INTEREST ON JUDGMENT ELEANOR DE LEON LLENADO vs. PEOPLE OF THE PHILIPPINES and EDITHA VILLAFLORES, G.R. No.

193279 Mar ! 1", 2#12 SERENO, J.$ FA%TS$ It appears that petitioner issued checks to secure the loans obtained from private respondent. Upon presentment, the checks were dishonored, leading to the filing with the MeTC of criminal cases for four (4 counts of violation of !.". ##. $ubse%uentl&, petitioner settled the loans sub'ect of the three (( Criminal Cases using the funds of the Children of Mar& Immaculate College, of which she was president. "rivate respondent e)ecuted an *ffidavit of +esistance for the three cases, thus, onl& Criminal Case -o. .4/0. covering a check worth, P1,.00,000, proceeded to trial. The MeTC ruled against petitioner. The MeTC took note that petitioner admitted knowledge of the check2s dishonor, and that the demand letter with -otice of +ishonor mailed to petitioner2s residence on 10 Ma& 1/// was received b& one *lfredo *bierra on 14 Ma& 1///. The MeTC also held the Children of Mar& Immaculate College liable for the value of the check for being the drawer thereof. 3n appeal (4TC , petitioner alleged that the receipt of the -otice of +ishonor was not sufficientl& proven. 4TC affirmed the +ecision of the MeTC. "etitioner filed a "etition for 4eview with the Court of *ppeals (C* which was denied, however, it held that the trial court erred in holding Children of Mar& Immaculate College civill& liable. *ppl&ing Lunaria v. People, the C* modified the appealed 'udgment b& imposing legal interest of 1#5 on the amount of the dishonored check from the date of 'udicial demand until the finalit& of this +ecision. ISS&E$ 6hether or not the Court of *ppeals erred in imposing 1#5 legal interest on the amount of the dishonored check from the date of 'udicial demand until the finalit& of this +ecision HELD$ 6e find the need to modif& the ruling of the C* with regard to the imposition of interest on the 'udgment. It has been established that in the absence of stipulation, the rate of interest shall be 1#5 per annum to be computed from default, that is, from 'udicial or Page | 1

e)tra'udicial demand under and sub'ect to the provisions of *rticle 117/ of the Civil Code. In Ongson v. People, we held that interest began to run from the time of the e)tra'udicial demand, as dul& proved b& the creditor. Thus, petitioner should also be held liable for the amount of the dishonored check, which is P1,.00,000, plus 1#5 legal interest covering the period from the date of the receipt of the demand letter on 14 Ma& 1/// to the finalit& of this +ecision. The total amount due in the dispositive portion of the C*2s +ecision, inclusive of interest, shall further earn 1#5 interest per annum from the finalit& of this +ecision until full& paid.

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QUASI-DELICT; EMPLOYERS LIABILITY PA&LITA 'EDITH( SERRA vs. NELFA T. M&MAR G.R. No. 193)*1 Mar ! 1", 2#12 %ARPIO, J.$ FA%TS$ *t around 78(0 in the evening of ( *pril #000, there was a vehicular accident along the -ational 9ighwa& in !aranga& *popong, :eneral $antos Cit&, which resulted in the death of *rmando Mumar, husband of respondent. !ased on the evidence presented, one *rmando Tenerife was driving his To&ota Corolla sedan on the -ational 9ighwa& heading in the direction of "olomolok, $outh Cotabato. Tenerife noticed the van owned b& petitioner $erra coming from the opposite direction, which was tr&ing to overtake a passenger 'eep, and in the process encroached on his lane. The left side of the sedan was hit b& the van, causing the sedan to swerve to the left and end up on the other side of the road. The van collided head on with the motorc&cle, which was about 1# meters behind the sedan on the outer lane, causing in'uries to Mumar, which eventuall& led to his death. "etitioner denied that her van was overtaking the 'eepne& at the time of the incident. $he claimed that the left tire of Tenerife2s sedan burst, causing it to sideswipe her van. Conse%uentl&, the left front tire of the van also burst and the van2s driver, Marciano de Castro, lost control of the vehicle. The van swerved to the left towards Mumar2s motorc&cle. The impact resulted in the death of Mumar. 4espondent filed a complaint against petitioner for +amages b& 4eason of 4eckless Imprudence resulting to 9omicide before the :eneral $antos Cit& 4TC. The 4TC, :eneral $antos Cit& promulgated a 'udgment against defendant. "etitioner appealed the 4TC ruling to the C* which denied the appeal and affirmed with modification the 4TC2s ruling. 9ence, this petition. "etitioner pra&s that the assailed C* decision and resolution be reversed and set aside. In the alternative, petitioner pra&s that, should the Court sustain the finding of negligence, that the award of damages for loss of earning capacit& in the sum of "1,##4,000.00 be completel& deleted for lack of evidentiar& basis. ISS&ES$ 1. 6hether or not both the lower court and the Court of *ppeals committed reversible error in holding ;ditha $erra as liable for damages and in not appreciating that she was not negligent in the selection and supervision of the Page | 3

driver of the van, Marciano de Castro #. 6hether or not the Court of *ppeals erred in awarding to herein respondent <loss of earning capacit&= despite complete absence of documentar& evidence that the deceased Mumar was self>emplo&ed and earning less than the minimum wage under current labor laws in force at the time of his death

HELD$ 1. NO. "etitioner failed to show that she e)ercised the level of diligence re%uired in supervising her driver in order to prevent the accident. $he admitted that de Castro had onl& been her driver for one &ear and she had no knowledge of his driving e)perience or record of previous accidents. $he also admitted that it was de Castro who maintained the vehicle and would even remind her <to pa& the installment of the car.= Under *rticle #1?0 of the Civil Code, emplo&ers are liable for the damages caused b& their emplo&ees acting within the scope of their assigned tasks. 6henever an emplo&ee2s negligence causes damage or in'ur& to another, there instantl& arises a presumption that the emplo&er failed to e)ercise the due diligence of a good father of the famil& in the selection or supervision of its emplo&ees. The liabilit& of the emplo&er is direct or immediate. It is not conditioned upon prior recourse against the negligent emplo&ee and a prior showing of insolvenc& of such emplo&ee. Moreover, under *rticle #1?4 of the Civil Code, if the causative factor was the driver2s negligence, the owner of the vehicle who was present is likewise held liable if he could have prevented the mishap b& the e)ercise of due diligence. #. +ES. The Court holds that the C* erred in awarding damages for loss of earning capacit& in the absence of documentar& evidence to support the claim. Da,a-.s /or 0oss o/ .arn1n- a2a 134 1s 1n 3!. na35r. o/ a 35a0 da,a-.s , which as a rule must be dul& proven b& documentar& evidence, not merel& b& the self>serving testimon& of the widow. !& wa& of e)ception, damages for loss of earning capacit& ma& be awarded despite the absence of documentar& evidence when (1 the deceased is self>emplo&ed earning less than the minimum wage under current labor laws, and 'udicial notice ma& be taken of the fact that in the deceased2s line of work no documentar& evidence is available, or (# the deceased is emplo&ed as a dail& wage worker earning less than the minimum wage under current labor laws. !ased solel& on -elfa2s testimon&, the C* determined that the deceased falls within one of these e)ceptions. -elfa testified that her husband was in the business of contracting and manufacturing grills, fences and gates, and his earnings <e)ceed "7,000.00= per month prior to his death. $he presented no documentar& proof of her claims.

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It was error for the C* to have awarded damages for loss of earning capacit& based on -elfa2s testimon& alone. @irst, while it is conceded that the deceased was self> emplo&ed, the Court cannot accept that in his line of work there was no documentar& proof available to prove his income from such occupation. There would have been receipts, 'ob orders, or some form of written contract or agreement between the deceased and his clients when he is contracted for a 'ob. $econd, and more importantl&, decedent was not earning <less than the minimum wage= at the time of his death. 4espondent testified that her husband was earning not less than "7,000.00 per month. 3n the other hand, the highest minimum wage rate at the time of the accident, based on 6age 3rder -o. 4T6"!>AI>0B, was "14?.00. *t that rate, the monthl& minimum wage would be "(,#.7.00, clearl& an amount less than what respondent testified to as her husband2s monthl& earnings. The deceased would not fall within the recogniCed e)ceptions. There is therefore no basis for the C*2s computation for Mumar2s supposed net earning capacit& and the subse%uent award of damages due to loss of earning capacit&. The petition is partl& granted. The Court affirms the decision of the C*, but modifies the award for damages.

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RESCISSION - ARTICLE 1191 F.F. %R&6 7 %O., IN%. vs. HR %ONSTR&%TION %ORP. G.R. No. 1)78219 Mar ! 1", 2#12 RE+ES, J.$ FA%TS$ @@CCI entered into a contract with the +"69 sometime in #004, for the construction of the Magsa&sa& Diaduct, known as the Eower *gusan +evelopment "ro'ect. @@CCI, in turn, entered into a $ubcontract *greement with 94 Construction Corporation (94CC for the suppl& of materials, labor, e%uipment, tools and supervision for the construction of a portion of the said pro'ect. "ursuant to the $ubcontract *greement, 94CC would submit to @@CCI a monthl& progress billing sub'ect to stipulated deductions. The parties agreed that the re%uests of 94CC for pa&ment should include progress accomplishment of its completed works as approved b& @@CCI. *dditionall&, the& agreed to conduct a 'oint measurement of the completed works of 94CC together with the representative of +"69 and consultants. 94CC commenced the construction of the works pursuant to the $ubcontract *greement. 94CC submitted to @@CCI its first progress billing covering the construction works it completed from *ugust 17 to $eptember 1., #004. 9owever, @@CCI asserted that the +"69 was then able to evaluate the completed works of 94CC onl& until Ful& #., #004. Thus, @@CCI onl& approved the gross amount of "4#(,.0#.?? for pa&ment. This amount was paid b& @@CCI to 94CC on +ecember (, #004. @@CCI and the +"69 then 'ointl& evaluated the completed works of 94CC for the period of Ful& #7 to $eptember #., #004. @@CCI paid the amount of "#,00?,?(B..# on +ecember #1, #004. 94CC submitted to @@CCI its second progress billing covering its completed works from $eptember 1? to #., #004. @@CCI did not pa& the amount claiming that it had alread& paid 94CC for the completed works for the period stated therein. 3n even date, 94CC submitted its third progress billing from $eptember #7 to 3ctober #., #004. @@CCI did not immediatel& pa& the amount claiming that it still had to evaluate the works accomplished b& 94CC. The 94CC submitted to @@CCI its fourth progress billing from 3ctober #7 to -ovember #., #004. @@CCI, after it had evaluated the completed works of 94CC from $eptember #7 to -ovember #., #004, approved the pa&ment which amount was paid to 94CC on March 11, #00.. Meanwhile, 94CC sent @@CCI a letterG dated +ecember 1(, #004 demanding the pa&ment of its progress billings in the total amount of "B,(40,047.0/, plus interests, within three da&s from receipt thereof. $ubse%uentl&, 94CC completel& halted the construction of the subcontracted pro'ect after taking its Christmas break on +ecember 1?, #004. 94CC, pursuant to the arbitration clause in the $ubcontract *greement, filed with the Page | 6

Construction Industr& *rbitration Commission (CI*C a Complaint against @@CCI pra&ing for the pa&ment of the overdue obligation plus legal interest. In its *nswer, @@CCI claimed that it no longer has an& liabilit& on the $ubcontract *greement as the three pa&ments it made to 94CC. @@CCI further asserted that the dela& in the pa&ment processing was primaril& attributable to 94CC inasmuch as it presented unverified work accomplishments contrar& to the stipulation in the $ubcontract *greement regarding re%uests for pa&ment. @@CCI maintained that 94CC failed to compl& with the condition stated under the $ubcontract *greement for the pa&ment of the latter2s progress billings, i.e. 'oint measurement of the completed works, and, hence, it was 'ustified in not pa&ing the amount stated in 94CC2s progress billings. *n *rbitral Tribunal was created. In a "reliminar& Conference, the parties defined the issues to be resolved and 94CC further reduced the amount of overdue obligation it claimed. The CI*C ruled in favor of 94CC. The CI*C held that the pa&ment method adopted b& @@CCI is actuall& what is known as the <back>to>back pa&ment scheme= which was not agreed upon under the $ubcontract *greement. *s such, the CI*C ruled that @@CCI could not impose upon 94CC its valuation of the works completed b& the latter. The CI*C gave credence to 94CC2s valuation of its completed works as stated in its progress billings. Eikewise, the CI*C held that @@CCI2s non>pa&ment of the progress billings submitted b& 94CC gave the latter the right to rescind the $ubcontract *greement and, accordingl&, 94CC2s work stoppage was 'ustified. It further opined that, in effect, @@CCI had ratified the right of 94CC to stop the construction works as it did not file an& counterclaim against 94CC for li%uidated damages arising therefrom. @@CCI then filed a petition for review with C* which denied the petition for review. The C* agreed with the CI*C that @@CCI had waived its right under the $ubcontract *greement to re%uire a 'oint %uantification of 94CC2s completed works. @@CCI sought a reconsideration but it was denied b& the C*. 9ence, this petition. ISS&E$ 1. In view of @@CCI2s waiver of its right to demand a 'oint measurement of 94CC2s completed works, is @@CCI now barred from disputing the claim of 94CC in its monthl& progress billingsH #. 6hether there was a valid rescission of the $ubcontract *greement b& 94CC. HELD$ 1. The $upreme Court ruled in the affirmative. *s intimated earlier, the 'oint measurement re%uirement is a mechanism essentiall& granting @@CCI the opportunit& Page | 7

to verif& and, if necessar&, contest 94CC2s valuation of its completed works prior to the submission of the latter2s monthl& progress billings. In the final anal&sis, the 'oint measurement re%uirement seeks to limit the dispute between the parties with regard to the valuation of 94CC2s completed works. *ccordingl&, an& issue which @@CCI ma& have with regard to 94CC2s valuation of the works it had completed should be raised and resolved during the said 'oint measurement instead of raising the same after 94CC had submitted its monthl& progress billings. Thus, having relin%uished its right to ask for a 'oint measurement of 94CC2s completed works, @@CCI had necessaril& waived its right to dispute 94CC2s valuation of the works it had accomplished. 2. NO. The determination of the validit& of 94CC2s work stoppage depends on a determination of the following8 first, whether 94CC has the right to e)tra'udiciall& rescind the $ubcontract *greement, and second, whether @@CCI is alread& barred from disputing the work stoppage of 94CC. 94CC had waived its right to rescind the $ubcontract *greement. The right of rescission is statutoril& recogniCed in reciprocal obligations. *rticle 11/1 of the Civil Code pertinentl& reads8
*rt. 11/1. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not compl& with what is incumbent upon him. The in'ured part& ma& choose between the fulfillment and the rescission of the obligation, with the pa&ment of damages in either case. 9e ma& also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be 'ust cause authoriCing the fi)ing of a period. This is understood to be without pre'udice to the rights of third persons who have ac%uired the thing, in accordance with *rticles 1(?. and 1(?? and the Mortgage Eaw.

The rescission referred to in this article, more appropriatel& referred to as resolution is on the breach of faith b& the defendant which is violative of the reciprocit& between the parties. The right to rescind, however, ma& be waived, e)pressl& or impliedl&. 6hile the right to rescind reciprocal obligations is implied, that is, that such right need not be e)pressl& provided in the contract, nevertheless the contracting parties ma& waive the same. Contrar& to the respective dispositions of the CI*C and the C*, we find that 94CC had no right to rescind the $ubcontract *greement in the guise of a work stoppage, the latter having waived such right. Apropos is *rticle 11.# of the $ubcontract *greement, which reads8 11.# > ;ffects of +isputes and Continuing 3bligations > Page | 8

No3:13!s3and1n- an4 d1s253., on3rov.rs4, d1//.r.n .s or ar;13ra31on 2ro ..d1n-s r.0a31n- d1r. 304 or 1nd1r. 304 3o 3!1s S&<%ONTRA%T A-r..,.n3 and without pre'udice to the eventual outcome thereof, =HR%%> s!a00 a3 a00 31,.s 2ro ..d :13! 3!. 2ro,23 2.r/or,an . o/ 3!. ?or@s 1n a ordan . :13! 3!. d1r. 31v.s o/ FF%%I and 3!1s S&<%ONTRA%T A-r..,.n3. (;mphasis supplied 9ence, in spite of the e)istence of dispute or controvers& between the parties during the course of the $ubcontract *greement, 94CC had agreed to continue the performance of its obligations pursuant to the $ubcontract *greement. In view of the provision of the $ubcontract *greement %uoted above, 94CC is deemed to have effectivel& waived its right to effect e)tra'udicial rescission of its contract with @@CCI. *ccordingl&, 94CC, in the guise of rescinding the $ubcontract *greement, was not 'ustified in implementing a work stoppage.

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CONTRACT; BAD FAITH; FRAUD R.S. TOMAS, IN%. vs. RI6AL %EMENT %OMPAN+, IN%. G.R. No. 1731889 Mar ! 21, 2#12 PERALTA, J.: FA%TS$ 4espondent 4iCal Cement Compan& and petitioner 4.$. Tomas entered into a Contract on +ecember #?, 1//0, for the suppl& of labor, materials, and technical supervision of the certain pro'ects. (1 A.O. BPC9#C212 D 6iring and installation of primar& and secondar& lines s&stem, (# A.O. BPC9#C213 I $uppl& and installation of primar& protection and disconnecting switch, (( A.O. BPC9#C21" D 4ewinding and conversion of one (1 unit (1#. JD*, (4.. JDK#.4 JD, (L Transformer to 4000 JD*, (4.. JDK4?0D, (L +elta "rimar&, 6&e with neutral secondar&. "etitioner agreed to perform the above> mentioned 'ob orders. $pecificall&, it undertook to suppl& the labor, e%uipment, supervision, and materials as specified in the detailed scope of work. @or its part, respondent agreed to pa& the total sum of "#,/44,000.00 in consideration of the performance of the 'ob orders. "etitioner undertook to complete the pro'ects within 1#0 da&s from the effectivit& of the contract. It was agreed upon that petitioner would be liable to respondent for li%uidated damages in the amount of "#/,440.00 per da& of dela& in the completion of the pro'ects which shall be limited to 105 of the pro'ect cost. To secure the full and faithful performance of all its obligations and responsibilities under the contract, petitioner obtained from Times $uret& M Insurance Co. Inc. a performance bond in an amount e%uivalent to fift& percent (.05 of the contract price. "ursuant to the terms of the contract, respondent made an initial pa&ment on Fanuar& ?, 1//1. "etitioner re%uested for an e)tension of sevent&>five (B. da&s within which to complete the pro'ects because of the need to import some of the materials needed. In the same letter, it also asked for a price ad'ustment and re%uested for e)tension for the completion of the transformer portion of the pro'ects for failure of its supplier to deliver the materials. 3n Fune 14, 1//1, petitioner manifested its desire to complete the pro'ect as soon as possible to prevent further losses and maintain goodwill between the companies. "etitioner re%uested for respondent2s assistance b& facilitating the ac%uisition of materials and supplies needed to complete F.3. N">/0>#1# and F.3. N">/0>#1( b& directl& pa&ing the suppliers. It further sought that it be allowed to back out from F.3. N">/0>#14. 4espondent manifested its observation that petitioner2s financial status showed that it could no longer complete the pro'ects. 4espondent also informed petitioner that it was alread& in default having failed to complete the pro'ects. 4espondent further notified petitioner that the former was terminating the contract. It Page | 10

also demanded for the refund of the amount alread& paid to petitioner. 3n -ovember 14, 1//1, respondent entered into two contracts with :eostar "hilippines, Inc. for the completion of the pro'ects commenced but not completed b& petitioner. "etitioner reiterated its desire to complete F.3. N">/0>#1# and F.3. N">/0>#1( and to e)clude F.3. N">/0>#14, but the same was denied b& respondent. 9ence, the Complaint for Sum of Money filed b& respondent against petitioner and Times $uret& M Insurance Co., Inc. pra&ing for the pa&ment of the amount which the& owed respondent from the down pa&ment and advances made b& the latter vis--vis the work accomplishment. @or its part, petitioner denied liabilit& and claimed instead that it failed to complete the pro'ects due to respondent2s fault. "etitioner also insisted that the pro)imate cause of the dela& is the misrepresentation of the respondent on the e)tent of the defect of the transformer. The 4TC rendered a decision in favor of petitioner. The 4TC held that the failure of petitioner to complete the pro'ects was not solel& due to its fault but more on respondent2s misrepresentation and bad faith. $ince respondent was found to have committed deceit in its dealings with petitioner, the court awarded damages in favor of the latter. 4espondent appealed before the C* which granted. The appellate court reversed and set aside the 4TC decision. The C* found that petitioner failed to prove that respondent made fraudulent misrepresentation to induce the former to enter into the contract. It further held that petitioner was given the opportunit& to inspect the transformer before offering its bid. *ggrieved, petitioner comes before the Court in this petition for review ISS&ES$ 6hether or not petitioner is guilt& of breach of contract (as the failure of petitioner to complete the pro'ects was not due to respondent2s misrepresentation and bad faith . HELD$ *fter a thorough review of the records of the case, the $upreme Court has no reason to depart from the conclusions of the C*. *ssuming for the sake of argument that the sub'ect transformer was indeed in a damaged condition even before the bidding which makes it impossible for petitioner to perform its obligations under the contract, we also agree with the C* that petitioner failed to prove that respondent was guilt& of bad faith, fraud, deceit or misrepresentation. !ad faith does not simpl& connote bad 'udgment or negligence, it imports a dishonest purpose or some moral obli%uit& and conscious doing of a wrong, a breach of a known Page | 11

dut& through some motive or interest or ill will that partakes of the nature of fraud. @raud has been defined to include an inducement through insidious machination. Insidious machination refers to a deceitful scheme or plot with an evil or devious purpose. +eceit e)ists where the part&, with intent to deceive, conceals or omits to state material facts and, b& reason of such omission or concealment, the other part& was induced to give consent that would not otherwise have been given. These are allegations of fact that demand clear and convincing proof. The& are serious accusations that can be so convenientl& and casuall& invoked, and that is wh& the& are never presumed. In this case, the evidence presented is insufficient to prove that respondent acted in bad faith or fraudulentl& in dealing with petitioner. "etitioner in fact admitted that its representatives were given the opportunit& to inspect the sub'ect transformer before it offered its bid. If indeed the transformer was completel& sealed, it should have demanded that the same be opened if it found it necessar& before it offered its bid. *s contractor, petitioner had been remiss in its obligation to obtain as much information as possible on the actual condition of the sub'ect transformer or at least it should have provided a %ualification in its bid so as to make clear its right to claim contract price and time ad'ustment. *s aptl& held b& the C*, considering that petitioner is a compan& engaged in the electrical business and the contract it had entered into involved a siCable amount of mone&, its failure to conduct an inspection of the sub'ect transformer is ine)cusable. In sum, the evidence presented b& the parties lead to the following conclusions8 (1 that the pro'ects were not completed b& petitioner, (# that petitioner was given the opportunit& to inspect the sub'ect transformer, (( that petitioner failed to thoroughl& stud& the entiret& of the pro'ects before it offered its bid, (4 that petitioner failed to complete the pro'ects because of the unavailabilit& of the re%uired materials and that petitioner needed financial assistance, (. that the evidence presented b& petitioner were inade%uate to prove that the sub'ect transformer could no longer be repaired, and (7 that there was no evidence to show that respondent was in bad faith, acted fraudulentl&, or guilt& of deceit and misrepresentation in dealing with petitioner. In view of the foregoing dis%uisitions, we find that there was not onl& dela& but non> completion of the pro'ects undertaken b& petitioner without 'ustifiable ground. Undoubtedl&, petitioner is guilt& of breach of contract. !reach of contract is defined as the failure without legal reason to compl& with the terms of a contract. It is also defined as the failure, without legal e)cuse, to perform an& promise which forms the whole or part of the contract. In the present case, petitioner did not complete the pro'ects. This gives respondent the right to terminate the contract b& serving petitioner a written notice. Considering that petitioner was alread& in dela& and in breach of contract, it is liable for damages that are the natural and probable conse%uences of its breach of obligation.

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