of the real estate mortgage enjoys the preference in the collection out
of the value of the mortgage property, over other credits.

2713. What is being referred to as laborer’s lien contemplated in Art. 2241?

The laborer’s lien contemplated in Art. 2241 refers to chattels or movables to imposable,
and in only in favors of laborers engaged by the owner of the goods to be manufactured. It does
not also include those engaged by contractors who do not work for the owners.

2714. Assuming that the debtor sold his car, can the credit or demand the return of the
property because he has a vendor’s lien over the property?

No. the last paragraph stated in Art. 2241 is applicable only to cases wherein the right to
ownership in such property continues in the debtor and not applicable only to case wherein the
debtor has sold the property and parted with his ownership therein.

2715. Who is more preferred a preliminary attachment over the land or a mortgage?

A preliminary attachment made on the mortgaged property is subordinate to the

mortgage, and unless the whole indebtedness for which the property is mortgaged is wholly
paid, the attaching creditors acquire no right over said mortgage property for the satisfaction of
their credits. (Director of public works vs. Sing Juco,53 Phil. 205)

2716. Pedro barrowed money from Juan to finance the construction of a building,
mortgaging his land and the building to be constructed thereon to secure the loan. After
the building was erected, Pedro failed to pay the laborers who work in the building, and
some suppliers who furnished materials thereon. Upon foreclosure of the mortgage, who

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would have preferential right to the proceeds of the sale; the laborers, the suppliers, or
the mortgagee?

Regarding the proceeds of the sale of the land, the mortgagee has the preferential right,
because the laborers and the suppliers certainly have no lien on the land.However, as to the
proceeds of the sale of the building, the morgagee, the labors, and the suppliers will all share
pro rata after the taxes on the building have been paid, provided, however, the mortgage credit
has been recorded in Registry of Property.

2717. Pedro sold his land to Xerox, apparently, Betag did not pay. Subsequently, Betag
was able to obtain a clean certificate of title and he mortgaged the same to Paterno.
Betag failed to pay the mortgage. Pedro file a motion to recognize his vendor’s lien and
was granted. The court distributed the proceeds of sale pro rata basing its decision
under Article 2242. Who is preferred the vendor’s lien or the mortgage?

It is the mortgage that is preferred and not the vendor’s lien because although Article
2242 states that vendor’s lien is preferred but in case of mortgages, the first who recorded it is
more preferred than those who did not. If pro rata distribution be allowed by the court then it
would defeat the purpose of Torrens title.Hence, relied provision is improper in this case.

2718. Leo was the owner of a certain warehouse. He was indebted to Mario, the
mortgagee, and Maria, the person who furnished materials used in its contruction.There
is no other creditors. Is there a need of insolvency proceedings?

There is no need for insolvency proceedings, because the two credits can be satisfied
pro rata from the amount that can be obtained in the foreclosure sale of the warehouse,
applying Arts.2242 and 2249 of the civil code.

2719. What is reason of Pro rata sharing in Art.2241 as well as in Art.2242?

According to the framer of the code, the reason of pro rata sharing is because it is
extremely difficult to determine a just order of preference among the debtors; the holder of the
lien or encumbrance could give plausible reason why his claims should be placed ahead of the

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others. But it would seem to be fairer course to divide the value of the property prop rata among
the lien holders.

2720. What is reflationary credit in art.2242?

This is a credit for the repair or reconstruction of something that had previously been
made.

2721. Who is more preferred a judgment credit or a mortgage?

A Judgment credit cannot have any preference over a credit secured by a pledge or
mortgage with respect to the property given. (National Bank Vs. Viuda de Limengco,57 Phil.81.)

2722. What is the nature of credits mentioned in Article 2244 in order for it to be
collectible?

The credits to which art.2244 gives preference are those which are due, and until they
are demandable the legal provisions contained therein are not applicable.

2723. To what credits article 2244 applies?

a.) Unpaid credits

b.) Preferred credits
c.) Concurred credits
d.) Matured credits

2724. In preference of credits, are notarial documents considered public document within
the meaning of Art. 2244 Par. 14 if such document does document does not contain
evidence of debts or credits?

No. in Roman vs. Herridge 47 Phil 98, the court said, where the notarial document in
itself does not contain debs or credits created, such document does not create a preference and
is not a public instrument within the meaning of this article.
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2725. The preference of public document and a final judgment can be determined;

a) When it was executed by the parties concerned.

b) According to their dates.
c) When such is only filed in court.
d) When such is approved by the Office of the Register of Deeds.

2726. In case there are several judgments secured on singe debt set out on the public
instrument. To collect such credits, how can we determine the preference of date?

Where several judgments have been secured in a single debt set out in the public
instrument, preference among said judgments is determined by the date of the public instrument
and not by the dates of the judgments secured by virtue of such public instrument. (Somes v.
Molina, 15 Phil.133)

2727. Is the right to a preference secured by judgment creditor lost by mere perfecting of
an appeal in the judgment?

No. The right to a preference secured to a judgment creditor in the distribution of funds
of the state of his judgment debtor, is not lost by the perfecting of the appeal from the judgment
in cases wherein execution is not stayed upon the judgment pending appeal (McMicking vs.
Lichauco,27 Phil.386)

2728. Supposed an assignee was recommended by the judgment creditor to be a

representative by the latter. Is that considered a waiver to his preference in the credits?

No. In O’Brien v. China Banking Corporation, 55 Phil. 353, the Supreme court states
when the judgment creditor recommend to the court that an assignee be appointed cannot be
considered as a waiver of creditor’s preferred credit. A waiver is the intentional relinquishment of
a known right, and such recommendation does not amount to an intentional relinquishment of a
preferred credit.

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2729. Pedro obtained a favorable judgment over a parcel of land in a collection suit filed
against Romeo. But Pedro did not do something to enforce the judgment. After forty
years, Romeo mortgaged the property to Francisco. Upon knowledge of the mortgage,
Pedro filed a second case to enforce the prior judgment and a second judgment was
rendered and, thereafter, the same property was attached. Is the attachment made in the
second judgment preferred over the mortgage?

No, in Francisco v. Guitote, (C.A.) G.R. No. 12, 29 May, 1943,the court stated that when
the party in whose favor a judgment for recovery of sum of money was rendered in a civil suit,
fails to execute his judgment and allows the same to remain unexecuted and unsatisfied,
notwithstanding the lapse of five years and periods provided by the rules of court, and a
mortgage was thereafter executed over the same parcel of land, a second judgment rendered
involving the same controversy does not preferred or given priority over the mortgage on the
same land given by the judgment debtor in favor of a third party, who brought a suit for
foreclosure, where it appears that such mortgage was executed prior to the promulgation of the
second judgment in the revived action.

2730. Unlike in Art.2241 and 2242, in the distribution of credits stated in Art.2244, does
we follow the rule on concurrence?

No, the distribution of debts should be preference, as such, in case of the insolvency of
the debtor, the enumeration in Art. 2244 should be preference in application; the funeral
expenses should come first, then laborers service, and so on. But this applies only to property
other than real or personal property.

2731. Abubakar owes Kevin the amount of 50,000 pesos for the services he performed for
the construction of the house of the former. Abubakar also incurred debt amounting
50,000 pesos to Carlo for his hospital expenses. And when he was still studying in
Harvard he barrowed money to Denis in the amount of 1 million pesos. Give the order of
preference of the various creditors involved.

Applying Art.2244 of the civil code, Kevin should be paid first for the labor he performed,
then Carlo for hospital expenses, then Denis for the expenses to support himself. There is no
pro rata sharing; there is a preference.Threfore, the 50,000 shall be paid to Kevin,50,000 also to
Carlo, and Denis cannot recover his 1 million pesos.
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2732. Berting is the owner of a parcel of land, there were several attachment and
execution that was annotated therein; the first for 10,000;the second for 10,000;the third
is 30,000; and the fourth is 40,000.the property is only sold at the public sale for
30,000,who would share in this amount?

As a general rule, there is no preference in the distribution of credits if specific property

is involved, but only concurrence. But the exception is when there are attachments and
execution in the property which means that there is still preference among them .those who
recorded it in the registry should be satisfied first. Therefore, the 30,000 should satisfy first the 3
attachments, and the remainder, if any, shall be given to the 4rth attachment.

2733. What credits that is not given preference in law?

Under art. 2245 provides that credits of any kind or class, or by any other right or title not
comprised in art.2241 and 2244, shall enjoy no preference.

2734. In ranking of liens involving property other than real or personal property, which
lien should be satisfied first?

a) Expenses for savage goods.

b) Laborers’ service
c) Taxes and fees owed to the state
d) Funeral expenses.

2735. What does preference in relation to specific real property exclude?

Those credits which enjoy preference in relation to specific real property or real rights,
exclude all others to the extent of the value of the immovable real right to which the preference
refers.

2736. If there are two or mare credits with respect to the same specific real property or
real rights they shall be divided:
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 a) equally
b) proportionately
c) successively
d) pro rata

2737. In payments of credits with respect to real or personal property, the payment
should not be made except;

a) Upon payment of funeral expenses.

b) Upon payment of taxes and fees due the government.
c) Upon payment of hospital expenses.
d) Upon payment of fines and civil indemnification arising from a criminal
offence.

2738. What is the rule if there is an excess after payment of the credits with respect to
specific property, either real or personal?

The rule is if after payment of the credits which enjoy preference with respect to specific
property, real or personal, it shall be added to the free property of which the debtor may have,
for the payment of other credits.

2739. How can common credits referred to in art.2245 be satisfied?

a) By pro rata distribution of credits.

b) By pro rata distribution of credits, regardless of dates.
c) By payment periodically.
d) By propionate distribution.

2740. The following are the exception to the rule that laws shall not have retroactive
effect except:

a) When the law provides for its retroactivity.

b) When the law creates new substantive rights.
c) When the provisions of the code do not impair any vested rights.
84
 d) When the law is curative in character.

2741. There are new provisions and rules laid down by the NCC which may prejudice or
impair vested rights. Do they have retroactive effect?

No, they do not have retroactive effect. According to art. 2252,changes made and new
provisions and rules laid down by this code which may prejudice vested rights in accordance
with the old legislation shall have no retroactive effect.

2742. The reason remedial or procedural law may be given retroactive effect is because:

a.) There are no substantial rights involved.

b.) The law so declares.
c.) It will favor the accused.
d.) It will determine whether the accused will be entitled to acquittal or not.

2743. All laws should take effect prospectively because:

a.) The law so provides.

b.) if it will take effect retroactively it will impair vested rights.
c.) It will impose greater punishment.
d.) Judges will not find hard time to impose the law.

2744. Is there a need for a new law to mention the retroactivity of its provisions, if that
law is to create new rights?

No need. Laws creating new rights may take effect retroactively despite the absence of
any provisions that gives retroactive application, provided, however, such law must not impair
rights.

2745. Penal law enacted is considered favorable to the accused when at the time the law
is passed, the penalty of the crime has been reduced except:

a.) When the law has given retroactive application.

85
 b.) When it aggravates the crime or penalty of the crime is increased.
c.) When he is not a habitual delinquent.
d.) When the penalty of the crime has benefited the accused as well as his
companions.

2746. Can successional right be given retroactive effect to an illegitimate child regarding
the estate of the deceased person if such was only granted by the new law?

No, Successional rights granted by the new civil code in favor to illegitimate children
cannot be given retroactive effect and be made to apply to the estate of the deceased who died
before the effectivity of the new civil code, for the same would have the effect of impairing the
vested rights of another who is deemed to become owner of the property of the decease d upon
the latter’s death during the regime of the old civil code.

2747. Is it correct to say that acquisition of vested rights cannot in any 2ay be
questioned?

No, because according to art. 2254 of the civil code, no vested right can arise from acts
or omissions which are against the law or which infringe the rights of others.

2748. Shall contracts with a condition or a period which were executed before the NCC
took effect be regulated by said NCC in the event that the condition should be fulfilled or
the period should arrive at the time the NCC become effective?

NO, because art. 2255 declares that the former laws shall regulate acts and contracts
with a period, which were executed or entered into before the effectivity of this code, even
though the condition or period may still be pending at the time this body of laws goes into effect.

2749. Article 2256 of the civil cod provides that rights granted to acts and contracts
executed under the old law shall be regulated by that old law. What governs if there were
revocation or modification on that such acts or contracts after the beginning of the new
law?

86
 The second paragraph of art. 2256 states that the revocation or modification of acts or
contracts after the beginning of the effectivity of this code shall be subject to the provisions of
the new body of laws. Hence, the new law shall govern.

2750. Pitong sold to Pitang a parcel of land with a right of repurchase within 10 years
from the date of sale. After 10 years, Pitang sold again the same to Lamun without the
knowledge of Pitang. Lamun tender payment to Pitang but the latter refuse to accept the
payment on the ground that the title of the property has already been consolidated.
Assuming that the time of execution of the contract no right of repurchase is established
by law, it is only after 10 year that the new law has granted that right, may the vendor
exercise his right of repurchase?

No, because art.2256 provides that conditional rights are subject to the law in fore in the
old law, Therefore, the vendee’s right of ownership became absolute immediately upon failure of
the vendor to redeem the property in de time, certainly the right would be impaired if the latter is
now to be given the privilege to redeem beyond the period stipulated.

ARTICLE 2256 – 2270

2751. If there are two (2) or more credits with respect to the same specific immovable
property, how shall they be satisfied?

If there are two or more credits with respect to the same specific real property or real
rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the
immovable property or real right.

2752. How shall credits be satisfied? If there are two or more credits with respect to the
same specific immovable property.

If there are two or more credits with respect to the same specific real property or real
rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the
immovable property or real right.
87
2753. There are new provisions and rules laid down by the New Civil Code which may
prejudice or impair vested rights. Do they have retroactive effect?

No. They do not have retroactive effect. Although the New Civil Code, following a well
established principle of modern legislation, provides that if a right should be declared for the first
time in said code, it shall effective at once, even though the act or event in which gives rise
thereto may have been done or may have occurred under the prior legislation, nevertheless,
there is an exception and that is when said right prejudices or impairs a vested or acquired right.
In such a case, such right shall be prospective and not retroactive.

2754. Shall contracts with a condition or a period which were executed before the New
Civil Code took effect be regulated by said New Civil Code in the event that the condition
should be fulfilled or the period should arrive at the time said New Civil Code become
effective?

No, such contracts shall not be regulated by the New Civil Code even though the
condition should be fulfilled or the period should arrive at the time said New Civil Code became
effective. This is clear in provision of said New Civil Code which declares that the former laws
shall regulate acts and contracts with regulation or period, which were executed or entered into
before the effectivity of this code even though the condition or period may still be pending at the
time this body of laws goes into effect.

2755. What is the repealing clause of the New Civil Code?

The following laws and regulations are hereby repealed:

1) Those parts and provisions of the Civil Code of 1889 which are in force on the
date when the New Civil Code becomes effective;
2) The provisions of the Code of Commerce governing sales, partnership,
agency, loan, deposit, guaranty;
3) The provisions of the Code of Civil Procedure on prescription as far as
inconsistent with the code; and
4) All laws, acts, parts of acts, rules of court, executive orders, and
administrative regulations which are inconsistent with the code.

88
2756. What laws and regulations repealed by the New Civil Code?

The following laws and regulations are repealed by the new civil code, those parts and
provisions of the Civil Code of 1889 which are in force on the date when the New Civil Code
becomes effective; it includes the provisions of the Code of Commerce governing sales,
partnership, agency, loan, deposit, guaranty; the provisions of the Code of Civil Procedure on
prescription as far as inconsistent with the code; and all laws, acts, parts of acts, rules of court,
executive orders, and administrative regulations which are inconsistent with the code.

2757. Enumerate the laws and regulations repealed by the New Civil Code.

The following laws and regulations are hereby repealed by the new civil code: (a)Those
parts and provisions of the Civil Code of 1889 which are in force on the date when the New Civil
Code becomes effective; (b)The provisions of the Code of Commerce governing sales,
partnership, agency, loan, deposit, guaranty;(c) The provisions of the Code of Civil Procedure
on prescription as far as inconsistent with the code; and All laws, acts, parts of acts, rules of
court, executive orders, and administrative regulations which are inconsistent with the code.

2758. Are laws and regulations under the Spanish civil code completely repealed by the
New Civil Code?

No, only those parts and provisions of the Civil Code of 1889 which are in force on the
date when the New Civil Code becomes effective; it includes the provisions of the Code of
Commerce governing sales, partnership, agency, loan, deposit, guaranty; the provisions of the
Code of Civil Procedure on prescription as far as inconsistent with the code; and all laws, acts,
parts of acts, rules of court, executive orders, and administrative regulations which are
inconsistent with the code.

2759. When was the Spanish Civil Code repealed?

The Spanish Civil Code was repealed by Rep. Act No. 386, otherwise known as the Civil
Code of the Philippines, on August 30, 1950. The reason for this is that it was on this date that
the New Civil Code became effective.

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2760. If the Spanish Civil Code was repealed on 1950, what code should governed with
those acts and contracts entered on August 10, 1948?

The acts and contracts entered on 1948 as long as it is valid in accordance therewith
shall continue to be fully operative, with the limitations established in the new civil code. But in
case of its revocation or modification after the beginning of the effectivity of the new civil Code,
the acts and contracts entered under the former code shall be to the provisions of the new body
of Laws.

2761. If Mr. X enters into a contracts of sale with Mr. Y on June 15, 1945, does the new
civil code govern these contracts entered into by the parties?

No, as long as the acts and contracts entered into by the parties under the regime of the
old laws are valid in accordance therewith, it shall continue to be fully operative, with the
limitations established in the new civil code. But in case of its revocation or modification after the
beginning of the effectivity of the new civil Code, the acts and contracts entered under the
former code shall be to the provisions of the new civil code.

2762. The Spanish Civil Code is repealed by what act?

The Spanish Civil Code was repealed by Republic Act No. 386, otherwise known as the
Civil Code of the Philippines, on August 30, 1950.

2763. When is the effectivity of the new civil code?

The date of effectivity of the new civil code was on August 30, 1950.

2764. When was the new civil code become effective?

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 The new civil code becomes effective on August 30, 1950.

2765. When was the new civil code approved?

The new civil code approved on June 18, 1949.

2766. What is the effect of acts and contracts under the regime of the old laws?

All acts and contracts under the regime of the old laws, if they are valid in accordance
therewith, shall continue to be fully operative, with the limitations established in the new civil
code.

2767. What is the effect in case of revocation of acts and contracts under the regime of
the old laws?

The Acts and contracts under the regime of the old laws, if they are valid in accordance
therewith, shall continue to be fully operative, with the limitations established in the new civil
code. But the revocation or modification of these acts and contracts entered into after the
beginning of the effectivity of Code shall be subject to the provisions of the new body of Laws.

2768. What is the effect in case of modification of acts and contracts under the regime of
the old laws?

All Acts and contracts under the regime of the old laws, if they are valid in accordance
therewith, shall continue to be fully operative, with the limitations established in the new civil
code. But the revocation or modification of these acts and contracts after the beginning of the
effectivity of Code shall be subject to the provisions of the new body of Laws.

2769. After the effectivity of the New Civil Code, what is the effect of acts and contracts
entered into under the regime of the old laws?

91
 If the Acts and contracts under the regime of the old laws are validly entered in
accordance therewith, it shall continue to be fully operative, with the limitations established in
the New Civil Code. But the revocation or modification of these acts and contracts after the
beginning of the effectivity of Code shall be subject to the provisions of the new body of Laws.

2770. In case of revocation of contracts entered into under the old laws and after the
effectivity of the New Civil Code, what code should govern?

It depends, if the acts and contracts under the regime of the old laws, if they are valid in
accordance therewith, shall continue to be fully operative, with the limitations established in
these rules. But the revocation or modification of these acts and contracts after the beginning of
the effectivity of Code shall be subject to the provisions of the new body of Laws.

2771. Does the New Civil Code expressly revoke those contracts entered into under the
old code?

No, those Acts and contracts under the regime of the old laws, if they are valid in
accordance therewith, shall continue to be fully operative as provided in the same, with the
limitations established in these rules. But the revocation or modification of these acts and
contracts after the beginning of the effectivity of Code shall be subject to the provisions of the
new body of Laws.

2772. What is the effect if the new civil code attach a civil sanction or penalty on
violations of contracts entered into by the contracting parties?

The Provisions of the New Civil Code which attach a civil sanction or penalty or a
deprivation of rights to acts or omissions which were not penalized by the former laws, are not
applicable to those who, when said laws were in force, may have executed the acts or incurred
in the omission, forbidden or condemned by the New Civil Code.

2773. What could be the remedy in case, fault is punished by the old and new code?

92
 If the fault is punished by the old and new code, the less severe sanction shall be
applied. Wherein if the new civil code provide lesser punishment to the acts committed by either
both of the parties, the provision of the new civil code shall be applied.

2774. What is the effect if the old code does not provide any sanction or penalty to acts
or omissions, but it was repeatedly committed after the effectivity of the new code.

If a continuous or repeated act or omission was commenced before the beginning of the
effectivity of the New Civil Code, and the same subsists or is maintained or repeated after the
new body of laws has become operative, the sanction or penalty prescribed in the New code
shall be applied, even though the previous laws may not have provided any sanction or penalty
therefore.

2775. Compromise the exercise of the rights or of the action if commenced under the old
laws but is pending on the date the new code takes effect.

If the exercise of the right or of the action was commenced under the old laws, but is
pending on the date the new code takes effect, and the procedure was different from that
established in the new body of laws, the parties concerned may choose which method or course
to pursue.

2776. Procedures in the exercise of the rights or of the action which came into being but
were not exercised before the effectivity of the new code.

In case of actions and rights which came into being by either of the parties over the other
but were not exercised before the effectivity of the New Code, shall remain in full force in
conformity with the old legislation; but their exercise, duration and the procedure to enforce
them shall be regulated by the new code and by the rules of court.

2777. What code is governed with respect to the capacity of married woman to execute
acts and contracts?

93
 The capacity of married woman to execute acts and contracts is governed by the New
Civil Code, even if her marriage was celebrated under the former laws.

2778. Ana married to Jason on November 1, 1940. What code should governed her
capacity to enter into a contract without the consent of her mother?

The capacity of married woman to execute acts and contracts is governed by the New
Civil Code, even if her marriage was celebrated under the former laws.

2779. Does the capacity of married woman to execute acts and contracts governed by the
old code?

No, the capacity of married woman to execute acts and contracts is governed by the
New Civil Code, even if her marriage was celebrated under the former laws.

2780. Does the new civil code govern the capacity of married woman to execute acts and
contracts?

Yes, the new civil code shall govern the capacity of married woman to execute acts and
contracts, even if her marriage was celebrated under the former laws.

2781. In case of voluntary recognition of a natural child, who was born before the
effectivity of the new civil code, what code should govern?

The voluntary recognition of a natural child shall take place according to the New Civil
Code, even if the child was born before the effectivity of the new body of laws.

2782. What code should govern in case of voluntary recognition of a natural child?

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 It has been settled that even if the child was born before the effectivity of the new civil
code. The New Civil Code should govern in case of voluntary recognition of a natural child.

2783. Does the provisions of the new civil concerning voluntary recognition of a natural
child applicable even if the child was born before its effectivity?

Yes, It has been settled that even if the child was born before the effectivity of the new
civil code. The provisions of the New Civil Code should govern in cases of voluntary recognition
of a natural child.

2784. In case of granting exemption prescribed in the old code with respect to any
support, pension or gratuity, how should be applied.

The exemption prescribed in the old code shall stay to be applicable to any support,
pension or gratuity already existing or granted before the new civil Code becomes effective.

2785. what is the effect of a Guardianship with respect to the property of minors,
appointed by the courts before this Code goes into effect.

Although the guardian of the property of minor was appointed by the court before the
effectivity of the new civil code, these guardians shall continue to act such, to avoid
disturbances in the administration of the property of minor children.

2786. What code should apply in case of rights of the heirs to the inheritance?

It depends, the rights to the inheritance of a person who died, with or without a will,
before the effectivity of the new civil Code, shall be governed by the Civil Code of1889, by other
previous laws, and by the Rules of Court, but he inheritance of those who, with or without a will,
die after the beginning of the effectivity of this code, shall be adjudicated and distributed in
accordance with the new body of laws and the Rules of Court.

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2787. Rule on the rights of heirs to the inheritance of a person who died before the
effectivity of the new civil code.

It has been settled that the rights to the inheritance of a person who died before the
effectivity of the new civil Code, leaving a will or not shall be governed by the Civil Code
of1889, by other previous laws, and by the Rules of Court.

2788. Rule on the rights of heirs to the inheritance of a person who died after the
effectivity of the new civil code.

The rights of an heirs to the inheritance, whether the decedent leave a will or not, and
die after the beginning of the effectivity of the new civil code, shall be adjudicated and
distributed in accordance with the new body of laws and the Rules of Court, but the
testamentary provisions shall be carried out insofar as they may be permitted by this Code.
Therefore, legitimes, betterments, legacies and bequests shall be respected; however, their
amount shall be reduced if in no other manner can every compulsory heir be given his full share
according to the new civil code.

2789. Is proof of filiation under the new civil code required in case a child claims
recognition in order to inherit from his alleged natural father?

If the alleged natural father died before the effectivity of the new civil code, proofs of
filiation allowed under the new civil code are useless in order that the child claiming recognition
may inherit from his alleged natural father.

2790. Enumerate those provisions which are not only prospective, but also has a
retroactive effect:

They are the following, (a) ART. 315, whereby a descendant cannot be compelled, in a
criminal case, to testify against his parents and ascendants; (b) Articles 101 and 88, providing
against collusion in cases of legal separation and annulment of marriage; (c) Articles 283, 284,
and 289, concerning the proof of illegitimate filiation; (d) Article 838, authorizing the probate of a
will on petition of the testator himself; (e)Articles 1359 to 1369, relative to the reformation of
instruments;(f)Articles 476 to 481, regulating actions to quiet title, and lastly, (g) Articles 2029 to
2031, which are designed to promote compromises.

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2791. Enumerate those provisions that are applicable not only to future cases but also to
those pending on the date the new civil code becomes effective.

They are the following provisions, (a) ART. 29, relative to criminal prosecutions wherein
the accused is acquitted on the ground that his guilt has not been proved beyond reasonable
doubt, and, (b) ART. 33, concerning cases of defamation, fraud and physical injuries.

2792. What happen in the suits between members of the same family which are pending
at the time the new civil code goes into effect.

The suits between members of the same family shall be suspended, under such terms
as the court may determine, in order that a compromise may be earnestly sought or in case of
legal separation proceedings, for the purpose or effecting if possible, reconciliation.

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