IX. ACTUAL OR COMPENSATORY DAMAGESA. DEFINITION

Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Art. 2200. 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. (1106)

B. COMPONENTS OF ACTUAL DAMAGES

B.1. VALUE OF LOSS SUFFERED (DAO EMERGENTE)

Art. 2200. 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. (1106)

B.2. PROFITS NOT OBTAINED OR REALIZED (LUCRO CESANTE)

Art. 2200. 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. (1106)

B.3. LOSS OF EARNING CAPACITY FOR PERSONAL INJURY

B.3.1: FORMULA IN DETERMINING LOSS OF EARNING CAPACITY

[G.R. No. 132252. April 27, 2000]

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. JESUS MUYCO and ARNULFO MUYCO (at large), accused

BELLOSILLO, J.:

JESUS MUYCO and ARNULFO MUYCO, cousins, were charged with murder for the death of Romeo Boteja Jr. on 13 May 1995. Only Jesus Muyco was apprehended while Arnulfo Muyco remains at large. On 11 September 1997 the Regional Trial Court, Br. 25, Iloilo City, found Jesus guilty as charged and correspondingly sentenced him to reclusion perpetua and to pay the heirs of Romeo Boteja Jr. P30,000.00 as death indemnity and P27,000.00 as funeral expenses.

Jesus Muyco in this appeal submits that the lower court erred (a) in giving credence to the testimony of Ernesto Boteja, which he (Jesus) claims to be improbable and incredible; (b) in finding him guilty despite the failure of the prosecution to overcome the presumption of his innocence; (c) in disregarding his alibi; and, (d) in appreciating the qualifying aggravating circumstance of treachery.

These contentions are without merit as shown by these facts: From 6:00 oclock to 7:00 oclock in the evening of 13 May 1995, Jesus Muyco and Arnulfo Muyco together with Romeo Boteja Jr. were in the house of Narciso Nadales at Barangay Pamuringao-Garrido, Cabatuan, Iloilo. At about 9:00 oclock the trio were seen walking towards the barangay dancehall where they met Ernesto Boteja, an uncle of Romeo and a relative by affinity of Jesus and Arnulfo. Romeo invited his uncle Ernesto for a drink so they all went to the store of Agnes Cao about a hundred (100) meters away from the dancehall to buy whisky. As the store was about to close, Jesus, Arnulfo, Romeo and Ernesto decided to drink their whisky under a mango tree nearby. After drinking for a while, Arnulfo suddenly grabbed the hands of Romeo, and while the latter was struggling, Jesus stabbed him with a knife hitting him near his collarbone. It was fatal. Arnulfo then dragged the lifeless body of Romeo towards the nearby sugarcane field with Jesus following them.

Ernesto was shocked by the startling occurrence. He was virtually immobilized. He only moved from there to run for his life when he saw Jesus and Arnulfo returning from the field with Jesus pointing a knife at him. Ernesto fled towards the opposite side of the sugarcane field and stayed there until dawn. Romeos body was found lifeless at 11:00 oclock that same evening.

Leticia Boteja, mother of the victim, testified that she incurred P27,000.00 for funeral expenses. Dr. Ricardo Jaboneta autopsied the body of Romeo and found that he sustained one (1) stab wound which penetrated his chest wall. It was fatal.

Narciso Nadales narrated that from 6:00 oclock until 7:00 oclock in the evening of 13 May 1995 Jesus, Arnulfo and the deceased were in his house drinking. The group left at around 7:30 oclock in the evening to go to the dancehall.

Leo Boteja, another prosecution witness, testified that on 13 May 1995 he joined Jesus, Arnulfo and the victim in the house of Narciso Nadales. They drank mucho. At around 7:30 oclock in the evening he left for home while Jesus, Arnulfo and the victim proceeded to the dancehall. About two (2) hours later, he also went to the dancehall but could not find Jesus, Arnulfo and the deceased there. At 11:00 oclock that evening he learned that Romeo Boteja Jr. was killed and his cadaver was found in the sugarcane field.

Jesus denied participation in the killing of Romeo Boteja, Jr. and insisted on his alibi. He averred that on 12 May 1995 he visited his brother Severo Muyco at Bgy. Pamuringao-Garrido, Cabatuan, Iloilo, as he got married there a year ago. From 10:00 oclock in the morning to 5:00 oclock in the afternoon of 13 May 1995 he drank with his brother Severo, cousin Arnulfo, uncle Crispin Debucon and the deceased Romeo Boteja Jr. whom he met for the first time. He did not know whose house it was where they drank. Upon the prodding of Severo, he left Cabatuan and proceeded to Passi, Iloilo, which is about fifty (50) kilometers away, arriving there at 7:00 oclock in the evening. He spent the night in the house of his cousin Nestor Muyco.

Vicente Inion and Joean Nufable corroborated accused-appellants alibi. Both asserted that they saw Jesus in the house of Nestor in Passi, Iloilo, on the night of 13 May 1995.

As already stated, the court a quo ruled against accused-appellant and found him guilty of murder. It did not give any probative value to his denial and alibi in view of his positive identification by prosecution witness Ernesto Boteja.

Accused-appellant imputes error on the part of the court a quo in lending credence to the testimony of Ernesto Boteja, contending that his testimony was improbable and incredible. He argues that Ernestos inaction when his nephew Romeo was stabbed just a meter away from him is contrary to human nature.

We disagree. Different people react differently to a given type of situation. There is no standard form of human behavioral response when one is confronted with a strange, startling or frightful experience. One persons spontaneous or unthinking, or even instinctive response to a horrid and repulsive stimulus may be aggression, while another persons reaction may be cold indifference.[1] A witness inability to move, help or even to run away when the incident occurs is not a ground to label his testimony as doubtful and unworthy of belief. There is no prescribed behavior when one is faced with a shocking event. In the case of Ernesto Boteja, his inability to react was understandable as he was shocked by the suddenness of the event and considering that it was his first time to witness a stabbing incident. Thus-

Q: After romeo Boteja Jr. was hit and x x x was struggling, what happened next?

A: Arnulfo Muyco dragged Romeo towards the sugarcane field.

Q: What about you, what did you do?

A: I was stunned that being the first time I saw a person stabbed. I was not able to move. I just stayed there x x x x

Q: How about during the period that your nephew was stabbed up to the time the he was dragged to the sugarcane field?

......What did you do?

A: I remained standing. I got stunned and nervous.

Q: You mean that you remained there standing from the time your nephew was stabbed up to the time that he was dragged?

A: Yes sir, because I was nervous.[2]

Accused-appellant also cites inconsistencies in the testimony of Ernesto. A close scrutiny of the records however would reveal that there are none at all. That Ernesto testified having seen the victim stabbed on his neck instead of his collarbone was not inconsistency. Dr. Jaboneta who autopsied the body of the victim explained that the wound inflicted was just below the collarbone. For a lay-man like Ernesto who does not have any medical background at all, there is little or no material difference between a neck and a collarbone. Besides, it would be too much to expect from Ernesto to be perfectly accurate in reporting the location of the wound considering the circumstances surrounding the incident. Inconsistencies and discrepancies in the testimony of a witness on minor details only serve to strenthen the credibility of the witness.[3] What is material is that a witness positively identified the two (2) accused as the perpetrators of the crime. This Court has ruled often enough that discrepancies in minor details indicate veracity rather than prevarication. They tend to bolster the probative value of the testimony being questioned. They enhance, rather than destroy, the witness credibility and the truthfulness of his testimony as they erase any suspicion of being a rehearsed testimony.[4]

Contrary to accused-appellants assertion, the prosecution has more than overcome his presumed innocence; it has satisfactorily established his guilt beyond reasonable doubt. Plainly, his alibi could not be given any weight at all in view of his positive identification by the prosecutions eyewitness. No ill-motive was imputed to Ernesto Boteja that would so move him to falsely testify against accused-appellant. The trial court properly assessed his testimony as credible and trustworthy. We find no reason not to affirm its findings.

Weak as it was, accused-appellants alibi became all the more ineffectual when he failed to demonstrate that it was physically impossible for him to be at the crime scene at the time it was committed. He testified being in Passi, Iloilo, during the stabbing incident. Passi, Iloilo is only fifty (50) kilometers from Cabatuan, Iloilo, the place where the crime was committed. He did not offer any evidence to prove impossibility of access between the two (2) places when the crime transpired.[5] Significantly, the defense even failed to fully establish the presence of accused-appellant in Passi on the night of 13 May 1995.

This Court agrees with the court below that treachery attended the commission of the crime. The evidence amply proves that Romeo Boteja Jr. was killed in a manner ensuring suddenness and surprise that virtually incapacitated the victim from offering any resistance or defense. The victim did not have any inkling of the lurking danger to his life. He might have felt at ease with Jesus and Arnulfo for he had been drinking with them since 6:00 oclock that evening of 13 May 1995 until he was stabbed to death. The attack was so sudden and unexpected that the victim failed to offer any resistance at all. All he could do was to struggle faintly against his attackers.

On the other hand, this court notes that the trial court failed to award damages for loss of earning capacity despite the testimony of Leticia Boteja to this effect. In People v. Dizon[6] this Court discussed the requisites for such award-

As a rule, documentary evidence should be presented to substantiate the claim for loss of earning capacity. In People v. Verde, the non-presentation of evidence to support the claim for damages for loss of earning capacity did not prevent this Court from awarding said damages. The testimony of the victims wife as to earning capacity of her murdered husband, who was then 48 years old and was earning P200.00 a day as a tricycle driver, sufficed to establish the basis for such an award.

In this case, Erwin Gesmundo was only 15 years old at the time of his death and was earning a daily wage of P100.00 as a construction worker. As in People v. Verde, this Court is inclined to grant the claim for damages for loss of earning capacity despite the absence of documentary evidence. To be able to claim damages for loss of earning capacity despite the nonavailability of documentary evidence, there must be oral testimony that: (a) the victim was self-employed earning less than the minimum wage under the current labor laws and judicial notice was taken of the fact that in the victims line of work, no documentary evidence is available; (b) the victim was employed as a daily wage worker earning less than the minimum wage under current labor laws x x x

In the instant case, the victim was nineteen (19) years old at the time of his death and earning P1,600.00 monthly as a farm laborer. Thus, his heirs are entitled to receive an award for lost earnings in accordance with the following formula: 2/3 (80 ATD [age at time of death]) x (GAI [gross annual income]) 80% GAI.[7] Thus

2/3 (80 19) x (P1,600 x 12) - 80% (P1,600.00 x 12)

2/3 (61) x P19,200 - 80% (P19,200)

40.67 x [P19,200 - P15,360]

40.67 x P3,840 = P156,172.80

On the basis of the above computation, the heirs of the deceased Romeo Boteja Jr. are entitled to receive P156,172.80 from accused-appellant Jesus Muyco.

WHEREFORE, the Decision appealed from the finding accused-appellant JESUS MUYCO guilty of murder aggravated by treachery and sentencing him to reclusion perpetua, and to pay the heirs of Romeo Boteja Jr. P27,000.00 for funeral expenses is AFFIRMED with the MODIFICATION that the death indemnity is increased to P50,000.00. Accused-appellant is further directed to pay the heirs of his victim the amount of P156,172.80 for lost earnings conformably with prevailing jurisprudence. Costs against accused-appellant.

SO ORDERED.

[G.R. No. 159636. November 25, 2004]

VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO P. GAMMAD and DIANA FRANCES P. GAMMAD, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

Assailed in this petition for review on certiorari is the April 11, 2003 decision[1] of the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with modification the November 6, 1998 decision[2] of the Regional Trial Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of carriage in Civil Case No. 5023.

The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace Pagulayan-Gammad,[3] was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries to other passengers.[4]

On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for damages arising from culpa contractual against petitioner. In its answer,[6] the petitioner claimed that the incident was purely accidental and that it has always exercised extraordinary diligence in its 50 years of operation.

After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For failure to appear on the said date, petitioner was declared as in default.[9] However, on petitioners motion[10] to lift the order of default, the same was granted by the trial court.[11]

At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for their part, did not accept petitioners proposal to pay P50,000.00.[12]

After respondent Rosalito Gammad completed his direct testimony, cross-examination was scheduled for November 17, 1997[13] but moved to December 8, 1997,[14] because the parties and the counsel failed to appear. On December 8, 1997, counsel of petitioner was absent despite due notice and was deemed to have waived right to cross-examine respondent Rosalito.[15]

Petitioners motion to reset the presentation of its evidence to March 25, 1998[16] was granted. However, on March 24, 1998, the counsel of petitioner sent the court a telegram[17] requesting postponement but the telegram was received by the trial court on March 25, 1998, after it had issued an order considering the case submitted for decision for failure of petitioner and counsel to appear.[18]

On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of which reads:

WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in favor of the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter to pay the following:

1. Actual Damages -------------------- P 122,000.00

2. Death Indemnity --------------------- 50,000.00

3. Exemplary and Moral Damages----- 400,000.00

4. Compensatory Damages ---------- 1,500,000.00

5. Attorneys Fees ------------ 10% of the total amount granted

6. Cost of the Suit.

SO ORDERED.[19]

On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as follows:

[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are hereby adjudged in favor of plaintiffs-appellees:

1. Actual Damages in the amount of P88,270.00;

2. Compensatory Damages in the amount of P1,135,536,10;

3. Moral and Exemplary Damages in the amount of P400,000.00; and

4. Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral, and exemplary damages herein adjudged.

The court a quos judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED.

SO ORDERED.[20]

Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration praying that the case be remanded to the trial court for cross- examination of respondents witness and for the presentation of its evidence; or in the alternative, dismiss the respondents complaint.[21] Invoking APEX Mining, Inc. v. Court of Appeals,[22] petitioner argues, inter alia, that the decision of the trial court should be set aside because the negligence of its former counsel, Atty. Antonio B. Paguirigan, in failing to appear at the scheduled hearings and move for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents witness and right to present evidence, deprived petitioner of its day in court.

On August 21, 2003, the Court of Appeals denied petitioners motion for reconsideration.[23]

Hence, this petition for review principally based on the fact that the mistake or gross negligence of its counsel deprived petitioner of due process of law. Petitioner also argues that the trial courts award of damages were without basis and should be deleted.

The issues for resolution are: (1) whether petitioners counsel was guilty of gross negligence; (2) whether petitioner should be held liable for breach of contract of carriage; and (3) whether the award of damages was proper.

It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed by a counsel within the scope of his general or implied authority is regarded as an act of his client. Consequently, the mistake or negligence of counsel may result in the rendition of an unfavorable judgment against the client. However, the application of the general rule to a given case should be looked into and adopted according to the surrounding circumstances obtaining. Thus, exceptions to the foregoing have been recognized by the court in cases where reckless or gross negligence of counsel deprives the client of due process of law, or when its application will result in outright deprivation of the clients liberty or property or where the interests of justice so require, and accord relief to the client who suffered by reason of the lawyers gross or palpable mistake or negligence.[24]

The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan successfully moved for the setting aside of the order of default. In fact, petitioner was represented by Atty. Paguirigan at the pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to file motions for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents witness and to present evidence, he nevertheless, filed a timely appeal with the Court of Appeals assailing the decision of the trial court. Hence, petitioners claim that it was denied due process lacks basis.

Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default for not appearing at the pre-trial, three notices (dated October 23, 1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring attendance at the pre-trial were sent and duly received by petitioner. However, it was only on April 27, 1997, after the issuance of the April 10, 1997 order of default for failure to appear at the pre-trial when petitioner, through its finance and administrative manager, executed a special power of attorney[28] authorizing Atty. Paguirigan or any member of his law firm to represent petitioner at the pre-trial. Petitioner is guilty, at the least, of contributory negligence and fault cannot be imputed solely on previous counsel.

The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar. In APEX, the negligent counsel not only allowed the adverse decision against his client to become final and executory, but deliberately misrepresented in the progress report that the case was still pending with the Court of Appeals when the same was dismissed 16 months ago.[29] These circumstances are absent in this case because Atty. Paguirigan timely filed an appeal from the decision of the trial court with the Court of Appeals.

In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with the issue of whether or not the client should bear the adverse consequences of its counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer failed to appear at the pre-trial despite notice and was declared as in default. After the plaintiffs presentation of evidence ex parte, the trial court rendered decision ordering Gold Line to pay damages to the heirs of its deceased passenger. The decision became final and executory because counsel of Gold Line did not file any appeal. Finding that Goldline was not denied due process of law and is thus bound by the negligence of its lawyer, the Court held as follows

This leads us to the question of whether the negligence of counsel was so gross and reckless that petitioner was deprived of its right to due process of law. We do not believe so. It cannot be denied that the requirements of due process were observed in the instant case. Petitioner was never deprived of its day in court, as in fact it was afforded every opportunity to be heard. Thus, it is of record that notices were sent to petitioner and that its counsel was able to file a motion to dismiss the complaint, an answer to the complaint, and even a pre-trial brief. What was irretrievably lost by petitioner was its opportunity to participate in the trial of the case and to adduce evidence in its behalf because of negligence.

In the application of the principle of due process, what is sought to be safeguarded against is not the lack of previous notice but the denial of the opportunity to be heard. The question is not whether petitioner succeeded in defending its rights and interests, but simply, whether it had the opportunity to present its side of the controversy. Verily, as petitioner retained the services of counsel of its choice, it should, as far as this suit is concerned, bear the consequences of its choice of a faulty option. Its plea that it was deprived of due process echoes on hollow ground and certainly cannot elicit approval nor sympathy.

To cater to petitioners arguments and reinstate its petition for relief from judgment would put a premium on the negligence of its former counsel and encourage the non-termination of this case by reason thereof. This is one case where petitioner has to bear the adverse consequences of its counsels act, for a client is bound by the action of his counsel in the conduct of a case and he cannot thereafter be heard to complain that the result might have been different had his counsel proceeded differently. The rationale for the rule is easily discernible. If the negligence of counsel be admitted as a reason for opening cases, there would never be an end to a suit so long as a new counsel could be hired every time it is shown that the prior counsel had not been sufficiently diligent, experienced or learned.[31]

Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation employee charged with dishonesty was not able to file an answer and position paper. He was found guilty solely on the basis of complainants evidence and was dismissed with forfeiture of all benefits and disqualification from government service. Challenging the decision of the Ombudsman, the employee contended that the gross negligence of his counsel deprived him of due process of law. In debunking his contention, the Court said

Neither can he claim that he is not bound by his lawyers actions; it is only in case of gross or palpable negligence of counsel when the courts can step in and accord relief to a client who would have suffered thereby. If every perceived mistake, failure of diligence, lack of experience or insufficient legal knowledge of the lawyer would be admitted as a reason for the reopening of a case, there would be no end to controversy. Fundamental to our judicial system is the principle that every litigation must come to an end. It would be a clear mockery if it were otherwise. Access to the courts is guaranteed, but there must be a limit to it.

Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it was denied due process of law due to negligence of its counsel would set a dangerous precedent. It would enable every party to render inutile any adverse order or decision through the simple expedient of alleging gross negligence on the part of its counsel. The Court will not countenance such a farce which contradicts long-settled doctrines of trial and procedure.[33]

Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard to all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.[34]

In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie Graces death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner was guilty of breach of contract of carriage.

Nevertheless, the award of damages should be modified.

Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages.

In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace which under current jurisprudence is fixed at P50,000.00.[37]

The award of compensatory damages for the loss of the deceaseds earning capacity should be deleted for lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceaseds 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.[38]

In People v. Oco,[39] the evidence presented by the prosecution to recover damages for loss of earning capacity was the bare testimony of the deceaseds wife that her husband was earning P8,000.00 monthly as a legal researcher of a private corporation. Finding that the deceased was neither self-employed nor employed as a daily-wage worker earning less than the minimum wage under the labor laws existing at the time of his death, the Court held that testimonial evidence alone is insufficient to justify an award for loss of earning capacity.

Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not awarded because the circumstances of the 3 deceased did not fall within the recognized exceptions, and except for the testimony of their wives, no documentary proof about their income was presented by the prosecution. Thus

The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr. were not self-employed or employed as daily-wage workers earning less than the minimum wage under the labor laws existing at the time of their death. Placido Agustin was a Social Security System employee who received a monthly salary of P5,000. Roberto Raagas was the President of Sinclair Security and Allied Services, a family owned corporation, with a monthly compensation of P30,000. Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning of P500 or a monthly earning of P7,500. Clearly, these cases do not fall under the exceptions where indemnity for loss of earning capacity can be given despite lack of documentary evidence. Therefore, for lack of documentary proof, no indemnity for loss of earning capacity can be given in these cases. (Emphasis supplied)

Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss of earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years of age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of P83,088.00 per annum when she died.[41] No other evidence was presented. The award is clearly erroneous because the deceaseds earnings does not fall within the exceptions.

However, the fact of loss having been established, temperate damages in the amount of P500,000.00 should be awarded to respondents. Under Article 2224 of the Civil Code, temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.

In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of P200,000.00 as temperate damages in lieu of actual damages for loss of earning capacity because the income of the victim was not sufficiently proven, thus

The trial court based the amounts of damages awarded to the petitioner on the following circumstances:

As to the loss or impairment of earning capacity, there is no doubt that Pleno is an ent[re]preneur and the founder of his own corporation, the Mayon Ceramics Corporation. It appears also that he is an industrious and resourceful person with several projects in line, and were it not for the incident, might have pushed them through. On the day of the incident, Pleno was driving homeward with geologist Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His actual income however has not been sufficiently established so that this Court cannot award actual damages, but, an award of temperate or moderate damages may still be made on loss or impairment of earning capacity. That Pleno sustained a permanent deformity due to a shortened left leg and that he also suffers from double vision in his left eye is also established. Because of this, he suffers from some inferiority complex and is no longer active in business as well as in social life. In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were given.

We rule that the lower courts awards of damages are more consonant with the factual circumstances of the instant case. The trial courts findings of facts are clear and well-developed. Each item of damages is adequately supported by evidence on record.

Article 2224 of the Civil Code was likewise applied in the recent cases of People v. Singh[43] and People v. Almedilla,[44] to justify the award of temperate damages in lieu of damages for loss of earning capacity which was not substantiated by the required documentary proof.

Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are based on different jural foundations.[45] These damages are different in nature and require separate determination.[46] In culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of contractual obligations and, as in this case, when the act of breach of contract itself constitutes the tort that results in physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage.[47] On the other hand, exemplary damages, which are awarded by way of example or correction for the public good may be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.[48]

Respondents in the instant case should be awarded moral damages to compensate for the grief caused by the death of the deceased resulting from the petitioners breach of contract of carriage. Furthermore, the petitioner failed to prove that it exercised the extraordinary diligence required for common carriers, it is presumed to have acted recklessly.[49] Thus, the award of exemplary damages is proper. Under the circumstances, we find it reasonable to award respondents the amount of P100,000.00 as moral damages and P100,000.00 as exemplary damages. These amounts are not excessive.[50]

The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced. In People v. Duban,[51] it was held that only substantiated and proven expenses or those that appear to have been genuinely incurred in connection with the death, wake or burial of the victim will be recognized. A list of expenses (Exhibit J),[52] and the contract/receipt for the construction of the tomb (Exhibit F)[53] in this case, cannot be considered competent proof and cannot replace the official receipts necessary to justify the award. Hence, actual damages should be further reduced to P78,160.00,[54] which was the amount supported by official receipts.

Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be recovered in the case at bar where exemplary damages are awarded. The Court finds the award of attorneys fees equivalent to 10% of the total amount adjudged against petitioner reasonable.

Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (Emphasis supplied).

In the instant case, petitioner should be held liable for payment of interest as damages for breach of contract of carriage. Considering that the amounts payable by petitioner has been determined with certainty only in the instant petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, per paragraph 3 of the aforecited rule.[57]

WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The April 11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees; and the costs of suit.

Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum computed from the finality of this decision until fully paid.

B.4. ATTORNEYS FEES AND INTERESTArt. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(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. 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. (1108)Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. (1109a)

G.R. No. 73886 January 31, 1989

JOHN C. QUIRANTE and DANTE CRUZ,petitioners,vs.THE HONORABLE INTERMEDIATE APPELLATE COURT, MANUEL C. CASASOLA, and ESTRELLITA C. CASASOLA,respondents.REGALADO,J.:This appeal bycertiorariseeks to set aside the judgment'1of the former Intermediate Appellate Court promulgated on November 6, 1985 in AC-G.R. No. SP-03640,2which found the petition forcertioraritherein meritorious, thus:

Firstly, there is still pending in the Supreme Court a petition whichmay or may notultimately result in the granting to the Isasola (sic) family of the total amount of damages given by the respondent Judge. Hence the award of damages confirmed in the two assailed Orders may bepremature. Secondly, assuming that the grant of damages to the family is eventually ratified, the alleged confirmation of attorney's fees will not and should not adversely affect thenon-signatoriesthereto.

WHEREFORE, in view of the grave abuse of discretion (amounting to lack of jurisdiction) committed by the respondent Judge, We hereby SET ASIDE his questioned orders of March 20, 1984 and May 25, 1984. The restraining order previously issued is made permanent.3The challenged decision of respondent court succinctly sets out the factual origin of this case as follows:

... Dr. Indalecio Casasola (father of respondents) had a contract with a building contractor named Norman GUERRERO. The Philippine American General Insurance Co. Inc. (PHILAMGEN, for short) acted as bondsman for GUERRERO. In view of GUERRERO'S failure to perform his part of the contract within the period specified, Dr. Indalecio Casasola, thru his counsel, Atty. John Quirante, sued both GUERRERO and PHILAMGEN before the Court of first Instance of Manila, now the Regional Trial Court (RTC) of Manila for damages, with PHILAMGEN filing a cross-claim against GUERRERO for indemnification. The RTC rendered a decision dated October 16, 1981. ...4In said decision, the trial court ruled in favor of the plaintiff by rescinding the contract; ordering GUERRERO and PHILAMGEN to pay the plaintiff actual damages in the amount of P129,430.00, moral damages in the amount of P50,000.00, exemplary damages in the amount of P40,000.00 and attorney's fees in the amount of P30,000.00; ordering Guerrero alone to pay liquidated damages of P300.00 a day from December 15, 1978 to July 16, 1979; and ordering PHILAMGEN to pay the plaintiff the amount of the surety bond equivalent to P120,000.00.5A motion for reconsideration filed by PHILAMGEN was denied by the trial court on November 4, 1982.6Not satisfied with the decision of the trial court, PHILAMGEN filed a notice of appeal but the same was not given due course because it was allegedly filed out of time. The trial court thereafter issued a writ of execution.7A petition was filed in AC-G.R. No. 00202 with the Intermediate Appellate Court for the quashal of the writ of execution and to compel the trial court to give due course to the appeal. The petition was dismissed on May 4, 19838so the case was elevated to this Court in G.R. No. 64334.9In the meantime, on November 16, 1981, Dr. Casasola died leaving his widow and several children as survivors.10On June 18, 1983, herein petitioner Quirante filed a motion in the trial court for the confirmation of his attorney's fees. According to him, there was an oral agreement between him and the late Dr. Casasola with regard to his attorney's fees, which agreement was allegedly confirmed in writing by the widow, Asuncion Vda. de Casasola, and the two daughters of the deceased, namely Mely C. Garcia and Virginia C. Nazareno. Petitioner avers that pursuant to said agreement, the attorney's fees would be computed as follows:

A. In case of recovery of the P120,000.00 surety bond, the attorney's fees of the undersigned counsel (Atty. Quirante) shall be P30,000.00.

B. In case the Honorable Court awards damages in excess of the P120,000.00 bond, it shall be divided equally between the Heirs of I. Casasola, Atty. John C. Quirante and Atty. Dante Cruz.

The trial court granted the motion for confirmation in an order dated March 20, 1984, despite an opposition thereto. It also denied the motion for reconsideration of the order of confirmation in its second order dated May 25, 1984.11These are the two orders which are assailed in this case.

Well settled is the rule that counsel's claim for attorney's fees may be asserted either in the very action in which the services in question have been rendered, or in a separate action. If the first alternative is chosen, the Court may pass upon said claim, even if its amount were less than the minimum prescribed by law for the jurisdiction of said court, upon the theory that the right to recover attorney's fees is but an incident of the case in which the services of counsel have been rendered ."12It also rests on the assumption that the court trying the case is to a certain degree already familiar with the nature and extent of the lawyer's services. The rule against multiplicity of suits will in effect be subserved.13What is being claimed here as attorney's fees by petitioners is, however, different from attorney's fees as an item of damages provided for under Article 2208 of the Civil Code, wherein the award is made in favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who may enforce the judgment for attorney's fees by execution.14Here, the petitioner's claims are based on an alleged contract for professional services, with them as the creditors and the private respondents as the debtors.

In filing the motion for confirmation of attorney's fees, petitioners chose to assert their claims in the same action. This is also a proper remedy under our jurisprudence. Nevertheless, we agree with the respondent court that the confirmation of attorney's fees is premature. As it correctly pointed out, the petition for review oncertiorarifiled by PHILAMGEN in this Court (G.R. No. 64834) "may or may not ultimately result in the granting to the Isasola (sic) family of the total amount of damages" awarded by the trial court. This especially true in the light of subsequent developments in G.R. No. 64334. In a decision promulgated on May 21, 1987, the Court rendered judgment setting aside the decision of May 4, 1983 of the Intermediate Appellate Court in AC-G.R. No. 00202 and ordering the respondent Regional Trial Court of Manila to certify the appeal of PHILAMGEN from said trial court's decision in Civil Case No. 122920 to the Court of Appeal. Said decision of the Court became final and executory on June 25, 1987.

Since the main case from which the petitioner's claims for their fees may arise has not yet become final, the determination of the propriety of said fees and the amount thereof should be held in abeyance. This procedure gains added validity in the light of the rule that the remedy for recovering attorney's fees as an incident of the main action may be availed of only when something is due to the client. Thus, it was ruled that:

... an attorney's fee cannot be determined until after the main litigation has been decided and the subject of recovery is at the disposition of the court. The issue over attorney's fee only arises when something has been recovered from which the fee is to be paid.15It is further observed that the supposed contract alleged by petitioners as the basis for their fees provides that the recovery of the amounts claimed is subject to certain contingencies. It is subject to the condition that the fee shall be P30,000.00 in case of recovery of the P120,000.00 surety bond, plus an additional amount in case the award is in excess of said P120,000.00 bond, on the sharing basis hereinbefore stated.

With regard to the effect of the alleged confirmation of the attorney's fees by some of the heirs of the deceased. We are of the considered view that the orderly administration of justice dictates that such issue be likewise determined by the courta quoinasmuch as it also necessarily involves the same contingencies in determining the propriety and assessing the extent of recovery of attorney's fees by both petitioners herein. The court below will be in a better position, after the entire case shall have been adjudicated, inclusive of any liability of PHILAMGEN and the respective participations of the heirs of Dr. Casasola in the award, to determine with evidentiary support such matters like the basis for the entitlement in the fees of petitioner Dante Cruz and as to whether the agreement allegedly entered into with the late Dr. Casasola would be binding on all his heirs, as contended by petitioner Quirante.

We, therefore, take exception to and reject that portion of the decision of the respondent court which holds that the alleged confirmation to attorney's fees should not adversely affect the non-signatories thereto, since it is also premised on the eventual grant of damages to the Casasola family, hence the same objection of prematurity obtains and such a holding may be pre-emptive of factual and evidentiary matters that may be presented for consideration by the trial court.

WHEREFORE, with the foregoing observation, the decision of the respondent court subject of the present recourse is hereby AFFIRMED.

SO ORDERED.

[G.R. No. 107508. April 25, 1996]

PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF COMMUNICATIONS, and F. ABANTE MARKETING, respondents.

SYLLABUS

1. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; MATERIAL ALTERATION, DEFINED, - An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law.

2. ID.; ID.; IMMATERIAL ALTERATION; EFFECT ON THE INSTRUMENT. - In his book entitled Pandect of Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that an innocent alteration (generally, changes on items other than those required to be stated under Sec. 1, N. I. L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it only according to its original tenor.

3. ID.; ID.; ID.; PRESENT IN CASE AT BAR. The case at bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instrument Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. The checks serial number is not the sole indication of its origin. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The checks issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number was altered, the same being an immaterial or innocent one.

4. CIVIL LAW; DAMAGES; ATTORNEYS FEES; AWARD THEREOF DEMANDS FACTUAL, LEGAL AND EQUITABLE JUSTIFICATION. The award of attorneys fees lies within the discretion of the court and depends upon the circumstances of each case. However, the discretion of the court to award attorneys fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable justification, without which the award is a conclusion without a premise and improperly left to speculation and conjecture. It becomes a violation of the proscription against the imposition of a penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188 SCRA 170 [1990]). The reason for the award must be stated in the text of the courts decision. If it is stated only in the dispositive portion of the decision, the same shall be disallowed. As to the award of attorneys fees being an exception rather than the rule, it is necessary for the court to make findings of fact and law that would bring the case within the exception and justify the grant of the award (Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539).

APPEARANCES OF COUNSEL

Monsod Tamargo Valencia & Associates for private respondent Capitol City Development Bank.

Siguion Reyna Montecillo & Ongsiako for private respondent Philippine Bank of Communications.

D E C I S I O N

KAPUNAN, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision dated April 29, 1992 of respondent Court of Appeals in CA-G.R. CV No. 24776 and its resolution dated September 16, 1992, denying petitioner Philippine National Banks motion for reconsideration of said decision.

The facts of the case are as follows:

A check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of P97,650.00 was issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports [DECS]) payable to F. Abante Marketing. This check was drawn against Philippine National Bank (herein petitioner).

On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol), deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the check to petitioner for clearing.

Petitioner cleared the check as good and, thereafter, PBCom credited Capitols account for the amount stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom and debited PBComs account for the amount covered by the check, the reason being that there was a material alteration of the check number.

PBCom, as collecting agent of Capitol, then proceeded to debit the latters account for the same amount, and subsequently, sent the check back to petitioner. Petitioner, however, returned the check to PBCom.

On the other hand, Capitol could not, in turn, debit F. Abante Marketings account since the latter had already withdrawn the amount of the check as of October 15, 1981. Capitol sought clarification from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an explanation and re-crediting from petitioner.

Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of Manila against PBCom which, in turn, filed a third-party complaint against petitioner for reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourth-party complaint against F. Abante Marketing.

On October 3, 1989; the Regional Trial Court rendered its decision the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1.) On plaintiffs complaint, defendant Philippine Bank of Communications is ordered to re-credit or reimburse plaintiff Capitol City Development Bank the amount of P97,650.00, plus interest of 12 percent thereto from October 19, 1981 until the amount is fully paid;

2.) On Philippine Bank of Communications third-party complaint, third-party defendant PNB is ordered to reimburse and indemnify Philippine Bank of Communications for whatever amount PBCom pays to plaintiff;

3.) On Philippine National Banks fourth-party complaint, F. Abante Marketing is ordered to reimburse and indemnify PNB for whatever amount PNB pays to PBCom;

4.) On attorneys fees, Philippine Bank of Communications is ordered to pay Capitol City Development Bank attorneys fees in the amount of Ten Thousand (P 10,000.00) Pesos; but PBCom is entitled to reimbursement/indemnity from PNB; and Philippine National Bank to be, in turn, reimbursed or indemnified by F. Abante Marketing for the same amount;

5.) The Counterclaims of PBCom and PNB are hereby dismissed;

6.) No pronouncement as to costs.

SO ORDERED.[1]

An appeal was interposed before the respondent Court of Appeals which rendered its decision on April 29, 1992, the decretal portion of which reads:

WHEREFORE, the judgment appealed from is modified by exempting PBCom from liability to plaintiff-appellee for attorneys fees and ordering PNB to honor the check for P97,650.00, with interest as declared by the trial court, and pay plaintiff-appellee attorneys fees of P10,000.00. After the check shall have been honored by PNB, PBCom shall re-credit plaintiff-appellees account with it with the amount. No pronouncement as to costs.

SO ORDERED.[2]

A motion for reconsideration of the decision was denied by the respondent Court in its resolution dated September 16, 1992 for lack of merit.[3]

Hence, petitioner filed the instant petition which raises the following issues:

I

WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS A MATERIAL ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW.

II

WHETHER OR NOT A CERTIFICATION HEREIN ISSUED BY THE MINISTRY OF EDUCATION CAN BE GIVEN WEIGHT IN EVIDENCE.

III

WHETHER OR NOT A DRAWEE BANK WHO FAILED TO RETURN A CHECK WITHIN THE TWENTY FOUR (24) HOUR CLEARING PERIOD MAY RECOVER THE VALUE OF THE CHECK FROM THE COLLECTING BANK.

IV

WHETHER OR NOT IN THE ABSENCE OF MALICE OR ILL WILL PETITIONER PNB MAY BE HELD LIABLE FOR ATTORNEYS FEES.[4]

We find no merit in the petition.

We shall first deal with the effect of the alteration of the serial number on the negotiability of the check in question.

Petitioner anchors its position on Section 125 of the Negotiable Instrument Law (ACT No. 2031)[5] which provides:

Section 125. What constitutes a material alteration. - Any alteration which changes:

(a) The date;

(b) The sum payable, either for principal or interest;

(c) The time or place of payment;

(d) The number or the relations of the parties;

(e) The medium or currency in which payment is to be made;

(f) Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.

Petitioner alleges that there is no hard and fast rule in the interpretation of the aforequoted provision of the Negotiable Instruments Law. It maintains that under Section 125(f), any change that alters the effect of the instrument is a material alteration.[6]

We do not agree.

An alteration is said to be material if it alters the effect of the instrument.[7] It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.[8] In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instrument Law.

Section 1 of the Negotiable Instruments Law provides:

Section 1. - Form of negotiable instruments. An instrument to be negotiable must conform to the following requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

In his book entitled Pandect of Commercial Law and Jurisprudence, Justice Jose C. Vitug opines that an innocent alteration (generally, changes on items other than those required to be stated under Sec. 1, N.I.L.) and spoliation (alterations done by a stranger) will not avoid the instrument, but the holder may enforce it only according to its original tenor.[9]Reproduced hereunder are some examples of material and immaterial alterations:

A. Material Alterations:

(1) Substituting the words or bearer for order.

(2) Writing protest waived above blank indorsements.

(3) A change in the date from which interest is to run.

(4) A check was originally drawn as follows: Iron County Bank, Crystal Falls, Mich. Aug. 5, 1901. Pay to G.L. or order $9 fifty cents CTR. The insertion of the figure 5 before the figure 9, the instrument being otherwise unchanged.

(5) Adding the words with interest with or without a fixed rate.

(6) An alteration in the maturity of a note, whether the time for payment is thereby curtailed or extended.

(7) An instrument was payable First Natl Bank, the plaintiff added the word Marion.

(8) Plaintiff, without consent of the defendant, struck out the name of the defendant as payee and inserted the name of the maker of the original note.

(9) Striking out the name of the payee and substituting that of the person who actually discounted the note.

(10) Substituting the address of the maker for the name of a co-maker.[10]

B. Immaterial Alterations:

(1) Changing I promise to pay to We promise to pay, where there are two makers.

(2) Adding the word annual after the interest clause.

(3) Adding the date of maturity as a marginal notation.

(4) Filling in the date of the actual delivery where the makers of a note gave it with the date in blank, July . . .

(5) An alteration of the marginal figures of a note where the sum stated in words in the body remained unchanged.

(6) The insertion of the legal rate of interest where the note had a provision for interest at . . . per cent.

(7) A printed form of promissory note had on the margin the printed words, Extended to . . . The holder on or after maturity wrote in the blank space the words May 1, 1913, as a reference memorandum of a promise made by him to the principal maker at the time the words were written to extend the time of payment.

(8) Where there was a blank for the place of payment, filling in the blank with the place desired.

(9) Adding to an indorsees name the abbreviation Cash when it had been agreed that the draft should be discounted by the trust company of which the indorsee was cashier.

(10) The indorsement of a note by a stranger after its delivery to the payee at the time the note was negotiated to the plaintiff.

(11) An extension of time given by the holder of a note to the principal maker, without the consent of the a surety co-maker.[11]

The case at the bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. Despite these findings, however, petitioner insists, that:

xxx xxx xxx.

It is an accepted concept, besides being a negotiable instrument itself, that a TCAA check by its very nature is the medium of exchange of governments (sic) instrumentalities or agencies. And as (a) safety measure, every government office o(r) agency (is) assigned TCAA checks bearing different number series.

A concrete example is that of the disbursements of the Ministry of Education and Culture. It is issued by the Bureau of Treasury sizeable bundles of checks in booklet form with serial numbers different from other government office or agency. Now, for fictitious payee to succeed in its malicious intentions to defraud the government, all it need do is to get hold of a TCAA Check and have the serial numbers of portion (sic) thereof changed or altered to make it appear that the same was issued by the MEC.

Otherwise, stated, it is through the serial numbers that (a) TCAA Check is determined to have been issued by a particular office or agency of the government.[12]

xxx xxx xxx

Petitioners arguments fail to convince. The checks serial number is not the sole indication of its origin. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The checks issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. Thus, we quote with favor the findings of the respondent court:

xxx xxx xxx

If the purpose of the serial number is merely to identify the issuing government office or agency, its alteration in this case had no material effect whatsoever on the integrity of the check. The identity of the issuing government office or agency was not changed thereby and the amount of the check was not charged against the account of another government office or agency which had no liability under the check. The owner and issuer of the check is boldly and clearly printed on its face, second line from the top: MiNiSTRY OF EDUCATiON AND CULTURE, and below the name of the payee are the rubber-stamped words: Ministry of Educ. & Culture. These words are not alleged to have been falsely or fraudulently intercalated into the check. The ownership of the check is established without the necessity of recourse to the serial number. Neither is there any proof that the amount of the check was erroneously charged against the account of a government office or agency other than the Ministry of Education and Culture. Hence, the alteration in the number of the check did not affect or change the liability of the Ministry of Education and Culture under the check and, therefore, is immaterial. The genuineness of the amount and the signatures therein of then Deputy Minister of Education Hermenegildo C. Dumlao and of the resident Auditor, Penomio C. Alvarez are not challenged. Neither is the authenticity of the different codes appearing therein questioned x x x.[13] (Italics ours.)

Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number was altered, the same being an immaterial or innocent one.

We now go to the second issue. It is petitioners submission that the certification issued by Minrado C. Batonghinog, Cashier III of the MEC clearly shows that the check was altered. Said certification reads:

July 22, 1985

TO WHOM IT MAY CONCERN:

This is to certify that according to the records of this Office, TCAA PNB Check No. SN7-3666223-3 dated August 7, 1981 drawn in favor of F. Abante Marketing in the amount of NINETY (S)EVEN THOUSAND SIX HUNDRED FIFTY PESOS ONLY (P97,650.00) was not issued by this Office nor released to the payee concerned. The series number of said check was not included among those requisition by this Office from the Bureau of Treasury

Very truly yours,

(SGD.) MINRADO C. BATONGHINOG Cashier III.[14]

Petitioner claims that even if the author of the certification issued by the Ministry of Education and Culture (MEC) was not presented, still the best evidence of the material alteration would be the disputed check itself and the serial number thereon. Petitioner thus assails the refusal of respondent court to give weight to the certification because the author thereof was not presented to identify it and to be cross-examined thereon.[15]

We agree with the respondent court.

The one who signed the certification was not presented before the trial court to prove that the said document was really the document he prepared and that the signature below the said document is his own signature. Neither did petitioner present an eyewitness to the execution of the questioned document who could possibly identify it.[16] Absent this proof, we cannot rule on the authenticity of the contents of the certification. Moreover, as we previously emphasized, there was no material alteration on the check, the change of its serial number not being substantial to its negotiability.

Anent the third issue - whether or not the drawee bank may still recover the value of the check from the collecting bank even if it failed to return the check within the twenty-four (24) hour clearing period because the check was tampered - suffice it to state that since there is no material alteration in the check, petitioner has no right to dishonor it and return it to PBCom, the same being in all respects negotiable.

However, the amount of P10,000.00 as attorneys fees is hereby deleted. In their respective decisions, the trial court and the Court of Appeals failed to explicitly state the rationale for the said award. The trial court merely ruled as follows:

With respect to Capitols claim for damages consisting of alleged loss of opportunity, this Court finds that Capitol failed to adequately substantiate its claim. What Capitol had presented was a self-serving, unsubstantiated and speculative computation of what it allegedly could have earned or realized were it not for the debit made by PBCom which was triggered by the return and debit made by PNB. However, this Court finds that it would be fair and reasonable to impose interest at 12% per annum on the principal amount of the check computed from October 19, 1981 (the date PBCom debited Capitols account) until the amount is fully paid and reasonable attorneys fees.[17] (Italics ours.)

And contrary to the Court of Appeals resolution, petitioner unambiguously questioned before it the award of attorneys fees, assigning the latter as one of the errors committed by the trial court.[18]

The foregoing is in conformity with the guiding principles laid down in a long line of cases and reiterated recently in Consolidated Bank & Trust Corporation (Solidbank) v. Court of Appeals:[19]

The award of attorneys fees lies within the discretion of the court and depends upon the circumstances of each case. However, the discretion of the court to award attorneys fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable justification, without which the award is a conclusion without a premise and improperly left to speculation and conjecture. It becomes a violation of the proscription against the imposition of a penalty on the right to litigate (Universal Shipping Lines Inc. v. Intermediate Appellate Court, 188 SCRA 170 [1990]). The reason for the award must be stated in the text of the courts decision. If it is stated only in the dispositive portion of the decision, the same shall be disallowed. As to the award of attorneys fees being an exception rather than the rule, it is necessary for the court to make findings of fact and law that would bring the case within the exception and justify the grant of the award (Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539).

WHEREFORE, premises considered, except for the deletion of the award of attorneys fees, the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.C. EXTENT OF RECOVERABLE DAMAGES

C.1. IN CONTRACTS AND QUASI-CONTRACTS WHERE THERE IS:

C.1.A. GOOD FAITH ON THE OBLIGOR

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. (1107a)

G.R. No. L-45048 January 7, 1987

BATONG BUHAY GOLD MINES, INC.,petitioner,vs.THE COURT OF APPEALS and INC. MINING CORPORATION,respondents.PARAS,J.:This is a petition to review the decision dated August 27, 1976 of the Court of Appeals (CA) in CA-G.R. No. 51313-R which modified the decision of the then Court of First Instance (CFI) of Manila, Branch 11 in Civil Case No. 79183 Also sought for review are the resolutions of the aforenamed court dated October 21, 1976 and November 12, 1976 which denied petitioner's motion for reconsideration of the subject decision and petition and/or motion for new trial, respectively.

The dispositive portion of the CFI judgment reads:

WHEREFORE, the Court renders judgment enjoining the defendants to effect the transfer of the shares covered by Stock Certificate No. 16807 to and in the name of plaintiff INCORPORATED Mining Corporation, and the writ of preliminary mandatory injunction issued on March 16, 1970 is hereby declared permanent.

SO ORDERED.

Upon the other hand, the decretal portion of the CA decision states:

WHEREFORE, the judgment appealed from is hereby modified by adding the following to the dispositive portion thereof:

Ordering defendant Batong Buhay Gold Mines, Inc. to pay to the plaintiff the sum of P5,625.55, with interest at the legal rate from March 5, 1970 until full payment; and dismissing the complaint with respect to defendant Del Rosario and Company. Defendant Batong Buhay shall pay the costs.

IT IS SO ORDERED.

(pp. 67-68, Rollo)

The antecedent facts, as found by the Court of Appeals, are as follows:

The defendant Batong Buhay Gold Mines, Inc. issued Stock Certificate No. 16807 covering 62,495 shares with a par value of P0.01 per share to Francisco Aguac who was then legally married to Paula G. Aguac, but the said spouses had lived separately for more than fourteen (14) years prior to the said date. On December 16, 1969, Francisco Aguac sold his 62,495 shares covered by Stock Certificate No. 16807 for the sum of P9,374.70 in favor of the plaintiff, the said transaction being evidenced by a deed of sale (Exhibit D). The said sale was made by Francisco Aguac without the knowledge or consent of his wife Paula G. Aguac.

On the same date of the sale, December 16, 1969, Paula G. Aguac wrote a letter to the president of defendant Batong Buhay Gold Mines, Inc. asking that the transfer of the shares sold by her husband be withheld, inasmuch as the same constituted conjugal property and her share of proceeds of the sale was not given to her (Exhibit 1).

On January 5, 1970, under a covering letter dated December 26, 1969, plaintiff's counsel presented Stock Certificate No. 16807 duly endorsed by Francisco Aguac for registration and transfer of the said stock certificate in the name of the plaintiff (Exhibit F). The said letter was addressed to defendant Del Rosario and Company which was the transfer agent of Batong Buhay at that time. In a letter dated February 24, 1970 also addressed to Del Rosario and Company, plaintiff's counsel requested information as to the action taken on the transferof Stock Certificate No. 16807 in favor of the plaintiff, nothing about which having heard despite the lapse of over a month (Exhibit H). In a reply letter dated February 28, 1970, Del Rosario and Company informed plaintiff's counsel that Batong Buhay has referred the matter to their attorneys, inasmuch as there was a "technical problem that has developed in the transfer of stock," and further advised that the plaintiff communicate directly with Batong Buhay for further details (Exhibit 1).lwphl@itIt developed that when Batong Buhay was about to effect the cancellation of Stock Certificate No. 16807 and transfer the 62,495 shares covered thereby to the plaintiff and had, in fact, prepared new Stock Certificate No. 27650 dated January 5, 1970, it received the letter of Paula G. Aguac advising it to withhold the transfer of the subject shares of stock on the ground that the same are conjugal property.

On March 2, 1970 Francisco Aguac was charged in a criminal complaint Pasil Kalinga-Apayao, docketed as Criminal Case No. 10, entitled "People vs. Francisco Aguac, et al."

The defendants justify their refusal to transfer the shares of stock of Francisco Aguac in the name of the plaintiff in view of their apprehension that they might he held liable for damages under Article 173 of the Civil Code and the ruling of the Supreme Court inBucoy vs. Paulino,23 SCRA 248.

On March 5, 1970, in view of the defendant's inaction on the request for the transfer of the stock certificate in its name, the plaintiff commenced this action before the Court of First Instance of Manila, praying that the defendants be ordered to issue and release the transfer stock certificate covering 62,495 shares of defendant Batong Buhay, formerly registered in the name of Francisco Aguac, in favor of the plaintiff, and for the recovery of compensatory, exemplary and corrective damages and attorney's fees. A writ of preliminary mandatory injunction was prayed for to order the defendants to issue immediately the transfer certificate covering the aforesaid shares of stock of defendant Batong Buhay in the name of the plaintiff.

The trial court granted the prayer for the issuance of the writ of preliminary mandatory injunction in its order of March 16, 1970. In compliance therewith, Stock Certificate No. 16807 was cancelled and new Stock Certificate No. 27650 dated January 5, 1970 was issued to and received by the plaintiff on July 20, 1970."

On October 28, 1971, the trial court handed down its judgment ordering the defendant (herein petitioner) to effect the transfer of the shares covered by Stock Certificate No. 16807 in the name of herein respondent Incoporated Mining Corporation and declaring permanent the writ of preliminary mandatory injunction issued on March 16, 1970.

Private respondent seasonably appealed the aforesaid decision to the Court of Appeals anchored on the lower court's alleged failure to award damages for the wrongful refusal of petitioner to transfer the subject shares of stock and alleged failure to award attorney's fees, cost of injunction bond and expenses of litigation.

On August 27, 1986, respondent appellate court rendered the subject decision the dispositive portion of which has already been quoted hereinabove.Hence, this petition.

In assailing the decision of the Court of Appeals, petitioner poses the following issues:

1. May the Court of Appeals award damages by way of unrealized profits despite the absence of supporting evidence, or merely on the basis of pure assumption, speculation or conjecture; or can the respondent recover damages by way of unrealized profits when it has not shown that it was damaged in any manner by the act of petitioner?

2. May the appellate court deny the petitioner the chance to present evidence discovered after judgment which were not only very material to its case, but would also show the untenability and illegality of private respondent's position?

We answer the first issue in thenegative.

The petitioner alleges that the appellate court gravely and categorically erred in awarding damages by way of unrealized profit (orlucro cesante) to private respondent. Petitioner company also alleges that the claim for unrealized profit must be duly and sufficiently established, that is, that the claimant must submit proof that it was in fact damaged because of petitioner's act or omission.

The stipulation of facts of the parties does not at all show that private respondent intended to sell, or would sell or would have sold the stocks in question on specified dates. While it is true that shares of stock may go up or down in value (as in fact the concerned shares here really rose from fifteen (15) centavos to twenty three or twenty four (23/24) centavos per share and then fell to about two (2) centavos per share, still whatever profits could have been made are purely SPECULATIVE, for it was difficult to predict with any decree of certainty the rise and fall in the value of the shares. Thus this Court has ruled that speculative damages cannot be recovered.

It is easy to say now that had private respondent gained legal title to the shares, it could have sold the same and reaped a profit of P5,624.95 but it could not do so because of petitioner's refusal to transfer the stocks in the former's name at the time demand was made, but then it is also true that human nature, being what it is, private respondent's officials could also have refused to sell and instead wait for expected further increases in value.

In view of what has been said, We find no necessity to discuss the second issue.

WHEREFORE, the assailed decision and resolutions of the Court of Appeals are hereby SET ASIDE, and a new one is hereby rendered REINSTATING the decision of the trial court. No costs.

SO ORDERED.

C.1.B: BAD FAITH IN OBLIGOR

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. (1107a)

G.R. No. L-18487 August 31, 1964GENERAL ENTERPRISES, INC.,plaintiff-appellee,vs.LIANGA BAY LOGGING COMPANY, INC.,defendant-appellant.

William H. Quasha and Associates for plaintiff-appellee.Sabido and Sabido Law Office for defendant-appellant.BAUTISTA ANGELO,J.:On May 25, 1959, Lianga Bay Logging Company, Inc., a corporation duly organized under the laws of the Philippines, and General Enterprises, Inc, another corporation, entered into a contract, herein marked as Annex A, whereby the former, a producer of logs from a timber concession at Lianga, Surigao, designated the latter as distributor of a portion of its log production to Korea and Europe on condition that it would pay the distributor a commission of 13% of the gross f.o.b. value of the logs exported. In the agreement, the Lianga Bay Logging Company, Inc. was named as Producer and the General Enterprises, Inc. as Distributor. The pertinent provisions of the agreement are hereunder quoted:

2. DISTRIBUTOR ... obliges to obtain the bent market prices for the logs sold by it ... that the selling price shall not be lower than the current market price, such term "current price" being the average price received by PRODUCER on other log sales over a ninety (90) day period: "current market price" shall, if PRODUCER requests, be subject to renegotiation every sixty (60) days during the term of this agreement; except that such renegotiation shall not take place where firm, long-term orders solicited by DISTRIBUTOR shall have been accepted by PRODUCER.

x x x x x x x x x

4. It is further understood that this agreement in no manner affects the existing and future barter arrangements that PRODUCER has and will have covering logs: ...

5. DISTRIBUTOR hereby agrees and obliges to market, sell, export and dispose under this agreement at least ONE MILLION (1,000,00) BOARD FEET BREARETON SCALE for PRODUCER every month during the first months of the term of this agreement: and the PRODUCER hereby agrees and obliges that each month thereafter, beginning September, 1959, PRODUCER will make available not less than 2,000,000 bd. ft. per month for export to the sales area.

x x x x x x x x x

7. In order that PRODUCER may increase its productive capacity, DISTRIBUTOR has made available to PRODUCER One (1) brand new TD-24 tractor, valued at approximately P105,000.00, which PRODUCER will purchase, payment thereafter to be made in 24 or fewer equal monthly installments DISTRIBUTOR further agrees that it will lend to PRODUCER pesos as needed by the latter up to P95,000.00 for local purchases of logging machinery, equipment and spare parts. PRODUCER agrees to repay any amount so loaned in twenty four (24) or less equal monthly installments, it being understood that each loan shall be understood to be a separate transaction. In the case of purchase of equipment, DISTRIBUTOR may retain title thereto, until such loan has been fully repaid.

8. It is mutually agreed as follows:

(a) That if either party shall be unable, by reason of the happening of any one or more of the causes set forth in the next succeeding paragraph marked "(b)" to carry out its obligations under this contract, either wholly or partly, the party so failing shall give notice and full particulars of such cause or causes in writing to the other party as soon as possible after the occurrence of any such cause; and, thereupon, such obligation shall be suspended during the continuance of such causes, which, however, shall be removed or remedied as soon as possible, and the obligations terms and conditions of this contract shall be extended for such period as may be necessary for the purpose of making good any suspension so caused:

(b) That the cause or causes of suspension herein before referred to shall be taken to mean fire, flood, casualty, unavoidable accident, strikes, labor conditions, lockout acts of God, the enactment of any national or local law or ordinance, or the issuance of any executive or judicial order, the issuance of any prohibitive or restrictive order, rule or regulation by the Central Bank of the Philippines or other government agency, accident to machinery, or any other cause not within the control of the party making relief from any of the requirements of this contract, and that, by the exercise of due care and diligence, the said party is unable to prevent or overcome.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts.1wph1.t9. Subject to any prior termination of this contract, the term of this contract for the distribution of logs shall be two (2) years beginning June 1, 1959. ...

Thereupon, the parties immediately began implementing the provisions of the contract by having the Distributor deliver to the Producer the tractor it agreed to deliver and by having the Producer deliver logs to the Distributor for export as agreed upon. On October 27, 1959, the Producer sent a notice to the Distributor stating that after the November shipment there will be no longer logs available for export to Korea and Europe "unless the price of such logs become comparable to what we may expect to receive in the way of returns from lumber and veneer of barterable and export grades", giving as reasons there for the following:

It will be necessary for us to increase our log production if we are to have available for the sales area covered by the Agreement. To increase log production we must have additional logging machinery. Such machinery had been available at Surigao; however, we have been advised by our representative, who investigated the matter in Surigao, that the equipment which we had agreed to buy had been sold to another purchaser under rather peculiar circumstances.

By reasons of, restrictions imposed by the Philippine Government we cannot barter logs (for, among other purposes, obtaining logging machinery and equipment) but we can barter lumber and low grade veneers. We have decided that we must take advantage of the situation and use our lumber for barter, immediately concurrently we are taking the necessary steps to erect the power house and veneer plant offered by a U.S. Firm. This will mean the immediate utilization by ourselves of an excess of one million or more feet of logs per month. The net result will be that we will not have logs for your sales area.

The Producer thereafter stopped supplying logs for export, whereupon the Distributor reminded the Producer th