SECOND DIVISION

G.R. No. 204620, July 11, 2016

ROWENA A. SANTOS, Petitioner, v. INTEGRATED PHARMACEUTICAL, INC. AND

KATHERYN TANTIANSU, Respondents.

DECISION

DEL CASTILLO, J.:

Failure to comply strictly with the requirements-of procedural due process for
dismissing an employee will not render such dismissal ineffectual if it is based on a
just or an authorized cause. The employer, however, must be held liable for nominal
damages for non-compliance with the requirements of procedural due
process.1ChanRoblesVirtualawlibrary

This Petition for Review on Certiorari2 assails the August 31, 2012 Decision3 of the
Court of Appeals (CA) in CA-G.R. SP No. 122180 that modified the July 14, 2011
Resolution4 of the National Labor Relations Commission (NLRC). Said Resolution of
the NLRC affirmed the April 1, 2011 Decision5 of the Labor Arbiter that, in turn,
granted petitioner Rowena A. Santos's (petitioner) Complaint6 for illegal dismissal
filed against respondents Integrated Pharmaceutical, Inc. (Integrated Pharma)
and/or Katheryn Tantiansu (Tantiansu).

Factual Antecedents

Integrated Pharma is a pharmaceutical marketing and distributing company. On

February 26, 2005, it engaged the services of petitioner as "Clinician," tasked with
the duty of promoting and selling Integrated Pharma's products. Petitioner's work
includes visiting doctors in different hospitals located in Makati, Taguig, Pateros and
Pasay.

On April 6, 2010, petitioner received a memorandum7 from Alicia E. Gamos (Gamos),

her immediate supervisor and District Manager of Integrated Pharma, relative to her
failure to remit her collections and to return the CareSens POP demonstration unit to
the office, at a specified time.

On April 19, 2010, Maribel E. Suarez (Suarez), National Sales Manager for
Pharmaceutical Division of Integrated Pharma, called the petitioner to a meeting.
Suarez informed petitioner that the management discovered that instead of reporting
P2.00 as the actual amount of her travelling expense in going to the Fort Bonifacio
Hospital, petitioner charged Integrated Pharma P10.00 as and for her transportation
expense.

Then in the morning of April 21, 2010, respondents attempted to serve upon
petitioner a memorandum8denominated as Memo on Padding of Expense Report. It
charged petitioner with (ii) attempting to coerce her immediate supervisor to pad her
transportation expenses and (ii) insubordination for not following the instructions of
her immediate supervisor to report the true amount of her transportation expenses.
In the same memorandum, respondents required petitioner to submit a written
explanation within 24 hours in "aid [of] investigation."

Petitioner, however, refused to accept said memorandum.

Subsequently, petitioner received through registered mail another

memorandum9 likewise dated April 21, 2010 but already denominated as
Termination of Employment. It enumerated five infractions which, allegedly,
constrained respondents to terminate petitioner's employment, viz.:

After weighing all the factors on the various infractions you have committed, to wit:

1. Overstating transportation expenses

2. Attempting to coerce your manager to overstate transportation

3. Unpleasant attitude towards clients, co-workers and superiors

4. Failure to remit collection on time

5. Insubordination (e.g., failure to arrive at appointed meeting time,

failure to submit reports at designated hour, and, ultimately, refusal to
accept the memo asking for a written explanation on the incidents in
question after verbally admitting to committing the stated offenses)

and despite considering your length of stay in the company, we have come to a
forced conclusion to terminate your employment, x x x10

Petitioner thus filed a complaint11 for illegal dismissal, nonpayment of salary,

separation pay, and 13thmonth pay, with claims for moral and exemplary damages
and attorney's fees.

Ruling of the Labor Arbiter

In a Decision dated April 1, 2011,12 the Labor Arbiter ruled that respondents failed to
comply with the two-notice requirement as the offenses stated in the April 21, 2010
memorandum terminating petitioner's employment do not pertain to the same
infractions enumerated in the April 6, 2010 memorandum. Hence, there is no proof
that petitioner was properly informed of the charges against her. With regard to the
charge of insubordination (specifically her failure to remit her collections and to
return the CareSens POP demonstration unit on time), the Labor Arbiter opined that
petitioner had already been reprimanded for such offense.

The Labor Arbiter likewise ruled the respondents failed to establish that there was a
just cause to terminate petitioner's employment; that petitioner is habitually tardy;
and, that petitioner was not entitled to P10.00 travelling allowance or that she
pocketed the P8.00 difference. The Labor Arbiter thus held Integrated Pharma liable
for illegal dismissal and to pay petitioner separation pay, backwages, unpaid salary,
13th month pay, and attorney's fees. The dispositive portion of the Labor Arbiter's
April 1, 2011 Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered finding respondent

[sic] liable for illegal dismissal and nonpayment of salary and 13th month pay.
Respondent Integrated Pharmaceutical Inc., is ordered to pay complainant Rowena
A. Santos the aggregate amount of Two Hundred Twenty Five Thousand Six Hundred
Ninety Eight Pesos and 23/100 (P225,698.23) representing separation pay,
backwages, salary for April 11-21, 2010 and 13th month pay for three (3) years, plus
ten percent (10%) thereof as and for attorney's fees in the amount of P22,569.82.

All other claims are dismissed for lack of merit.13cralawred

Not satisfied, respondents appealed to the NLRC. They insisted that petitioner was
validly dismissed for cause and with due process of law.

Ruling of the National Labor Relations Commission

In its Resolution14 dated July 14, 2011, the NLRC sustained the ruling of the Labor
Arbiter that the additional infractions mentioned in the April 21, 2010 memorandum
cannot be used against petitioner for lack of prior notice. The NLRC likewise affirmed
the ruling of the Labor Arbiter anent the charge of padding of transportation
expenses.

Respondents filed a Motion for Reconsideration. In a Resolution15 dated August 23,

2011, however, the NLRC likewise denied said motion.

Still unfazed by the adverse rulings of the labor tribunals, respondents filed before
the CA a Petition for Certiorari16 ascribing grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the NLRC in rendering its July 14, 2011
Resolution.

Ruling of the Court of Appeals

On August 31, 2012, the CA rendered its Decision17 modifying the NLRC's Resolution.
It held that petitioner was not illegally dismissed and, therefore, not entitled to
separation pay, backwages, attorney's fees, damages, and 13th month pay. It opined
that there are just causes to terminate petitioner's employment because she was
always late in district meetings and in the submission of periodical reports, had
committed acts of insubordination and dishonesty, and her sales performance was
far from satisfactory. The CA nonetheless agreed with the NLRC that respondents
failed to comply with the two-notice requirement. The fallo of the assailed CA
Decision reads:

WHEREFORE, premises considered, the petition is PARTLY GRANTED. The assailed

Decision dated 14 July 2011 of [the] National Labor Relations Commission is
MODIFIED in that private respondent was not illegally dismissed and, therefore, the
awards of separation pay, backwages, attorney's fees, other damages and
13th month pay are deleted. For failure to comply with the twin notice requirements
of due process in effecting the just dismissal of private respondent, petitioner is
ordered to pay private respondent the amount of P30,000.00 as nominal damages.

SO ORDERED.18

Petitioner filed a Motion for Partial Reconsideration.19 In a Resolution20 promulgated

on November 5, 2012, however, the CA denied petitioner's motion.

Issues
Feeling aggrieved, petitioner filed the instant Petition imputing upon the CA the
following errors:

I.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT THERE IS

SUFFICIENT PROOF TO SUPPORT THE VARIOUS INFRACTIONS COMMITTED BY
PETITIONER SANTOS.

II.

THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT THE DISMISSAL OF
PETITIONER SANTOS WAS WITH JUST CAUSE.21

Petitioner contends that the CA erred in deviating from the uniform rulings of the
labor tribunals whose findings of facts are binding on the CA. She insists that the CA
grievously erred in delving into the factual issues of the case instead of limiting itself
with the issue of jurisdiction.

Petitioner denies being habitually tardy. She claims that respondents failed to
provide specific instances where her alleged habitual tardiness could be deduced.
Petitioner likewise faults the CA in finding her guilty of insubordination since she was
already reprimanded for the acts she committed relative thereto. She maintains that
she had dutifully abided with all the lawful orders of Integrated Pharma.

As to her alleged dismal performance, petitioner argues that respondent Integrated

Pharma has no written policy as to the expected performance of its employees.
Hence, it had no basis in concluding that her performance was unsatisfactory.

Lastly, petitioner admits reporting the amount of P10.00 as her fare in going to the
Fort Bonifacio Hospital. Nevertheless, she denies overcharging respondents and
maintains that she only reported the actual amount she incurred in going to the said
hospital. According to petitioner, to maximize her time, she used to take tricycles
and pay P10.00 for her fare, instead of multicabs for only P2.00. After all,
respondents neither forbade her from taking tricycles nor denied her claim for
P10.00 tricycle fare. In fact, they allowed her to spend P10.00 for travel expenses for
quite some time already.

Respondents, on the other hand, argue that petitioner essentially assails the CA's
factual findings, which cannot be done in a petition for review on certiorari. They
point out that the Supreme Court is not a trier of facts and only questions of law can
be raised in a petition for review on certiorari. Hence, the Decision of the CA finding
sufficient proof that petitioner committed various infractions deserves full faith and
credence. Respondents contend that these infractions should be taken collectively;
not singly or separately. Viewed as a whole, the series of infractions committed by
the petitioner constitutes serious misconduct that justifies the termination of her
employment. Specifically, respondents claim that petitioner was guilty of habitual
absenteeism and tardiness, insubordination, and dishonesty. According to
respondents, petitioner was habitually absent as shown by the evaluation reports
and affidavits22 of petitioner's immediate supervisors who stated that petitioner was
always late in district meetings and in the submission of required reports. She
committed insubordination when she refused to heed to the reasonable instructions
of her supervisor to remit her collections and to bring the CareSens POP
demonstration unit at the particular time specified by her supervisor. And, petitioner
is guilty of dishonesty because she overstated her travel expenses.

Respondents further contend that they did not reprimand respondent in the April 6,
2010 memorandum. Said memorandum is actually the first written notice in effecting
termination of employment.

Our Ruling

We dismiss the Petition.

At the outset, we note that the Petition essentially assails the factual findings of the
CA. As a rule, this Court does not analyze and weigh again the evidence presented
before the tribunals below because it is not a trier of facts.23 The only issues it can
pass upon in a Petition for Review on Certiorari are questions of law. In view,
however, of the conflicting findings of the labor tribunals and the CA, this Court finds
it compelling to make its own independent findings of
facts.24ChanRoblesVirtualawlibrary

Petitioner was guilty of gross and

habitual neglect of duty for being
excessively tardy.

Records reveal that petitioner was indeed habitually tardy. She was always late in
district meetings and in the submission of her periodic reports. These are borne out
by the evaluation25 conducted by petitioner's former supervisor, Arnelo R. Penaranda,
on September 26, 2008 where it was observed that petitioner was "[a]lways late
during District Meetings and [in] passing x x x required reports." 26Correspondingly, in
a scale of 1-5 (5 being the highest), petitioner was given a low mark of 1.5 as to
punctuality. Despite such rock-bottom mark, however, the result on petitioner's
evaluation27 conducted barely two years later by her new supervisor did not show
any sign of improvement. She still failed "to report on time both in the office and
during regular field work visits."28ChanRoblesVirtualawlibrary

The memorandum29 dated April 6, 2010 also bears out petitioner's lack of deep sense
of duty and punctuality. In that memorandum, petitioner was chastised for arriving
in the office late in the afternoon on March 22, 2010 when she was given the specific
instruction to be at the office in the morning of said date. Petitioner was also late for
about 4 ½ hours for her appointment on April 5, 2010. Her payslips also reveal
several deductions from her salary due to tardiness and absences.

These pieces of documentary evidence already constitute substantial evidence (or

that amount of relevant evidence that a reasonable mind might accept as adequate
to justify a conclusion) proving petitioner's habitual tardiness. Her tardiness is so
excessive that it already affects the general productivity and business of Integrated
Pharma. It has amounted to gross and habitual neglect of her duty, which is a just
cause for terminating employment under Article 282 of the Labor Code.

Petitioner was guilty of insubordination.

Petitioner also committed willful disobedience of reasonable and lawful orders of her
employer. As a just cause for dismissal of an employee under Article 282 of the
Labor Code, willful disobedience of the employer's lawful orders requires the
concurrence of two elements: "(1) the employee's assailed conduct must have been
willful, that is, characterized by a wrongful and perverse attitude; and (2) the order
violated must have been reasonable, lawful, made known to the employee, and must
pertain to the duties which she had been engaged to
discharge."30ChanRoblesVirtualawlibrary

Both requisites are present in the instant case. It is clear from the April 6, 2010
memorandum that petitioner was tasked to remit her collections to the office in the
morning of March 22, 2010, a Monday. In fact, it was upon her behest that instead
of on March 19, 2010, the date when she got her collections, petitioner would make
the remittance on Monday morning. Come Monday, however, petitioner arrived in
her office late in the afternoon, thereby making it impossible for the respondents to
deposit her collections. While petitioner alleged that she attended first to her area of
coverage, the fact remains that she wantonly disobeyed the reasonable and lawful
orders of her employer to remit her collections in the morning of March 22, 2010, the
specific time given by her employer. In one case, this Court held that "the employer
had the discretion to regulate all aspects of employment, and that the workers had
the corresponding obligation to obey company rules and regulations, x x x
[Deliberately disregarding or disobeying the rules could not be countenanced, and
any justification that the disobedient employee might put forth would be deemed
inconsequential. The lack of resulting damages was unimportant, because the 'heart
of the charge is the crooked and anarchic attitude of the employee towards his
employer. Damage aggravates the charge but its absence does not mitigate or
negate the employee's liability.'"31ChanRoblesVirtualawlibrary

Another instance of petitioner's insubordination was when she did not bring the
CareSens SOP demonstration unit to the office at a particular given time. Petitioner
does not dispute that respondents instructed her to bring to the office said
demonstration unit at 9:00 o'clock in the morning as a fellow Clinician from Batangas
would pick it up that same morning. However, petitioner could not provide sensible
justification why she failed to arrive at the appointed time. Her failure to come on
time without weighty reasons evinces her willful disregard of the clear and simple
instructions of her superiors.

Lastly, as early as January 2010 Gamos instructed petitioner to reflect in her

expense report the amount of P2.00, which is the actual amount she incurred as
transportation expense in going to the Fort Bonifacio Hospital. Petitioner, however,
disobeyed her immediate supervisor and continued to reflect the amount of PI 0.00
in her expense reports.

Petitioner is guilty of dishonesty.

Petitioner would also have this Court believe that she actually incurred PI0.00 travel
expense in going to the Fort Bonifacio Hospital because she used to take tricycles.
She avers that it is faster to take the tricycle because it takes quite a while before
multicabs are filled with passengers.

We cannot, however, give credence to petitioner's excuses in light of the result of the
investigation Gamos conducted on the matter and petitioner's own admission to
Suarez that she overcharged respondents. In her memorandum dated April 13,
2010, Gamos reported to Suarez that the only means of public transportation to Fort
Bonifcio Hospital at that time was by taking a multicab. Thus:
[Petitioner] admitted that ever since she started covering FBH under her former
DSM's, she was charging a tricycle fare of P10 on her way to the mentioned
[hospital]. Further, she claimed that [in] her previous Expense Reports she was
declaring that the means of transportation she regularly take is tricycle when in fact
the only means of regular transportation to FBH is actually a multicab.

But since I had no service car then, I went to the same route and discovered that
there was no tricycle ride since last year on the way to FBH[;] instead available for
free to employees and soldiers of Fort Bonifacio were multicabs with routes around
the camp. The public or outsiders were requested to pay the P2 amount only as
donation for the unit's maintenance and driver's salary and this was confirmed by the
guards on the gate when I asked them about it that same day.32 (Emphasis ours)

In her affidavit,33 Suarez stated that on April 19, 2010 she, together with Tantiansu,
discussed the matter of overcharging with petitioner. On said occasion, petitioner
admitted that she overcharged the transportation expense every time she would go
to Fort Bonifacio Hospital.

We are not also convinced with the labor tribunals' ratiocination that petitioner
should be absolved for overcharging since there is no proof that she is not entitled to
PI0.00 travel expense or that she pocketed the difference of P8.00. There is a
difference between allotted transportation allowance and actual transportation
expense. Thus, to state an amount of actual transportation expense other than the
amount actually incurred for transportation is dishonesty. Elsewise put, just because
petitioner was allotted P10.00 transportation expense does not mean that she can
keep the remainder should she not exhaust the entire amount thereof. Petitioner's
act of deliberately misdeclaring or overstating her actual travelling expense
constitutes dishonesty and serious misconduct, which are lawful grounds for her
dismissal under paragraphs (a) and (c) of Article 282 of the Labor Code. 34 It
provides:

ART. 282. Termination by employer. An employer may terminate an employment for

any of the following just causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders
of his employer or representative in connection with his work.

xxxx

(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative.

The fact that petitioner had been declaring P10.00 as her actual travelling expense
for quite some time cannot be interpreted as condonation of the offense or waiver of
Integrated Pharma to enforce its rules. "A waiver is a voluntary and intentional
relinquishment or abandonment of a known legal right or privilege."35 To be valid and
effective, the waiver must be couched in clear and unequivocal terms leaving no
doubt as to the intention of a party to give up a right or benefit which legally
pertains to it.36Hence, the management prerogative to discipline employees and
impose punishment cannot, as a general rule, be impliedly
waived.37ChanRoblesVirtualawlibrary

Past offense may be taken into

consideration in imposing the
appropriate penalty.

Petitioner further faults the CA in finding her guilty of insubordination since she was
already reprimanded for the acts she committed in relation thereto.

We agree with petitioner that she had already been reprimanded for the infractions
stated in the April 6, 2010 memorandum. It undoubtedly dealt with her failure to
remit her collections and to return the Caresens POP demonstration unit, at the
appointed time. Thus:

This memo is being issued to reprimand you for an offense you have repeated
despite several discussions in the hope that you will correct your bad habit and
improve your performance. However, it seems that our pleas have been unheard or
disregarded because you continue to commit the same infraction, to wit: 38

The last paragraph of said Memorandum even contained a warning that a repetition
of the same offense in the future may result in the imposition of stiffer penalty of
suspension or even termination.

Your failure to comply with appointed tasks and schedules shows disobedience and a
lack of respect for authority and peers. This is clearly a form of insubordination. We
have talked with you time and again to help you realize this offense, but we have
hardly seen any improvement. We really hope that you will strive to correct this poor
behavior. Otherwise, we will be constrained to impose a suspension that may lead to
eventual termination should the same offense happen again.39

Hence, petitioner could no longer be punished for said offenses. Nevertheless,

petitioner's failure to remit her collections and to return the Caresens POP
demonstration unit on time may still be considered in imposing the appropriate
penalty for future offenses. In Philippine Rabbit Bus Lines, Inc. v. National Labor
Relations Commission40 we held that that:

Nor can it be plausibly argued that because the offenses were already given the
appropriate sanctions, they cannot be taken against him. They are relevant in
assessing private respondent's liability for the present violation for the purpose of
determining the appropriate penalty. To sustain private respondent's argument that
the past violation should not be considered is to disregard the warnings previously
issued to him.41

As discussed above, petitioner is guilty of dishonesty and serious misconduct. Based

on Article 282 of the Labor Code, such offense may merit the termination of
employment. However, while the law provides for a just cause to dismiss an
employee, the employer still has the discretion whether it would exercise its right to
terminate the employment or not. In other words, the existence of any of the just or
authorized causes enumerated in Articles 282 and 283 of the Labor Code does not
automatically result in the dismissal of the employee. The employer has to make a
decision whether it would dismiss the employee, impose a lighter penalty, or perhaps
even condone the offense committed by an erring employee. In making a decision,
the employer may take into consideration the employee's past offenses. In this case,
petitioner had been forewarned that her failure to correct her poor behavior would be
visited with stiffer penalty. However, she remained recalcitrant to her superiors'
directives and warnings. Thus, respondents "have come to a forced conclusion to
terminate [her] employment."42ChanRoblesVirtualawlibrary

Petitioner was not accorded due process.

But the existence of a just cause to terminate an employment is one thing; the
manner and procedure by which such termination should be effected is another. If
the dismissal is based on a just cause under Article 282 of the Labor Code, as in this
case, the employer must give the employee two written notices and conduct a
hearing. The first written notice is intended to apprise the employee of the particular
acts or omissions for which the employer seeks her dismissal; while the second is
intended to inform the employee of the employer's decision to terminate
him.43 In King of Kings Transport, Inc. v. Mamac,44this Court elaborated on what
should be the contents of the first notice and the purpose thereof. Thus:

(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees
are given the opportunity to submit their written explanation within a reasonable
period. 'Reasonable opportunity' under the Omnibus Rules means every kind of
assistance that management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed as a period of at least
five (5) calendar days from receipt of the notice to give the employees an
opportunity to study the accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A
general description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the grounds
under Art. 282 is being charged against the employees.45

The employer bears the burden of proving compliance with the above two-notice
requirement.46ChanRoblesVirtualawlibrary

In the present case, respondents presented two first written notices (memoranda
dated April 6, 2010 and April 21, 2010) charging petitioner with various offenses.
Both notices, however, fell short of the requirements of the law. The April 6, 2010
memorandum did not apprise petitioner of an impending termination from
employment. It did not require her to submit within a specified period of time her
written explanation controverting the charges against her. Said memorandum did not
also specify the company rules allegedly violated by the petitioner or the cause of
her possible dismissal as provided under Article 282 of the Labor Code. After
elaborating on the two acts of insubordination, said memorandum merely
reprimanded petitioner and warned her that a commission of the same or similar
offense in the future would be visited with stiffer penalty. It reads:

This memo is being issued to reprimand you for an offense you have repeated
despite several discussions in the hope that you will correct your bad habit and
improve your performance. However, it seems that our pleas have been unheard or
disregarded because you continue to commit the same infraction, to wit:

1. On March 19, 2010, late in the afternoon, you informed our VP for operations
that you were able to collect some accounts and asked if you could postpone
your remittance to the office to Monday the following week. You were asked
 to report early on Monday morning, so that your remittances may be
deposited on the same day. Without notice, you appeared close to 5:00PM
that day, thus the office was not able to deposit your remittances anymore.
Your explanation that you prioritized regular coverage in the morning is not
acceptable. If you had an important appointment that morning/day, you
should have taken this up with our VP for operations during your conversation
on Friday or even during the weekend prior to Monday morning to allow the
office to think of a way to get the remittances from you and be able to deposit
them that morning. It was clear to you that you were tasked to bring them to
the office during opening hours on Monday, March 22, but you failed to do so.

2. Yesterday, you were asked to bring the CareSens POP demo unit to the office
at 9:00AM, so that your fellow clinician from Batangas can pick it up for an
urgent demo. Again, you agreed, and it was clear to you what time you were
expected at the office. However, you arrived at 1:30PM, claiming that you
sent text messages today and explaining that you had to go to PAL to cover
doctors. While it is important to keep to your itinerary, the specific instruction
for you to deviate your morning schedule to deliver the demo unit should
have been your priority. If your visit to PAL office was very important, you
should have brought this up as you were being instructed yesterday. Your
failure to surrender the unit to the office resulted in a missed appointment for
your fellow clinician, not to mention incurred travel expenses and wasted time
and effort. This was not only irresponsible but selfish on your part.

You failure to comply with appointed tasks and schedules shows disobedience and a
lack of respect for authority and peers. This is clearly a form of insubordination. We
have talked with you time and again to help you realize this offense, but we have
hardly seen any improvement. We really hope that you will strive to correct this poor
behavior. Otherwise, we will be constrained to impose a suspension that may lead to
eventual termination should the same offense happen again.47

With regard to the April 21, 2010 memorandum,48 respondents claim that they
attempted to furnish petitioner with a copy thereof, but that petitioner refused to
receive the same. However, respondents' bare allegation that they attempted to
furnish the petitioner with a copy of the April 21, 2010 memorandum is not
sufficient. Proof of actual service is required.49 Also, the April 21, 2010 memorandum
did not afford petitioner ample opportunity to intelligently respond to the accusations
hurled against her as she was not given a reasonable period of at least five days to
prepare for her defense. Notably, respondents terminated her employment through
another memorandum bearing the same date. Moreover, the April 21, 2010
memorandum did not also state the specific company rule petitioner violated or the
just cause for terminating an employment. Nothing was likewise mentioned about
the effect on petitioner's employment should the charges against her are found to be
true.50ChanRoblesVirtualawlibrary

Lastly, it does not escape our attention that respondents never scheduled a hearing
or conference where petitioner could have responded to the charge and presented
her evidence.51 Both the April 6, 2010 and the April 21, 2010 memoranda do not
contain a notice setting a particular date for hearing or conference.

In Agabon v. National Labor Relations Commission,52 the Court held that if the
dismissal was for cause, the lack of statutory due process should not nullify the
dismissal, or render it illegal or ineffectual. However, respondents' violation of
petitioner's right to statutory due process warrants the payment of indemnity in the
form of nominal damages. The amount of such damages is addressed to the sound
discretion of the Court, taking into account the relevant circumstances. Hence, the
CA did not err in awarding the amount of P30,000.00 to petitioner as and by way of
nominal damages.

WHEREFORE, premises considered, the instant Petition is hereby DENIED and the
assailed August 31, 2012 Decision of the Court of Appeals in CA-G.R. SP No. 122180
is AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 192011 June 30, 2014

LIBCAP MARKETING CORP., JOHANNA J. CELIZ, and MA. LUCIA G.

MONDRAGON, Petitioners,
vs.
LANNY JEAN B. BAQUIAL, Respondent.

DECISION

DEL CASTILLO, J.:

The law and jurisprudence allow the award of nominal damages in favor of an employee in a case
where a valid cause for dismissal exists but the employer fails to observe due process in
dismissing the employee. On the other hand, financial assistance is granted to a dismissed
employee as a measure of equity or social justice, and is in the nature or takes the place of
severance compensation.

Assailed in this Petition for Review on Certiorari1 are the April 22, 2009 Decision2 of the Court of
Appeals (CA) in CA-G.R. SP No. 01794, entitled "Libcap Marketing Corporation, and/or Johanna
J. Celiz, and Ma. Lucia G. Mondragon, Petitioners, versus National Labor Relations Commission
and Lanny Jean B. Baquial, Respondents," and its March 24, 2010 Resolution 3 denying
reconsideration thereof

Factual Antecedents

Petitioner Libcap Marketing Corporation (Libcap) is engaged in the freight forwarding business
with offices in Iloilo City. Petitioner Johanna J. Celiz (Celiz) is Libcap’s Human Resources Division
Head, and petitioner Ma. Lucia G. Mondragon is Libcap’s Vice-President for Administration.

Respondent Lanny Jean B. Baquial was employed by Libcap on October 12, 1999 as accounting
clerk for Libcap’s Super Express branch in Cagayan de Oro City. Her functions included
depositing Libcap’s daily sales and collections in Libcap’s bank account with Global Bank (now
PSBank). She was paid a monthly salary of ₱4,600.00,and was required to work from 8:00 a.m.
to 6:30 p.m. six days each week without additional compensation and/or overtime pay. From her
salary each payday, an amount of ₱200.00 was deducted by way of cash bond. 4

Sometime in March 2003, an audit of Libcap’s Super Express branch in Cagayan de Oro City was
conducted, and the resulting audit report 5 showed that respondent made a double reporting of a
single deposit made on April 2,2001. In other words, a single April 2, 2001 bank deposit of
₱1,437.00 was used to cover or account for two days’ sales of apparently identical amounts,
covering the undeposited collection for March 19, 2001 and current sales for March 31, 2001.

In a March 28, 2003 letter, Celiz required respondent to explain in writing within 24 hours why the
cash sales of₱1,437.00 each for March 31, 2001 and April 1, 2001 – as reported in the daily
collection reports – were covered by a single April 2, 2001 validated bank deposit slip for only
₱1,437.00.6

In an April 1, 2003 written reply,7 respondent claimed that on April 2, 2001, she deposited with the
bank two separate amounts of ₱1,437.00 each, but that it appears that both separate deposits
were covered by a single bank validation, which defect should not be blamed on her but on the
bank.8 Respondent then forwarded to Libcap’s head office two bank deposit slips to show that she
deposited two amounts of ₱1,437.00 each on April 2,2001 with Global Bank. 9
Libcap discovered that only one ₱1,437.00 deposit was made on April 2, 2001. On verification
with PS Bank, its branch head confirmed in an August 7, 2003 letter that only a single deposit of
₱1,437.00 was posted on April 2, 2001, and that there was no misposting or deposits to other
accounts of the same amount made on such date. 10The two bank deposit slips forwarded by
respondent revealed that only one of them was validated by the bank. 11Libcap’s bank account
passbook showed that only one deposit for ₱1,437.00 was made on April 2, 2001. 12 Finally,
Libcap’s Global Bank bank statement covering April 1–30, 2001 showed that only one cash
deposit of ₱1,437.00 was made on April 2, 2001.13

Meanwhile, the amount of ₱1,437.00 was deducted from respondent’s salary each payday on a
staggered basis – or on April 30, June 15, and June 30, 2003, respectively. 14

On July 26, 2003, respondent received a Notice of Administrative Investigation 15 requiring her to
attend a July 28, 2003 investigation at Libcap’s Iloilo office. Respondent was unable to attend due
to lack of financial resources.16

On July 28, 2003, respondent received a 2nd Notice of Administrative Investigation 17 requiring her
to attend an August4, 2003 investigation in Iloilo City. Again, respondent failed to attend.

Respondent was placed on preventive suspension from July 29, 2003 to August 12, 2003. 18

Respondent sent petitioners an August 6, 2003 written explanation. 19

On August 16, 2003, respondent received a Notice of Termination 20 dated August 9, 2003, stating
that she was terminated from employment effective August 12, 2003 for dishonesty,
embezzlement, inefficiency, and for commission of acts inconsistent with Libcap’s work
standards.

Respondent filed a labor complaint for illegal dismissal against petitioners, which was docketed in
the National Labor Relations Commission, Regional Arbitration Branch No. X, Cagayan de Oro
City as NLRC Case No. RAB-10-08-00586-2003.

Ruling of the Labor Arbiter

On January 20, 2006, Labor Arbiter Joselito B. de Leon issued his Decision 21 in NLRC Case No.
RAB-10-08-00586-2003, which decreed as follows:

WHEREFORE, in view of the foregoing premises, this Office holds that the dismissal, under the
cited jurisprudence is ineffectual. Respondents LIBCAP Marketing Corp. and Johanna J. Celiz,
HRD Head and Ma. Lucia G. Mondragon, EVP for Administration are jointly and severally ordered
to pay the complainant, Lanny Jean Baquial, her backwages from August 12, 2003 to November
30, 2005 in the sum of₱127,911.04 computed as follows:

1) From August 12-15, 2003:

₱4,600/mo./26.08/mo. = ₱176.38/day

₱176.38/day x 4 days = ₱705.52

2) From August 16, 2003 to November 30, 2005 – (27.5) mos.

₱4,600.00/mo. x 27.5 mos. = ₱127,205.52

 Total………… ₱127,911.04

The other money claims are denied for lack of legal and factual basis.

SO ORDERED.22

In effect, the Labor Arbiter held that respondent was dismissed for just cause, but the dismissal
was ineffectual as she was deprived of procedural due process; it was error for Libcap to
schedule the July 28, 2003 investigation at its Iloilo office when it could very well have held it in
Cagayan de Oro City. In other words, conducting the hearing in Iloilo City was tantamount to
depriving respondent’s day in court, because she did not have the financial resources to go to
Iloilo City.

In awarding backwages, the Labor Arbiter relied on the ruling in Serrano v. National Labor
Relations Commission,23which held that an employee dismissed for just cause but without notice
need not be reinstated, but must be paid backwages from the time of termination until it is
determined that his termination was for a just cause.

Ruling of the National Labor Relations Commission (NLRC)

Both petitioners and respondent appealed to the NLRC, where the case was docketed as NLRC
CA No. M-008999-2006.

On January 29, 2007, the NLRC rendered a Resolution 24 dismissing the parties’ respective
appeals, thus:

WHEREFORE, in the light of the foregoing, both appeals are hereby DISMISSED.1âwphi1 The
assailed decision of the Labor Arbiter is hereby AFFIRMED in toto.

SO ORDERED.25

In a second Resolution26 dated May 31, 2007, petitioners’ Motion for Reconsideration 27 was
denied.

The NLRC affirmed the Labor Arbiter’s finding that respondent was deprived of due process when
she was required to attend hearings in Iloilo City when she had limited financial resources, and
given the fact that at the time, she had just given birth to her first-born child; petitioners, for
humanitarian considerations, could have scheduled the hearings in Cagayan de Oro City instead.
Furthermore, it held that the case cited and relied upon by petitioners – Agabon v. National Labor
Relations Commission,28 which provided for the payment of nominal damages in lieu of
backwages incase of dismissal where the employer fails to comply with the requirements of due
process – could not be applied as it was promulgated only on November 17, 2004, while
respondent’s Amended Complaint in NLRC Case No. RAB-10-08-00586-2003 was filed on
September 1, 2003 or while the Serrano doctrine was not yet in effect.

Ruling of the Court of Appeals

In a Petition for Certiorari filed with the CA and therein docketed as CAG.R. SP No. 01794,
petitioners sought to nullify the Resolutions of the NLRC, arguing that the latter committed grave
abuse of discretion and gross error in declaring that respondent’s right to due process was
violated and in applying the Serranocase, instead of the doctrine in Agabon.
On April 22, 2009, the CA issued the assailed Decision which contained the following decretal
portion:

WHEREFORE, the assailed Resolution of the National Labor Relations Commission dated
January29, 2007 is AFFIRMED, with the MODIFICATION that the award of backwages is deleted.
Petitioners are ordered to pay private respondent nominal damages in the amount of
₱100,000.00.

SO ORDERED.29

The CA upheld the labor tribunals’ findings that while there was just cause to dismiss respondent
for dishonesty and embezzlement, petitioners failed to comply with procedural due process in
effecting her dismissal. It held that in requiring respondent to attend the scheduled hearing and
investigation in Iloilo City, "petitioners were callous of private respondent’s difficulties, considering
that not only would she have had to go to Iloilo City for the purpose, but that her having to do so
would also have meant straining her financial resources. Thus, as a result of failing to appear in
the investigation, private respondent was unable to confront her accusers face to face, and to
rebut the evidence relied upon by petitioners in dismissing her." 30

The CA held further that while the Agabon case, instead of the Serrano doctrine, should apply,
respondent was nevertheless entitled to nominal damages in the amount of ₱100,000.00
considering that she was required to work beyond her scheduled or assigned hours of work
without overtime pay, from date of hiring until she was terminated on August 12, 2003– or for a
period of four years.

Petitioners filed a Motion for Reconsideration,31 but the CA denied the same in its March 24, 2010
Resolution. Hence, the instant Petition.

Issues

Petitioners submit the following issues for the Court’s resolution:

THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE WAS NON-COMPLIANCE
WITH THE PROCEDURAL DUE PROCESS REQUIREMENT WHEN THE RECORDS SHOW
THAT THE RESPONDENT WAS GIVEN FULL OPPORTUNITY TO EXPLAIN THE CHARGES
AGAINST HER.

II

THE COURT OF APPEALS ERRED WHEN IT AWARDED RESPONDENT THE AMOUNT

OF₱100,000.00 ABSENT ANY JUSTIFIABLE, COMPELLING CIRCUMSTANCE TO DEPART
FROM THE STANDARD ₱30,000.00 ESTABLISHED BY JURISPRUDENCE[.] 32

Petitioners’ Arguments

In claiming that respondent’s dismissal was valid, petitioners contend that a face-to-face
confrontation between the employer and employee is not required in dismissal cases. They cite
the pronouncement in Perez v. Philippine Telegraph and Telephone Company, 33 which states that
"the employer may provide an employee with ample opportunity to be heard and defend himself
with the assistance of a representative or counsel in ways other than a formal hearing. The
employee can be fully afforded a chance to respond to the charges against him, adduce his
evidence or rebut the evidence against him through a wide array of methods, verbal or
written,"34 and that –

In sum, the following are the guiding principles in connection with the hearing requirement in
dismissal cases:

(a) "ample opportunity to be heard" means any meaningful opportunity (verbal or written)
given to the employee to answer the charges against him and submit evidence in support
of his defense, whether in a hearing, conference or some other fair, just and reasonable
way.

(b) a formal hearing or conference becomes mandatory only when requested by the
employee in writing or substantial evidentiary disputes exist or a company rule or practice
requires it, or when similar circumstances justify it.

(c) the "ample opportunity to be heard" standard in the Labor Code prevails over the
"hearing or conference" requirement in the implementing rules and regulations. 35

Petitioners contend that so long as respondent was given the opportunity to be heard, which in
fact she was afforded, then the twin-notice requirement is satisfied.

With regard to the award of nominal damages in the amount of ₱100,000.00, petitioners argue
that the award is erroneous and respondent is not entitled to the same, given the nature and
gravity of her offense. They cite the ruling in Philippine Airlines, Inc. v. National Labor Relations
Commission,36 stating that if the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft, fraud, falsification or illicit sexual
relations with a fellow worker, separation pay or financial assistance, or by whatever other name it
is called, may not be allowed. They add that the CA’s conclusions that respondent worked long
hours without overtime pay is not supported by evidence; thus, it could not grant nominal
damages greater than ₱30,000.00, which is the amount fixed by the Court in a host of cases.
Petitioners thus pray that the Court declare that due process was properly observed in the
dismissal of respondent, and that the award of nominal damages be deleted. In the alternative,
they pray that the amount of nominal damages be reduced from ₱100,000.00 to ₱30,000.00.

In addition, petitioners contend in their Reply37 that respondent may no longer question the
existence of just cause for her dismissal, as she did not raise the issue in an appropriate appeal
or petition before the NLRC or the CA.

Respondent’s Arguments

In her Comment,38 apart from arguing the claim that she was denied due process, respondent
insists that her dismissal was without just cause. In addition, she revives the Labor Arbiter’s
award of backwages, and makes a new claim for reinstatement with corresponding claims for
refund of her cash bond, maternity leave benefits, moral damages, overtime pay and attorney’s
fees. All these claims are of course premised on the argument, resurrected at this stage of the
proceedings, that respondent was illegally dismissed and thus forced to litigate to protect her
rights and interests.

Our Ruling

The Court denies the Petition.

At this juncture, it must be stated that respondent’s failure to file an appropriate appeal or petition
from the respective dispositions of the NLRC and the CA precludes her from questioning these
dispositions at this stage. "The rule is clear that no modification of judgment could be granted to a
party who did not appeal."39 Thus, respondent’s pleas for reinstatement and the payment of
backwages, cash bond, maternity leave benefits, moral damages, overtime pay, and attorney’s
fees may no longer be taken up.

The CA, the NLRC and the Labor Arbiter are correct in concluding that respondent was denied
due process, but their reasons for arriving at such conclusion are erroneous. What they seem to
have overlooked is that respondent’s case has been pre-judged even prior to the start of the
investigation on July 28, 2003. This is evident from the fact that the amount of ₱1,437.00 – or the
amount which petitioners claim was embezzled – was peremptorily deducted each payday from
respondent’s salary on a staggered basis, culminating on June 30, 2003, or nearly one month
prior to the scheduled investigation on July 28, 2003. In doing so, petitioners have made it clear
that they considered respondent as the individual responsible for the embezzlement; thus, in
petitioners’ eyes, respondent was adjudged guilty even before she could be tried – the payroll
deductions being her penalty and recompense.

By pre-judging respondent’s case, petitioners clearly violated her right to due process from the
very beginning, and from then on it could not be expected that she would obtain a fair resolution
of her case. In a democratic system, the infliction of punishment before trial is fundamentally
abhorred. What petitioners did was clearly illegal and improper.

While it is correct to conclude that there was valid cause for dismissal considering that
respondent did not contest the NLRC or CA findings to such effect through an appropriate appeal
or petition, the only issue that remains to be tackled is the correctness of the award of nominal
damages.

Petitioners claim that respondent is not entitled to financial assistance given that she is guilty of
theft or embezzlement. The law and jurisprudence, on the other hand, allow the award of nominal
damages in favor of an employee in a case where a valid cause for dismissal exists but the
employer fails to observe due process in dismissing the employee. 40 Financial assistance is
granted as a measure of equity or social justice, and is in the nature or takes the place of
severance compensation.41

On the other hand, nominal damages "may be awarded to a plaintiff whose right has been
violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and
not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose
of indemnification for a loss but for the recognition and vindication of a right." 42 The amount of
nominal damages to be awarded the employee is addressed to the sound discretion of the court,
taking into consideration the relevant circumstances. 43 Nevertheless, while the amount of
damages is left to the discretion of the court, it has been held that –

Again, we stress that though the Court is given the latitude to determine the amount of nominal
damages to be awarded to an employee who was validly dismissed but whose due process rights
were violated, a distinction should be made between a valid dismissal due to just causes under
Article 282 of the Labor Code and those based on authorized causes, under Article 283. The two
causes for a valid dismissal were differentiated in the case of Jaka Food Processing Corporation
v. Pacot where the Court held that:

A dismissal for just cause under Article 282 implies that the employee concerned has committed,
or is guilty of, some violation against the employer, i.e. the employee has committed some
serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has
neglected his duties. Thus, it can be said that the employee himself initiated the dismissal
process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily
imply delinquency or culpability on the part of the employee. Instead, the dismissal process is
initiated by the employer’s exercise of his management prerogative, i.e. when the employer opts
to install labor saving devices, when he decides to cease business operations or when, as in this
case, he undertakes to implement a retrenchment program.

xxxx

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282
but the employer failed to comply with the notice requirement, the sanction to be imposed upon
him should be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article
283 but the employer failed to comply with the notice requirement, the sanction should be stiffer
because the dismissal process was initiated by the employer’s exercise of his management
prerogative.

Since in the case of JAKA, the employee was terminated for authorized causes as the employer
was suffering from serious business losses, the Court fixed the indemnity at a higher amount of
₱50,000.00. In the case at bar, the cause for termination was abandonment, thus it is due to the
employee’s fault. It is equitable under these circumstances to order the petitioner company to pay
nominal damages in the amount of ₱30,000.00, similar to the case of Agabon.

We affirm the award of salary differentials, 13th month pay and holiday pay, awarded by the
NLRC and the Court of Appeals. We note that although petitioner company had cause to
terminate Madriaga, this has no bearing on the issue of award of salary differentials, holiday pay
and 13th month pay because prior to his valid dismissal, he performed work as a regular
employee of petitioner company, and he is entitled to the benefits provided under the law. Thus, in
the case of Agabon, even while the Court found that the dismissal was for a just cause, the
employee was still awarded his monetary claims.

An employee should be compensated for the work he has rendered in accordance with the
minimum wage, and must be appropriately remunerated when he was suffered to work on a
regular holiday during the time he was employed by the petitioner company. As regards the 13th
month pay, an employee who was terminated at any time before the time for payment of the 13th
month pay is entitled to this monetary benefit in proportion to the length of time he worked during
the year, reckoned from the time he started working during the calendar year up to the time of his
termination from the service.

As a general rule, one who pleads payment has the burden of proving it. Even where the
employee must allege nonpayment, the general rule is that the burden rests on the employer to
prove payment, rather than on the employee to prove nonpayment. The reason for the rule is that
the pertinent personnel files, payrolls, records, remittances and other similar documents — which
will show that overtime, differentials, service incentive leave and other claims of workers have
been paid — are not in the possession of the employee but in the custody and absolute control of
the employer. Since in the case at bar petitioner company has not shown any proof of payment of
the correct amount of salary, holiday pay and 13th month pay, we affirm the award of Madriaga’s
monetary claims.44(Emphases supplied)

Prescinding from the foregoing, we find it necessary to reduce the amount of nominal damages
the CA awarded from ₱100,000.00 to ₱30,000.00. We cannot subscribe to the CA’s ratiocination
that since respondent rendered overtime work for four years without receiving any overtime pay,
she is entitled to ₱100,000.00 nominal damages. Nominal damages are awarded for the purpose
of vindicating or recognizing a right and not for indemnifying a loss. Hence, the CA should have
limited the justification of the award of nominal damages to petitioners’ violation of respondent’s
right to due process in effecting her termination. It should not have considered the claimed unpaid
overtime pay.

After all, the Labor Arbiter had already denied the same. Thus, it cannot be invoked again as a
justification to increase the award of nominal damages.

WHEREFORE, the Petition is GRANTED IN PART. The assailed April 22, 2009 Decision and
March 24, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 01794 are AFFIRMED with
MODIFICATION that the award of nominal damages is reduced to ₱30,000.00.

SO ORDERED.
G.R. No. 202996 June 18, 2014

MARLO A. DEOFERIO, Petitioner,

vs.
INTEL TECHNOLOGY PHILIPPINES, INC. and/or MIKE WENTLING, Respondents.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by petitioner Marlo A. Deoferio to challenge
the February 24, 2012 decision2 and the August 2, 2012 resolution3 of the Court of Appeals (CA)
in CA-G.R. SP No. 115708.

The Factual Antecedents

On February 1, 1996, respondent Intel Technology Philippines, Inc. (Intel)employed Deoferio as a

product quality and reliability engineer with a monthly salary of ₱9,000.00. In July2001, Intel
assigned him to the United States as a validation engineer for an agreed period of two years and
with a monthly salary of US$3,000.00. On January 27, 2002, Deoferio was repatriated to the
Philippines after being confined at Providence St. Vincent Medical Center for major depression
with psychosis.4 In the Philippines, he worked as a product engineer with a monthly salary of
₱23,000.00.5

Deoferio underwent a series of medical and psychiatric treatment at Intel’s expense after his
confinement in the United States. In 2002, Dr. Elizabeth Rondain of Makati Medical Center
diagnosed him to be suffering from mood disorder, major depression, and auditory
hallucination.6 He was also referred to Dr. Norieta Balderrama, Intel’s forensic psychologist, and
to a certain Dr. Cynthia Leynes who both confirmed his mental condition. 7 On August 8, 2005, Dr.
Paul Lee, a consultant psychiatrist of the Philippine General Hospital, concluded that Deoferio
was suffering from schizophrenia. After several consultations, Dr. Lee issued a psychiatric report
dated January 17,2006 concluding and stating that Deoferio’s psychotic symptoms are not
curable within a period of six months and "will negatively affect his work and social relation with
his co-worker[s]."8 Pursuant to these findings, Intel issued Deoferio a notice of termination on
March 10, 2006.9

Deoferio responded to his termination of employment by filing a complaint for illegal dismissal
with prayer for money claims against respondents Intel and Mike Wentling (respondents). He
denied that he ever had mental illness and insisted that he satisfactorily performed his duties as a
product engineer. He argued that Intel violated his statutory right to procedural due process when
it summarily issued a notice of termination. He further claimed that he was entitled to a salary
differential equivalent to the pre-terminated period of his assignment in the United States minus
the base pay that he had already received. Deoferio also prayed for backwages, separation pay,
moral and exemplary damages, as well as attorney’s fees.10

In defense, the respondents argued that Deoferio’s dismissal was based on Dr. Lee’s certification
that: (1) his schizophrenia was not curable within a period of six months even with proper medical
treatment; and (2) his continued employment would be prejudicial to his and to the other
employees’ health.11 The respondents also insisted that Deoferio’s presence at Intel’s premises
would pose an actual harm to his co-employees as shown by his previous acts. On May 8, 2003,
Deoferio emailed an Intel employee with this message: "All soul’s day back to work Monday
WW45.1." On January 18, 2005, he cut the mouse cables, stepped on the keyboards, and
disarranged the desks of his co-employees.12 The respondents also highlighted that Deoferio
incurred numerous absences from work due to his mental condition, specifically, from January 31,
2002 until February 28, 2002,13 from August 2002 until September 2002,14 and from May 2003
until July 2003.15 Deoferio also took an administrative leave with pay from January 2005 until
December 2005.16

The respondents further asserted that the twin-notice requirement in dismissals does not apply to
terminations under Article 284 of the Labor Code.17 They emphasized that the Labor Code’s
implementing rules (IRR) only requires a competent public health authority’s certification to
effectively terminate the services of an employee.18They insisted that Deoferio’s separation and
retirement payments for ₱247,517.35 were offset by his company car loan which amounted to
₱448,132.43.19 He was likewise not entitled to moral and exemplary damages, as well as
attorney’s fees, because the respondents faithfully relied on Dr. Lee’s certification that he was not
fit to work as a product engineer.20

The Labor Arbitration Ruling

In a decision21 dated March 6, 2008,the Labor Arbiter (LA) ruled that Deoferio had been validly
dismissed. The LA gave weight to Dr. Lee’s certification that Deoferio had been suffering from
schizophrenia and was not fit for employment. The evidence on record shows that Deoferio’s
continued employment at Intel would pose a threat to the health of his co-employees. The LA
further held that the Labor Code and its IRR do not require the employer to comply with the twin-
notice requirement in dismissals due to disease. The LA also found unmeritorious Deoferio’s
money claims against Intel.22

On appeal by Deoferio, the National Labor Relations Commission (NLRC) wholly affirmed the
LA’s ruling.23 The NLRC also denied24 Deoferio’s motion for reconsideration,25 prompting him to
seek relief from the CA through a petition for certiorari under Rule 65 of the Rules of Court.

The CA’s Ruling

On February 24, 2012, the CA affirmed the NLRC decision. It agreed with the lower tribunals’
findings that Deoferio was suffering from schizophrenia and that his continued employment at
Intel would be prejudicial to his health and to those of his co-employees. It ruled that the only
procedural requirement under the IRR is the certification by a competent public health authority
on the non-curability of the disease within a period of six months even with proper medical
treatment. It also concurred with the lower tribunals that Intel was justified in not paying Deoferio
separation pay as required by Article 284 of the Labor Code because this obligation had already
been offset by the matured car loan that Deoferio owed Intel. 26

Deoferio filed the present petition after the CA denied his motion for reconsideration. 27

The Petition

In the present petition before the Court, Deoferio argues that the uniform finding that he was
suffering from schizophrenia is belied by his subsequent employment at Maxim Philippines
Operating Corp. and Philips Semiconductors Corp., which both offered him higher
compensations. He also asserts that the Labor Code does not exempt the employer from
complying with the twin-notice requirement in terminations due to disease. 28

The Respondents’ Position

In their Comment,29 the respondents posit that the petition raises purely questions of fact which a
petition for review on certiorari does not allow. They submit that Deoferio’s arguments have been
fully passed upon and found unmeritorious by the lower tribunals and by the CA. They
additionally argue that Deoferio’s subsequent employment in other corporations is irrelevant in
determining the validity of his dismissal; the law merely requires the non-curability of the disease
within a period of six months even with proper medical treatment.

The respondents also maintain that Deoferio’s claim for salary differential is already barred by
prescription under Article 291 of the Labor Code.30 Even assuming that the claim for salary
differential has been timely filed, the respondents assert that the parties expressly agreed in the
International Assignment Relocation Agreement that "the assignment length is only an estimate
and not a guarantee of employment for any particular length of time." 31Moreover, his assignment
in the United States was merely temporary and did not change his salary base, an amount which
he already received.

The Issues

This case presents to us the following issues:

(1) Whether Deoferio was suffering from schizophrenia and whether his continued
employment was prejudicial to his health, as well as to the health of his co-employees;

(2) Whether the twin-notice requirement in dismissals applies to terminations due to

disease; and

As part of the second issue, the following issues are raised:

(a) Whether Deoferio is entitled to nominal damages for violation of his right to statutory
procedural due process; and

(b) Whether the respondents are solidarily liable to Deoferio for nominal damages.

(3) Whether Deoferio is entitled to salary differential, backwages, separation pay, moral
and exemplary damages, as well as attorney’s fees.

The Court’s Ruling

We find the petition partly meritorious.

Intel had an authorized cause to dismiss Deoferio from employment

Concomitant to the employer’s right to freely select and engage an employee is the employer’s
right to discharge the employee for just and/or authorized causes. To validly effect terminations of
employment, the discharge must be for a valid cause in the manner required by law. The purpose
of these two-pronged qualifications is to protect the working class from the employer’s arbitrary
and unreasonable exercise of its right to dismiss. Thus, in termination cases, the law places the
burden of proof upon the employer to show by substantial evidence that the termination was for a
lawful cause and in the manner required by law.

In concrete terms, these qualifications embody the due process requirement in labor cases -
substantive and procedural due process. Substantive due process means that the termination
must be based on just and/or authorized causes of dismissal. On the other hand, procedural due
process requires the employer to effect the dismissal in a manner specified in the Labor Code
and its IRR.32
The present case involves termination due to disease – an authorized cause for dismissal under
Article 284 of the Labor Code. As substantive requirements, the Labor Code and its IRR 33 require
the presence of the following elements:

(1) An employer has been found to be suffering from any disease.

(2) His continued employment is prohibited by law or prejudicial to his health, as well as
to the health of his co-employees.

(3) A competent public health authority certifies that the disease is of such nature or at
such a stage that it cannot be cured within a period of six months even with proper
medical treatment. With respect to the first and second elements, the Court liberally
construed the phrase "prejudicial to his health as well as to the health of his co-
employees" to mean "prejudicial to his health or to the health of his co-employees." We
did not limit the scope of this phrase to contagious diseases for the reason that this
phrase is preceded by the phrase "any disease" under Article 284 of the Labor Code, to
wit:

Art. 284. Disease as ground for termination. – An employer may terminate the services of an
employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of his co-
employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary
or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year. [underscores, italics and emphases
ours]

Consistent with this construction, we applied this provision in resolving illegal dismissal cases due
to non-contagious diseases such as stroke, heart attack, osteoarthritis, and eye cataract, among
others. In Baby Bus, Inc. v. Minister of Labor, 34 we upheld the labor arbitration’s finding that
Jacinto Mangalino’s continued employment – after he suffered several strokes – would be
prejudicial to his health. In Duterte v. Kingswood Trading Co., Inc., 35 we recognized the
applicability of Article 284 of the Labor Code to heart attacks. In that case, we held that the
employer- company’s failure to present a certification from a public health authority rendered
Roque Duterte’s termination due to a heart attack illegal. We also applied this provision in Sy v.
Court of Appeals36 to determine whether Jaime Sahot was illegally dismissed dueto various
ailments such as presleyopia, hypertensive retinopathy, osteoarthritis, and heart enlargement,
among others. In Manly Express, Inc. v. Payong, Jr., 37 we ruled that the employer-company’s non-
presentment of a certification from a public health authority with respect to Romualdo Payong
Jr.’s eye cataract was fatal to its defense.

The third element substantiates the contention that the employee has indeed been suffering from
a disease that: (1) is prejudicial to his health as well as to the health of his co-employees; and (2)
cannot be cured within a period of six months even with proper medical treatment. Without the
medical certificate, there can be no authorized cause for the employee’s dismissal. The absence
of this element thus renders the dismissal void and illegal.

Simply stated, this requirement is not merely a procedural requirement, but a substantive
one.1âwphi1 The certification from a competent public health authority is precisely the substantial
evidence required by law to prove the existence of the disease itself, its non-curability within a
period of six months even with proper medical treatment, and the prejudice that it would cause to
the health of the sick employee and to those of his co-employees.

In the current case, we agree with the CA that Dr. Lee’s psychiatric report substantially proves
that Deoferio was suffering from schizophrenia, that his disease was not curable within a period
of six months even with proper medical treatment, and that his continued employment would be
prejudicial to his mental health. This conclusion is further substantiated by the unusual and
bizarre acts that Deoferio committed while at Intel’s employ.

The twin-notice requirement applies

to terminations under Article 284 of
the Labor Code

The Labor Code and its IRR are silent on the procedural due process required in terminations
due to disease. Despite the seeming gap in the law, Section 2, Rule 1, Book VI of the IRR
expressly states that the employee should be afforded procedural due process in all cases of
dismissals.38

In Sy v. Court of Appeals39 and Manly Express, Inc. v. Payong, Jr.,40 promulgated in 2003 and
2005, respectively, the Court finally pronounced the rule that the employer must furnish the
employee two written notices in terminations due to disease, namely: (1) the notice to apprise the
employee of the ground for which his dismissal is sought; and (2) the notice informing the
employee of his dismissal, to be issued after the employee has been given reasonable
opportunity to answer and to be heard on his defense. These rulings reinforce the State policy of
protecting the workers from being terminated without cause and without affording them the
opportunity to explain their side of the controversy.

From these perspectives, the CA erred in not finding that the NLRC gravely abused its discretion
when it ruled that the twin-notice requirement does not apply to Article 284 of the Labor Code.
This conclusion is totally devoid of any legal basis; its ruling is wholly unsupported by law and
jurisprudence. In other words, the NLRC’s unprecedented, whimsical and arbitrary ruling, which
the CA erroneously affirmed, amounted to a jurisdictional error.

Deoferio is entitled to nominal

damages for violation of his right to
statutory procedural due process

Intel’s violation of Deoferio’s right to statutory procedural due process warrants the payment of
indemnity in the form of nominal damages. In Jaka Food Processing Corp. v. Pacot, 41 we
distinguished between terminations based on Article 282 of the Labor Code 42 and dismissals
under Article 283 of the Labor Code.43 We then pegged the nominal damages at ₱30,000.00 if the
dismissal is based on a just cause but the employer failed to comply with the twin-notice
requirement. On the other hand, we fixed the nominal damages at ₱50,000.00 if the dismissal is
due to an authorized cause under Article 283 of the Labor Code but the employer failed to comply
with the notice requirement. The reason is that dismissals for just cause imply that the employee
has committed a violation against the employer, while terminations under Article 283 of the Labor
Code are initiated by the employer in the exercise of his management prerogative.

With respect to Article 284 of the Labor Code, terminations due to disease do not entail any
wrongdoing on the part of the employee. It also does not purely involve the employer’s willful and
voluntary exercise of management prerogative – a function associated with the employer's
inherent right to control and effectively manage its enterprise. 44 Rather, terminations due to
disease are occasioned by matters generally beyond the worker and the employer's control.

In fixing the amount of nominal damages whose determination is addressed to our sound
discretion, the Court should take into account several factors surrounding the case, such as: (1)
the employer’s financial, medical, and/or moral assistance to the sick employee; (2) the flexibility
and leeway that the employer allowed the sick employee in performing his duties while attending
to his medical needs; (3) the employer’s grant of other termination benefits in favor of the
employee; and (4) whether there was a bona fide attempt on the part of the employer to comply
with the twin-notice requirement as opposed to giving no notice at all.

We award Deoferio the sum of ₱30,000.00 as nominal damages for violation of his statutory right
to procedural due process. In so ruling, we take into account Intel’s faithful compliance with Article
284 of the Labor Code and Section 8, Rule 1, Book 6 of the IRR. We also note that Deoferio’s
separation pay equivalent to one-half month salary for every year of service 45 was validly offset by
his matured car loan. Under Article 1278 of the Civil Code, in relation to Article 1706 of the Civil
Code46 and Article 113(c) of the Labor Code,47 compensation shall take place when two persons
are creditors and debtors of each other in their own right. We likewise consider the fact that Intel
exhibited real concern to Deoferio when it financed his medical expenses for more than four
years. Furthermore, prior to his termination, Intel liberally allowed Deoferio to take lengthy leave
of absences to allow him to attend to his medical needs.

Wentling is not personally liable for

the satisfaction of nominal damages
in favor of Deoferio

Intel shall be solely liable to Deoferio for the satisfaction of nominal damages. Wentling, as a
corporate officer, cannot be held liable for acts done in his official capacity because a corporation,
by legal fiction, has a personality separate and distinct from its officers, stockholders, and
members. There is also no ground for piercing the veil of corporate fiction because Wentling
acted in good faith and merely relied on Dr. Lee’s psychiatric report in carrying out the dismissal. 48

Deoferio is not entitled to salary

differential, backwages, separation
pay, moral and exemplary damages,
as well as attorney's fees

Deoferio's claim for salary differential is already barred by prescription. Under Article 291 of the
Labor Code, all money claims arising from employer-employee relations shall be filed within three
years from the time the cause of action accrued. In the current case, more than four years have
elapsed from the pre-termination of his assignment to the United States until the filing of his
complaint against the respondents. We thus see no point in further discussing this matter. His
claim for backwages, separation pay, moral and exemplary damages, as well as attorney's fees
must also necessarily fail as a consequence of our finding that his dismissal was for an
authorized cause and that the respondents acted in good faith when they terminated his services.

WHEREFORE, premises considered, we partially grant the petition; the assailed February 24,
2012 decision and the August 2, 2012 resolution of the Court of Appeals stand but respondent
Intel Technology Philippines, Inc. is ordered to pay petitioner Marlo A. Deoferio nominal damages
in the amount of ₱30,000.00. We totally deny the petition with respect to respondent Mike
Wending.

SO ORDERED.
 G.R. No. 182201, November 14, 2016

UNIVERSAL INTERNATIONAL INVESTMENT (BVI) LIMITED, Petitioner, v. RAY BURTON
DEVELOPMENT CORPORATION, Respondent.

G.R. No. 185815, November 14, 2016

UNIVERSAL INTERNATIONAL INVESTMENT (BVI) LIMITED, Petitioner, v. RAY BURTON
DEVELOPMENT CORPORATION, Respondent.

D E C I S I O N

SERENO, C.J.:

At bench is a review of the damage claims for contractual breach sought by

petitioner Universal International Investment (BVI) Limited (Universal) against
respondent Ray Burton Development Corporation (RBDC). In G.R. No. 185815,
Universal contests the Court of Appeals (CA) Decision and Resolution rejecting its
demand for damages against RBDC.1 Petitioner seeks damages for non-delivery of
the properties it had purchased from respondent and the titles thereto. In G.R. No.
182201, Universal assails the CA Decision and Resolution, which affirmed the
discharge of one of respondent's attached properties meant to secure petitioner's
claims for damages.2

FACTUAL ANTECEDENTS

RBDC owned and developed Elizabeth Place, a condominium located at H.V. De la

Costa St., Salcedo Village, Makati City. On 18 October 1996, respondent and
petitioner entered into separate Contracts to Sell 3 covering the purchase of 10
condominium units and 10 parking slots in the building. In February 1999, petitioner
paid respondent the full purchase price of these properties amounting to
P52,836,781.50.4

Universal issued a letter dated 23 August 2000 to RBDC demanding the cancellation
of the sales transaction after the latter failed to deliver possession of the properties
and reneged on its obligation to transfer the Condominium Certificates of Title
(CCTs) to petitioner's name.5 On 6 August 2001, respondent sent a letter to
Universal informing the latter that the construction of the subject properties had
been completed.6 Several demand letters followed.7

RBDC ultimately failed to satisfy the demand of Universal to deliver the properties.
Thereafter, petitioner discovered that the mother title to the lot of Elizabeth Place
had been mortgaged to China Banking Corporation (China Bank) since 31 July
1991.8 Petitioner found that a Mortgage Clearance from the Housing and Land Use
Regulatory Board (HLURB) had been issued on 17 October 1996 9 and the securities
foreclosed by China Bank on 18 May 2001.10

PROCEEDINGS BEFORE THE HLURB

On 29 May 2002, Universal filed with the Expanded National Capital Region Field
Office (ENCRFO) of the HLURB a Complaint for Specific Performance or Rescission of
Contract and Damages.11 To secure its claims, petitioner moved for the issuance of a
writ of preliminary attachment against the properties of RBDC. Universal imputed
fraud to respondent for concealing the mortgage with China Bank. On 3 June 2002, a
Writ of Attachment was issued by the ENCRFO.12

Universal sought the delivery of (1) the condominium units and (2) their CCTs. In
the event that delivery were to be proven impossible, it prayed for the rescission of
the Contracts to Sell with a refund of the purchase price plus the penalty interest
stipulated under Section 6 thereof. The contracts provide for a 1.5% monthly
interest on the total purchase price, computed from the date of cancellation of the
sale until full refund of the payments.

RBDC countered13 that Universal could not rightly demand delivery, for the latter had
yet to pay transfer charges under the Contracts to Sell. In the alternative,
respondent claimed that it had already delivered the properties when it sent a letter
to petitioner on 6 August 2001.

As regards the CCTs, RBDC argued that petitioner should demand these from China
Bank. The CA summarized that contention of respondent in this wise: 14

Moreover, RBDC claims that it was impeded from releasing the titles of Elizabeth
Place to the deserving buyers because Chinabank had illegally foreclosed the
mortgage over Elizabeth Place; that in fact, RBDC had instituted a case for delivery
of titles before the HLURB entitled "Ray Burton Development Corp. versus China
Banking Corp." docketed as HLURB REM 121401-11726; and that in a Judgment
Upon Compromise dated August 1, 2002, HLURB directed Chinabank "to
release the titles of all units in Elizabeth Place that are now fully paid and
those that will in the future be fully paid to their respective buyers
irrespective of who the seller is." RBDC asserted that Universal should instead
direct its claim for delivery of the titles of the properties to Chinabank. (Emphasis
supplied)

On 25 March 2003, the ENCRFO issued a Decision15 in favor of Universal. The former
found that petitioner had completed the payment of the total contract price of
P52,836,781.50 in February 1999. At that point, said the ENCRFO, the reciprocal
obligation of respondent to deliver possession of the properties and their CCTs
became due and demandable.

On 12 May 2003, RBDC filed a Petition for Review 16 before the Board of
Commissioners (BOC) of the HLURB. Respondent also moved for the partial
discharge17 of one of its attached properties: the lot in Lapu-Lapu City with Transfer
Certificate of Title (TCT) No. T-29726.

RBDC reiterated its arguments below. Universal likewise echoed its earlier assertions,
but additionally claimed that respondent's Petition for Review lacked the appeal bond
needed to perfect an appeal.18

The BOC did not dismiss respondent's Petition for Review. Instead, on 10 October
2003, it issued an Order19 directing the remand of the case to the ENCRFO so that
the latter could include China Bank in the proceedings. Universal moved for
reconsideration, but to no avail.20

The BOC did not rule upon the motion of RBDC for the discharge of its Lapu-Lapu
City property. Therefore, respondents filed a second Motion for Partial Discharge. 21 In
its Resolution dated 29 June 2004, the BOC allowed the discharge of the Lapu-Lapu
City property owned by respondent, since the latter was willing to put up a
counterbond.22

PROCEEDINGS BEFORE THE OP

Universal successfully appealed its case before the Office of the President (OP). 23 In
its Decision dated 29 October 2004,24 the OP reversed the ruling of the BOC and held
that Universal had a right to rescind the Contracts to Sell, as well as to refund the
purchase price of the properties with the liquidated damages specified in Section 6 of
the contracts. Nonetheless, the OP maintained the validity of the discharge of the
Lapu-Lapu City property.25

PROCEEDINGS BEFORE THE CA

Universal assailed the discharge of the Lapu-Lapu City property via a Petition for
Certiorari under Rule 65 of the Rules of Court in CA-G.R. SP No. 89578. 26 In its
Decision dated 25 June 2007 and Resolution dated 14 March 2008, the CA dismissed
the action for lack of merit. Anent the main controversy involving the non-delivery of
the condominium units and parking slots, RBDC filed a Petition for Review 27 under
Rule 43 of the Rules of Court in CA-G.R. SP No. 89468. In both proceedings, the
parties repeated their arguments a quo.

During the pendency of the case before the CA, Universal manifested 28that
China Bank had released the subject properties, and that petitioner had
already obtained their CCTs on 5 January 2005.

On account of this supervening event, RBDC moved that this case be considered
moot and academic.29

Universal responded that its acquisition of the condominium units from China Bank
resulted only in the partial satisfaction of the former's claims against RBDC.
Petitioner claimed before the CA that respondent must still pay for the damages
specified in Section 6 of the Contracts to Sell on account of the latter's delayed
delivery of the properties. Universal also claimed compensation for property losses
amounting to P19,646,483.72, supposedly to cover the depreciation costs and
expenses it had incurred for the release of the properties from China Bank.

In its Decision dated 31 July 2007, which was maintained in its Resolution dated II
December 2008, the CA wholly denied Universal's entreaty for damages.

PROCEEDINGS BEFORE THIS COURT

The consolidated Petitions for Review on Certiorari filed by Universal under Rule 45
of the Rules of Court, docketed as G.R. Nos. 182201 and 185815, collectively raise
three points.30
First, Universal contends that the CA gravely erred when the latter sustained the
OP's discharge of the Lapu-Lapu City property, notwithstanding the irregularities in
the proceedings below.

Second, Universal argues that because RBDC failed to attach an appeal bond when
the latter elevated the ENCRFO Decision to the BOC, that ruling had become final
and executory and can no longer be reviewed by the BOC, the OP, the CA, or this
Court.

Third, petitioner claims that the CA gravely erred in refusing to award damages and
property losses. Petitioner seeks damages on account of the contractual breaches of
respondent consisting of the latter's failure to deliver the properties and to transfer
their CCTs to the name of Universal. Petitioner also narrates that RBDC concealed
the mortgage of the properties to China Bank.

RBDC stands by the validity of the partial discharge of its Lapu-Lapu City property.
In the main, it denies committing any breach of contract against Universal. Absent
any dereliction on its part, respondent claims that petitioner should not be awarded
damages.31

ISSUES

Given the developments in this case, this Court adjudges that the main issues to be
resolved are as follows:

I. Whether the CA incorrectly affirmed the discharge of the Lapu-Lapu City

property of RBDC

II. Whether the CA gravely erred in denying the demand of petitioner for the
liquidated damages specified in Section 6 of the Contracts to Sell

III. Whether the CA committed a grievous error in not granting the claims of
petitioner for losses amounting to P19,646,483.72

IV. Whether petitioner is entitled to damages on account of the contractual

breaches committed by respondent

RULING OF THE COURT

At the outset, this Court outrightly rejects the argument of Universal regarding the
failure of RBDC to attach an appeal bond when the latter elevated the ENCRFO
Decision to the BOC for being moot and academic. To recall, the appealed ENCRFO
Decision required RBDC to deliver the purchased properties and pay damages to
Universal; and if that delivery was no longer possible, to refund the purchase price
plus interests thereon.

The properties and the titles thereto were finally delivered to Universal on 5 January
2005. Hence, its only existing claim in this case is for damages, which an appeal
bond does not secure under Section 3 (c), Rule XII of the 1996 HLURB Rules of
Procedure.32 Since interests, damages, and attorney's fees need not be covered by
an appeal bond, that controversy has come to an end with no practical and effective
relief to be given to petitioner.33

The Discharge of the Lapu-Lapu

City Property

Universal highlights the irregularities that supposedly attended the discharge of the
Lapu-Lapu City property owned by RBDC. First, the BOC Order dated 10 October
2003, which did not rule upon the issue of the discharge, was improvidently modified
by its Resolution dated 29 June 2004. The Order was modified upon respondent's
filing of a second Motion for Partial Discharge, instead of a proper Motion for
Reconsideration. Second, since the BOC had directed the remand of the case to the
ENCRFO, the former lost the jurisdiction to order the discharge. Third, the discharge
transpired without notice and hearing.

On the first infirmity, we hold that the CA did not exceed its jurisdiction when it
sustained the BOC Resolution dated 29 June 2004 granting the discharge, even if not
through a motion for reconsideration but via a second Motion for Partial Discharge.
The second Motion for Partial Discharge may very well take the place of a motion for
reconsideration, considering that it also sought the reconsideration of the BOC's
failure to resolve the first Motion for Partial Discharge. It is basic that the caption
should not be the governing factor, but rather the allegations contained in the
motion or pleading, that should determine the nature of the action.34

As regards the second and the third irregularities, this Court finds no justification for
the exercise of its discretionary power of appellate review. The CA, which heard the
issues under the framework of a special civil action for certiorari, has thoroughly
explained the purported irregularities. We quote with approval the following excerpt
from the assailed CA Decision:35

It is absurd to assume that the ENCRFO, a subordinate of the HLURB Board of

Commissioners, is the only agency that can discharge the writ of attachment it
previously issued. As the Board is the reviewing body of the entire HLURB, it
definitely has the power to overturn, revise or modify the ruling handed down by its
subordinate. To rule otherwise would render the appeal before the Board nugatory
and irrelevant.

xxxx

As for the alleged lack of hearing, petitioner's filing of an Opposition to respondent's

motion for partial discharge before the HLURB Board sufficiently satisfies said
requirement. x x x.

Universal's Claim for Liquidated

Damages under Section 6 of the
Contracts to Sell

Proceeding to the main controversy of these consolidated cases, Universal asserts

that because RBDC failed to transfer possession of the properties, and their CCTs,
petitioner-buyer is entitled to damages by way of the interest specified in Section 6
of the Contracts to Sell, viz:
SECTION 6. BREACH AND/OR VIOLATIONS OF THE CONTRACT.

This agreement shall be deemed cancelled, at the option of the BUYER, in the event
that SELLER, for the reasons of force majeure, decide not to continue with the
Project or the Project has been substantially delayed. In such a case, the BUYER
shall be entitled to refund all the payments made with interest at one-and-a-half
(1 ½) percent per month on the amount paid computed from the date of
cancellation until the payments have been fully refunded. Substantial delay is
defined as six (6) months from date of estimated date of completion. The parties
agree that the estimated date of completion shall be December 31, 1998. (Emphasis
supplied)

RBDC counters that it cannot be considered in breach of the agreement, since

Universal failed to pay the transfer charges. The CA agreed with respondent's
reasoning and thus rejected petitioner's demand for liquidated damages. This Court
concurs with the CA's rejection of liquidated damages, but for a different reason.

If the terms of the contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. 36 In this case,
the very words of Section 6 of the Contracts to Sell refer only to situations of (1)
force majeure or (2) substantial delay in the condominium project, Elizabeth Place.

Universal is not alleging either of these two circumstances. Rather, it is claiming

damages for RBDC's failure to deliver possession of the condominium units, parking
slots, and their CCTs. Hence, Section 6 of the Contracts to Sell is clearly inapplicable
to petitioner's cause of action.

The Demand of Universal to Recover

Losses amounting toP19,646,483.72

Universal reiterates its claims for actual damages based on the losses it suffered
amounting to P19,646,483.72. This amount represents the depreciation between the
P57,146,483.72 purchase priceof the properties in 1996 and the
P37,500,000 market value of the properties appraised at the time that petitioner
obtained the titles from China Bank in 2005.37

Petitioner computes that the purchase price in 1996 totals P57,146,483.72, which is
the summation of the following amounts: P52,836,781.50 total contract price;
P770,613.68 condominium dues, P368,881.63 real estate taxes, and the
P3,170,206.91 expenses paid to China Bank for the release of the properties. In
effect, petitioner seeks to recover the depreciation costs and the additional sums it
paid to obtain the release of the properties from China Bank. For lack of legal basis,
the CA entirely rejected petitioner's claims for losses.

Universal now seeks refuge under Article 2200 of the Civil Code to justify its claim for
damages:

ARTICLE 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.
To adjudicate petitioner's claims, this Court looks into the fundamental elements in
recovering damages. In MEA Builders Inc. v. Court of Appeals,38 We defined damages
as follows:

In legal contemplation, the term "damages" is the sum of money which the law
awards or imposes as a pecuniary compensation, a recompense or satisfaction for an
injury done or a wrong sustained as a consequence either of a breach of a
contractual obligation or a tortuous act.

Based on the above definition, in order to recover damages, the claimant must prove
(1) an injury or a wrong sustained (2) as a consequence of a breach of contract or
tort and (3) caused by the party chargeable with a wrong. 39 As Universal claims
actual damages, it is only entitled to such pecuniary loss as it has duly proved. 40

Losses Sustained by Universal

Petitioner cites Article 2200 of the Civil Code to support its claim for losses
equivalent to a P19,646,483.72 reduction in the market value of the condominium
units. This provision speaks of indemnification for lost profits that would have been
obtained by the claimant if not for the injury caused by the erring party. 41 In the
present case, however, Universal does not even allege that it is marketing the
properties for profit, either by lease or by sale. Thus, Article 2200 cannot serve as
the proper basis for recovering the value of the condominium units.

In the alternative, assuming that the condominium units were utilized for profit, this
Court finds no iota of evidence as to the amount of profits that Universal would have
earned from the properties. To justify a grant of compensatory damages, it is
necessary that the actual amount of loss to be proved with a reasonable degree of
certainty, premised upon competent proof and the best evidence obtainable by the
injured party.42

We cannot consider as unearned profits the P19,646,483.72 difference between the

total contract price and the present market value of the properties. That conclusion
presupposes that Universal has (1) successfully marketed the properties (2) at a
favorable retail price that would allow it to recover its original investment.
In National Power Corp. v. Philipp Brothers Oceanic, Inc.,43 this Court explained that
in order to recover actual damages, the alleged unearned profits must not be
conjectural or based on contingent transactions. Speculative damages are too
remote to be included in an accurate estimate of damages.44

Breach of Contract by RBDC

Both parties entered into a contract to sell, not a contract of sale. In the former
agreement, ownership is reserved by the vendor. 45 Upon full payment of the
purchase price, the resulting duties of RBDC as vendor are found in Section 3 of the
subject agreement, viz:

SECTION 3. TITLE AND OWNERSHIP OF UNIT.

a) Upon full payment of the BUYER of the above purchase price, including any and all
payments as provided herein, and upon full compliance by the BUYER of all his
obligation as contained in this contract, the SELLER shall deliver to the BUYER a
Deed of Absolute Sale conveying its rights, interests and title to the UNIT and the
appurtenant undivided interest in the common areas of the Project, and
the corresponding Condominium Certificate of Title. The BUYER shall give the
SELLER reasonable time from date of completion of the Project to secure the title to
the UNIT. A copy of the Deed of Absolute Sale is attached as Annex A. x x x.
(Emphasis supplied)

RBDC only has two obligations specified by Section 3: (1) to deliver deeds of
absolute sale; and (2) to deliver the corresponding CCTs. Contrary to the demands
of petitioner, respondent did not have any contractual obligation to surrender
possession of the properties. Neither did the latter have to cause the transfer of the
CCTs to petitioner's name.

In Chua v. Court of Appeals,46 we explained the nature and the incidents of a

contract to sell as follows:

In a contract to sell, the obligation of the seller to sell becomes demandable only
upon the happening of the suspensive condition. In this case, the suspensive
condition is the full payment of the purchase price by Chua. Such full payment gives
rise to Chua's right to demand the execution of the contract of sale.

It is only upon the existence of the contract of sale that the seller becomes
obligated to transfer the ownership of the thing sold to the buyer.

xxxx

In the sale of real property, the seller is not obligated to transfer in the name of
the buyer a new certificate of title, but rather to transfer ownership of the real
property. There is a difference between transfer of the certificate of title in the name
of the buyer, and transfer of ownership to the buyer. The buyer may become the
owner of the real property even if the certificate of title is still registered in the name
of the seller. (Emphasis supplied)

Universal does not base its claim for damages on grounds supported by the
Contracts to Sell. Instead, it argues that respondent's failure to transfer the CCTs
and convey possession of the properties caused the depreciation of their market
value. Hence, this Court rules that petitioner's premise for its recovery of
depreciation losses is misplaced.47

Proximate Cause of Universal's

Losses

The act or omission of respondent must have been the proximate cause, as
distinguished from the remote cause, of the loss sustained by the
claimant.48 Proximate cause - determined by a mixed consideration of logic, common
sense, policy, and precedent49 - is that cause which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred.50
Applying that definition to the case at bar, Universal must demonstrate that the
breaches of RBDC caused the depreciation of the condominium units; or conversely,
that had respondent performed its contractual obligations, the properties would not
have diminished in value.

Universal does not specify how RBDC's non-delivery of the properties resulted in the
depreciation of their value. Neither does petitioner prove that had it possessed the
properties, it could have avoided their decline in the real estate market. At most, it
has only been able to show that with the passage of time, its P57,146,483.72
investment in 1996 was reduced to P37,500,000 in 2005. Therefore, considering the
dearth of proof of causality in this case, this Court cannot justly exact the supposed
P19,646,483.72 depreciated value of the 1 0 condominium units and 10 parking slots
from RBDC.

Recovery from RBDC of Sums Paid

by Universal to China Bank

As mentioned above, Universal seeks to recover from RBDC the additional sums paid
by the former to obtain the release of the properties from China Bank. Respondent
counters that it should not be made to pay the P770,613.68 condominium dues,
P368,881.63 real estate taxes, and P3,170,206.91 expenses, given that China Bank
was the one obliged by the HLURB to release the condominium units.

We agree with RBDC. Respondent correctly argues that it is not chargeable for the
alleged expense items. Clearly - and logically - the HLURB did not require any
additional payment for the fully paid buyers of the condominium units. Hence,
Universal should not have paid any additional amount to China Bank. In the
final Judgment Upon Compromise dated 1 August 2002, the HLURB directed the
bank to release the titles to all the units without qualification:51

The affidavits of undertaking of the mortgagee bank are requirements in the

issuance of a clearance to mortgage as provided for under Section 18 of Presidential
Decree No. 957 for the protection of the buyers.

It is clear from the affidavits that the mortgagee bank undertook to cancel/release
the mortgage to fully paid units notwithstanding the nonpayment of the total
mortgage loan incurred by the mortgagor. The mortgagee bank has to abide by this
undertaking.

Moreover, Section 25 of Presidential Decree No. 957 substantially provides that the
titles to fully paid condominium units should be secured and delivered to the buyers.

Therefore, the China Banking Corporation should release the titles to all fully paid
condominium units to the buyers whether they are its buyers or the buyers of Ray
Burton Development Corporation or Mercantile Investment Company, Inc.

Given that the sums expended by Universal should not have been incurred in the
first place, this Court finds no just reason for petitioner to demand the payment of
the expenses, association dues, and realty taxes from RBDC. Notably, as regards the
payment of association dues and realty taxes, the Contracts to Sell provide that
these shall not be shouldered by respondent seller.52
Universal's Entitlement to Damages
on Account of RBDC's Breaches

As discussed. respondent had two obligations specified in Section 3 of the Contracts

to Sell: ( 1) to deliver the deeds of absolute sale; and (2) to give the corresponding
CCTs. RBDC admittedly failed to perform these obligations, but invoked the excuse
that Universal had defaulted on the payment of transfer charges under Section 5(a)
of the Contracts to Sell. The provision reads as follows:53

SECTION 5. TAXES ASSESSMENTS AND EXPENSES.

a) Documentary stamp taxes, registration fees, taxes and assessments on transfer of

real properties and other necessary and incidental expenses and all other forms of
taxes as imposed by the government related to the acquisition of the
property as well as other expenses that may be incurred in connection with the
execution of the Absolute Deed of Sale and the conveyance/transfer of Title
to the BUYER, shall be for the sole account and responsibility of the BUYER.

In the event the SELLER agrees to handle the registration of the Deed of Sale and
effect title transfer in the name of the BUYER, the amount of taxes, fees, and
expenses covering the same shall be paid by the BUYER to the SELLER within five (5)
days from receipt of the Notice of Completion and Delivery of the Unit issued by the
SELLER. (Emphasis supplied)

The excuse given by RBDC deserves scant consideration. In order that the debtor
may be held to be in default, the following requisite conditions must be present: (1)
the obligation is demandable and already liquidated; (2) the debtor delays
performance of the obligation; and (3) the creditor requires the performance
judicially or extrajudicially.54

Nowhere in the records does this Court find a demand from RBDC for Universal to
pay any sum under the above provision. None of the letters of respondent to
petitioner resembles a notice requiring the latter to tender any payment for
government charges and expenses connected with the execution of the Deed of
Absolute Sale or the transfer of titles. Moreover, there is no liquidated demand to
speak of, as there is no itemized final computation. 55 All in all, this Court does not
consider Universal to have defaulted on the payment of transfer charges.

Section 5(a) must be construed as a whole. Its first paragraph refers to the payment
for (1) government-imposed taxes, fees, and expenses related to the acquisition of
the property; and (2) expenses that may be incurred in connection with the
execution of the Deeds of Absolute Sale and the conveyance or transfer of titles to
the buyer.

The second paragraph of Section 5 specifies that in the event the seller handles the
registration of the Deed of Absolute Sale and effects title transfer in the name of the
buyer, then that is the time that the buyer would have to give the seller the payment
for those transactions. Specifically, the buyer must tender payment within five days
from receipt of the seller's notice of completion and delivery of the unit.
We appreciate that the charges under Section 5(a) are sums to be expended for the
titling of the properties. However, the obligation to pay these charges specifically to
the seller - arises only "in the event" that the latter elects to handle the titling of the
properties. In this case, RBDC has not averred that it has undertaken that
responsibility. Consequently, Universal cannot be obliged to pay the transfer charges
to respondent. RBDC cannot demand performance by Universal without offering to
comply with its own prestation.56

RBDC is then left with no just reason not to perform its obligations to Universal. As
early as February 1999, respondent should have (1) executed deeds of absolute
sale; and (2) given the CCTs of the properties to petitioner. RBDC has not at all
complied with its duties despite the fact that Universal has already fully paid the
purchase price of the properties.

Temperate Damages in lieu of Actual

Damages

As explained above, Universal failed to prove its claims for actual damages, both as
regards the liquidated damages under Section 6 of the Contracts to Sell and the
alleged losses amounting to P19,646,483.72.

Nonetheless, petitioner may still be awarded damages in the concept of temperate or

moderate damages. Temperate damages may be recovered when the court finds
that some pecuniary loss has been suffered but the amount cannot, from the nature
of the case, be proven with certainty. 57 In this case, there is no doubt that Universal
sustained pecuniary loss, albeit difficult to quantify, arising from RBDC's failure to
execute deeds of absolute sale and to deliver the CCTs of the properties.

Had RBDC fulfilled these obligations, its transaction with Universal under the
Contracts to Sell would have been complete. 58 After an absolute deed of sale has
been signed by the parties, notarized and hence, turned into a public instrument,
then the delivery of the real property is deemed made by the seller to the
buyer.59 Consequently, the buyer would have right away enjoyed the possession of
the realties. Likewise, the titles thereto would have permitted the use of the
properties as collateral for further investments. Universal lost all of these
opportunities after RBDC failed to perform the latter's duties as a seller.

Hence, this Court is empowered to calculate moderate damages, rather than let the
aggrieved party suffer without redress from RBDC's wrongful act.60

The calculation of temperate damages is usually left to the sound discretion of the
courts.61 We observe the limit that in giving recompense, the amount must be
reasonable, bearing in mind that the same should be more than nominal, but less
than compensatory.62 In jurisprudence, this Court has pegged temperate damages to
an amount equivalent to a certain percentage of the actual damages claimed by the
injured party.63

The plight of the petitioner in Pacific Basin Securities Co., Inc. v. Oriental
Petroleum64 is parallel to that of Universal. In that case, the petitioner was also not
given transfer documents for the properties it had purchased, and the respondent
unjustifiably refused to record the transfer of the P17,727,000 worth of shares
purchased by the former. As a result, the petitioner therein was prevented from
reselling the subject shares in the stock market. For that dereliction, this Court
awarded the petitioner therein P1 million for temperate damages equivalent to 5% of
the actual damages claimed.

Anent the failure to deliver the titles to a purchased property, Government Service
Insurance System v. Spouses Labung-Deang65 is instructive. Similar to petitioners
herein, Spouses Labung-Deang were deprived by the bank of copies of the title to
the property that they had purchased. Consequently, the spouses failed to mortgage
it as security for a P50,000 loan that they could have utilized to renovate their
house. As recompense, this Court awarded them P20,000 temperate damages
equivalent to 40% of the amount of their alleged injury.

Aside from those two analogous cases, this Court has reviewed other cases involving
the award of temperate damages for breaches of contract. We have considered the:
(1) investment to be lost by the injured party; 66 (2) duration of suffering of the
injured party;67 and (3) urgent action undertaken by the party in breach to remedy
the situation.68 Thus, we take into account the following: (1) in 1999, Universal
invested P52,836,781.50 for 10 condominium units and 10 parking slots of Elizabeth
Place in Makati City; (2) Universal asked RBDC about the monthly rental rates of
each of the properties, which turned out be in the range of P20,000 to P48,000; 69 (3)
for six years, petitioner had no titles to or possession of the properties; and (4)
RBDC could have easily executed deeds of absolute sale as the templates of these
contracts had already been attached to the Contracts to Sell.70

Having laid down all the circumstances obtaining in this case, this Court is of the
view that an award for temperate damages equivalent to 15% of the P52,836,781.50
purchase value of the properties, or P7,925,517.23, is just and reasonable.

Exemplary Damages and Attorney's

Fees

Since petitioner is entitled to temperate damages, then the courts may also examine
the propriety of imposing exemplary damages on respondent.71 Exemplary damages
are corrective damages imposed by way of example or correction for the public
good.72 The grant thereof is intended to serve as a deterrent to or negative incentive
for curbing socially deleterious actions. 73 Relevant to this case, this Court highlights
that the State has an avowed policy to protect innocent buyers in real estate
transactions.74

Article 2232 of the Civil Code of the Philippines provides that in contracts, the court
may award exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. In this case, we find that respondent
indeed acted in that manner when, despite demand for and full payment of the
properties,75 it refused to execute deeds of absolute sale and release the CCTs to
petitioner without any sound basis.76 As already discussed, Universal's nonpayment
of transfer charges does not even serve as a potent excuse for RBDC's refusal to
execute deeds of absolute sale and to deliver the titles of the purchased properties.

Moreover, there was no impediment to RBDC's issuance of deeds of absolute sale. As

the owner, it could have still sold the properties even if it mortgaged them to China
Bank.77 As for the CCTs, respondent need not cause their transfer to the name of
petitioners. RBDC could have simply turned them over to Universal in 1999, two
years prior the foreclosure of the securities by China Bank in 2001. To make matters
worse, respondent did not categorically deny that it had failed to disclose to
petitioner that the lot of Elizabeth Place had been mortgaged to China Bank prior the
execution of the Contracts to Sell.78This Court holds that the totality of these
circumstances justify the imposition of exemplary damages on RBDC.

In Cantemprate v. CRS Realty Development Corporation,79 which is fairly akin to the

case at bar, the developer did not deliver the titles to the buyers of the fully paid
properties. For failing to comply with its unequivocal duty, this Court affirmed the
HLURB's award of P30,000 exemplary damages and P20,000 attorney's fees to each
of the buyers. Considering that ruling vis-a-vis the dereliction of RBDC in the present
case, which also involves the violation of a straightforward obligation to execute the
deeds of absolute sale and to deliver the CCTs for the 1 0 condominium units and 10
parking slots, an award of P300,000 as exemplary damages is justified to set an
example.

Given the award of exemplary damages, this Court likewise finds it just and
equitable under the circumstances to award P200,000 as attorney's fees. 80 In
addition, all damages awarded shall earn interest at the rate of 6% per annum from
the date of finality of this judgment until full payment.

WHEREFORE, premises considered, in G.R. No. 182201, the Court of Appeals

Decision dated 25 June 2007 and Resolution dated 14 March 2008 in CA-G.R. SP No.
89578 are AFFIRMED. In G.R. No. 185815, the Court of Appeals Decision dated 31
July 2007 and Resolution dated 11 December 2008 in CA-G.R. SP No. 89468
are AFFIRMED with the MODIFICATION that P7,925,517.23 as temperate
damages, P300,000 as exemplary damages, and P200,000 as attorney's fees are
awarded to petitioner Universal International Investment (BVI) Limited. All damages
awarded shall earn interest at the rate of 6% per annum from the date of finality of
this judgment until full payment.

SO ORDERED.
G.R. No. 211062

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,

vs.
MANUEL MACAL y BOLASCO, Accused-Appellant.

DECISION

PEREZ, J.:

Violence between husband and wife is nothing new. Marital violence that leads to spousal killing
is parricide. Perceived as a horrific kind of killing, penal laws impose a harsher penalty on
persons found guilty of parricide compared to those who commit the felony of homicide.

For review is the June 28, 2013 Decision1 of the Court of Appeals (CA) in CA-G.R. CEB-CR H.C.
No. 01209 which affirmed with modification the August 18, 2009 Decision 2 of the Regional Trial
Court (RTC) of Tacloban City, Branch 6, convicting Manuel Macal y Bolasco (accused-appellant)
of the crime of parricide and sentencing him to suffer the penalty of reclusion perpetua.

The Facts

For allegedly killing his spouse, Auria Ytac Macal (Auria), the accused-appellant was charged
with the crime of parricide in a February 13, 2003 Information 3 that reads:

"That on or about the 12th day of February, 2003, in the City of Tacloban, Philippines and within
the jurisdiction of this Honorable Court, the above-named accused, MANUEL MACAL y BOLASO,
did, then and there, wilfully, unlawfully and feloniously and with evident premeditation, that is,
having conceived and deliberated to kill his wife, AURIA MACAL y YTAC, with whom he was
united in lawful wedlock, armed with an improvised bladed weapon (belt buckle) and a kitchen
knife, stab said Auria Macal on the front portion of her body inflicting a fatal wound which caused
her death, which incident happened inside the bedroom of the house they are residing.

CONTRARY TO LAW."

On July 7, 2003, upon arraignment, the accused-appellant, duly assisted by counsel, pleaded not
guilty to the charge of parricide.4 During the pre-trial conference, the parties agreed to stipulate
that Auria was the wife of the accused-appellant.5 Thereafter, trial on the merits ensued.

Version of the Prosecution

To prove the accusation, the prosecution presented Angeles Ytac (Angeles) and Erwin Silvano
(Erwin) as witnesses.

Angeles, the mother of Auria, narrated that Auria and the accused-appellant got married in March
2000 and that out of their union, they begot two (2) children. Angeles claimed that, at the time of
the incident, they were all living together in a house located in V & G Subdivision, Tacloban City.
The said house was entrusted to Angeles by her brother, Quirino Ragub, who was then residing
in Canada.

Angeles testified that at around 1:20 in the morning of February 12, 2003, she, her children
Catherine, Jessica, Auria and Arvin were walking home after playing bingo at a
local peryahan. Some friends tagged along with them so that they could all feast on the leftover
food prepared for the fiesta that was celebrated the previous day. Along the way, Angeles and her
group met Auria's husband, the accused appellant. The latter joined them in walking back to their
house.

When they arrived at the house, the group proceeded to the living room except for Auria and the
accused-appellant who went straight to their bedroom, about four (4) meters away from the living
room. Shortly thereafter, Angeles heard her daughter Auria shouting, "mother help me I am going
to be killed."6 Upon hearing Auria's plea for help, Angeles and the rest of her companions raced
towards the bedroom but they found the door of the room locked. Arvin kicked open the door of
the bedroom and there they all saw a bloodied Auria on one side of the room. Next to Auria was
the accused-appellant who was then trying to stab himself with the use of an improvised bladed
weapon (belt buckle). Auria was immediately taken to a hospital, on board a vehicle owned by a
neighbor, but was pronounced dead on arrival. Angeles declared that the accused-appellant
jumped over the fence and managed to escape before the policemen could reach the crime
scene.

Erwin corroborated Angeles' testimony that Auria was killed by the accused-appellant. Erwin
claimed that he was part of the group that went to Angeles' residence on that fateful morning.
From where he was seated in the living room, Erwin recounted that he heard Auria's screaming
for her mother's help. The cry for help prompted him to ran towards the bedroom. Once the door
was forcibly opened, Erwin became aware that the accused-appellant stabbed Auria on the upper
left portion of her chest with a stainless knife. Erwin testified that the accused-appellant stabbed
himself on the chest with a knife-like belt buckle and that soon after, the accused-appellant
hurriedly left the house.

The prosecution formally offered in evidence the Certificate of Death wherein it is indicated that
Auria died of hemorrhagic shock secondary to stab wound. 7

Version of the Defense

To substantiate its version of the fact, the defense called to the witness stand the accused-
appellant, Benito Billota (Benito) and Nerissa Alcantara (Nerissa).1âwphi1

The accused-appellant did not refute the factual allegations of the prosecution that he stabbed his
wife, resulting in the latter's death, but seeks exoneration from criminal liability by interposing the
defense that the stabbing was accidental and not intentional.

The accused-appellant admitted that he was married to Auria in March 2000 and the wedding
was held in Manila. The couple had two children but one of them died. According to the accused-
appellant, he was employed as a security guard by Fighter Wing Security Agency which was
based in Manila. While the accused-appellant was working in Manila, his family lived with Angeles
in Tacloban City. The accused-appellant came home only once a year to his family in Tacloban
City.

On February 12, 2003, the accused-appellant arrived home in V & G Subdivision, Tacloban City
from Manila. Before the accused-appellant could reach the bedroom, he was warned by Arvin, his
brother-in-law, not to go inside the bedroom where his wife was with a man for he might be killed.
Ignoring Arvin's admonition, the accused-appellant kicked the door but it was opened from the
inside. After the bedroom door was opened, the accused-appellant saw his wife and a man
seated beside each other conversing. Furious by what he had seen, the accused-appellant went
out of the room, got a knife and delivered a stab blow towards the man but the latter was shielded
by Auria. In the process, the stab blow landed on Auria. After Auria was accidentally stabbed, the
man ran outside and fled. The accused-appellant testified that out of frustration for not killing the
man, he wounded himself on the chest. He then left the house and went to Eastern Visayas
Regional Medical Center (EVRMC) for medical treatment.

Benito attested that he came to know the accused-appellant while they were seated next to each
other on board a Christopher Bus bound for Tacloban City. The bus they were riding reached
Tacloban City past midnight of February 12, 2003. Considering the lateness of the hour and there
was no bus available that would take Benito to his final destination, the accused-appellant
convinced Benito to simply go home with him. Once they got home, the accused-appellant went
inside the house while Benito opted to stay by the main door. The accused-appellant asked
someone from the living room the whereabouts of his wife, Auria. Benito testified that a female
informed the accused-appellant that Auria was inside the bedroom but advised him not to go in as
Auria was not alone in the room. Undettered, the accused-appellant proceeded to the bedroom
and was able to get inside the room. Moments later, Benito heard a thudding sound coming from
the bedroom. Then, Benito saw a man running out of the house. Sensing trouble, Benito
immediately proceeded to the bus terminal.

To support the accused-appellant's claim that he brought himself to a hospital on February 12,
2003, Nerissa, the Administrative Officer/OIC Records Officer of EVRMC, was presented as
witness for the defense. Her testimony focused on the existence of the medical record concerning
the examination conducted on the accused-appellant by a physician at EVRMC. Per hospital
record, Nerissa confirmed that the accused-appellant sustained a three-centimeter wound located
at the left parastemal, level of the 5th ICS non-penetrating and another lacerated wound in the left
anterior chest.8

The RTC's Ruling

The RTC convicted the accused-appellant of the crime of parricide and the dispositive portion of
its judgment reads:

WHEREFORE, in view of the foregoing considerations, this Court finds accused MANUEL
MACAL y BOLASCOguilty beyond reasonable doubt of the crime of Parricide, and sentences
him to suffer the penalty of imprisonment of RECLUSION PERPETUA; to pay the heirs of the
victim, Aurea Ytac Macal, P.50,000.00 as civil indemnity, and P.50,000.00 for moral damages.
And, to pay the Costs.

SO ORDERED.9

The RTC gave full credence to the testimonies of the prosecution witnesses. In contrast, the RTC
found accused-appellant's declarations doubtful and contrary to human experience and reason.
The RTC was not persuaded by the accused-appellant's argument that the stabbing incident was
purely accidental after it took into account Auria's terrifying wail that she was going to be killed.
The RTC also refused to believe accused-appellant's claim that there was a man with Auria inside
the bedroom. Logic dictates that a man in that situation would normally run away the first
opportunity he had specifically when the accused-appellant stepped out of the bedroom to obtain
a knife. The RTC even went further by saying that the accused-appellant injured himself so that
he can later on invoke self-defense which he failed to do as there are witnesses who can easily
disprove his theory of self-defense.

The CA 's Ruling

On appeal, the CA affirmed with modification the RTC decision. The fallo of the CA decision
states:
IN LIGHT OF ALL THE FOREGOING, the Court hereby AFFIRMS with MODIFICATION the
assailed Decision dated August 18, 2009, of the Regional Trial Court, Branch 6, Tacloban City in
Criminal Case No. 2003-02-92. Accused-Appellant MANUEL MACAL y BOLASCO is found
GUILTY of parricide committed against his legal wife, Auria Ytac Macal, on February 12, 2003
and is sentenced to suffer the penalty of reclusion perpetua. He is further ordered to pay the heirs
of Auria Ytac Macal the amounts of Php 50,000.00 as civil indemnity, Php 50,000.00 as moral
damages, Php 25,000.00 as temperate damages and Php 30,000.00 as exemplary damages. All
monetary awards for damages shall earn interest at the legal rate of six percent (6%) per annum
from date of finality of this Decision until fully paid.

SO ORDERED.10

The appellate court ruled that all the elements of parricide are present in this case. Moreover, the
CA reasoned out that while Angeles did not actually see the accused-appellant stab Auria, the
prosecution adduced sufficient circumstantial evidence to sustain his conviction. From the
viewpoint of the CA, the prosecution's case against the accused-appellant was strengthened by
the latter's own testimony and admission that he stabbed his wife. The CA further held that
neither can the act of the accused-appellant be covered under the exempting circumstance of
accident under Article 12(4)11 of the Revised Penal Code nor under absolutory cause found in
Article 2412 of the same Code.

Hence, this appeal.

The Issue

The principal issue before the Court is whether the court a quo erred in finding the accused-
appellant guilty beyond reasonable doubt of the crime of parricide.

In the resolution of March 10, 2014, the Court required the parties to submit their respective
supplemental briefs within thirty (30) days from notice. However, both parties manifested that they
will no longer file the required briefs as they had already exhaustively and extensively discussed
all the matters and issues of this case in the briefs earlier submitted with the CA.

The Court's Ruling

The Court affirms the conviction of the accused-appellant with modifications.

All the Essential Elements of Parricide Duly Established and Proven by the Prosecution

Parricide is committed when: (1) a person is killed; (2) the deceased is killed by the accused; (3)
the deceased is the father, mother, or child, whether legitimate or illegitimate, or a legitimate other
ascendants or other descendants, or the legitimate spouse of the accused. 13

Among the three requisites, the relationship between the offender and the victim is the most
crucial.14 This relationship is what actually distinguishes the crime of parricide from homicide. 15 In
parricide involving spouses, the best proof of the relationship between the offender and victim is
their marriage certificate.16 Oral evidence may also be considered in proving the relationship
between the two as long as such proof is not contested. 17

In this case, the spousal relationship between Auria and the accused-appellant is beyond dispute.
As previously stated, the defense already admitted that Auria was the legitimate wife of the
accused-appellant during the pre-trial conference. Such admission was even reiterated by the
accused-appellant in the course of trial of the case. Nevertheless, the prosecution produced a
copy of the couple's marriage certificate which the defense admitted to be a genuine and faithful
reproduction of the original.18 Hence, the key element that qualifies the killing to parricide was
satisfactorily demonstrated in this case.

Just like the marital relationship between Auria and the accused-appellant, the fact of Auria's
death is incontestable. Witnesses, from both the prosecution and defense, were in agreement
that Auria expired on February 12, 2003. As additional proof of her demise, the prosecution
presented Auria's Certificate of Death which was admitted by the RTC and the defense did not
object to its admissibility.

Anent the remaining element, there is no doubt that Auria was killed by the accused-appellant.
The stabbing incident was acknowledged by the accused-appellant himself during his direct
examination by defense counsel Emelinda Maquilan, to wit:

xxxx

Q: What is the name of your wife?

A: Aurea Ytac.

Q: You said you saw your wife in your room with a man. Now, what was the man doing when you
saw this man together with your wife?

A: They were conversing.

Q: They were conversing in what part of your room?

A: At one side of the room.

Q: So, what did you do upon seeing the man, if there was any?

A: Because of my anger, I stabbed the man.

Q: Were you able to hit the man?

A: No, because my wife shielded him.

Q: Since your wife shielded the man, what happened to your wife?

A: My wife got hit.

Q: Now, in what of the body of his wife was hit?

A: I cannot exactly tell where she was hit but he delivered a stabbing blow at the man.

Q: So, after your wife was hit by the stabbing blow to be directed to the man, what happened
next?

A: Out of desperation because I was not able to kill the man, I wounded myself.

Q: How about the man whom you wanted to stab, what happened to him?
A: He ran.

Q: Since you said your wife was hit by that stabbing blow, what happen to your wife then?

A: She died.

Q: How about you, what happened to you after you yourself?

A: I left the place.19

The outright admission of the accused-appellant in open court that he delivered the fatal stabbing
blow that ended Auria's life established his culpability.

Clearly, all the elements of the crime of parricide as defined in Article 246 of the Revised Penal
Code are present in this case.

Affirmative Defense of Accident as an Exempting Circumstance Must Fail

The defense invoked Article 12 paragraph 4 of the Revised Penal Code to release the accused-
appellant from criminal liability. Pursuant to said provision, the essential requisites of accident as
an exempting circumstance are: (1) a person is performing a lawful act; (2) with due care; (3) he
causes an injury to another by mere accident; and (4) without fault or intention of causing it. 20

A close scrutiny of the transcripts of stenographic notes would reveal that the accused-appellant
was not performing a lawful act at the time Auria was stabbed. This can be gathered from the
narration of the accused-appellant during cross-examination conducted by Prosecutor Percival
Dolina:

xxxx

Q: Now, of course, when you saw the man and your wife, according to you, they were just
conversing with each other, correct?

A: Yes, sir.

Q: How far where they to each other?

A: They were beside each other.

Q: They were sitting?

A: Yes, sir, both were sitting.

Q: Of course, when you saw them, you got angry?

A: I became angry.

Q: That is why you got a knife and stabbed the man?

A: Yes, sir.
Q: And when you stabbed the man, you had the intention to kill him?

A: Yes, my intention was to kill him.

Q: But it was your wife who was hit?

A: My wife was the one hit.21

The defense of accident presupposes lack of intention to kill. 22 This certainly does not hold true in
the instant case based on the aforequoted testimony of the accused-appellant. Moreover, the
prosecution witnesses, who were then within hearing distance from the bedroom, testified that
they distinctly heard Auria screaming that she was going to be killed by the accused-appellant.

Given these testimonies, the accused-appellant's defense of accident is negated as he was

carrying out an unlawful act at the time of the incident.

It also bears stressing that in raising the defense of accident, the accused-appellant had the
inescapable burden of proving, by clear and convincing evidence, of accidental infliction of
injuries on the victim.23 In so doing, the accused-appellant had to rely on the strength of his own
evidence and not on the weakness of the prosecution's evidence. 24 As aptly pointed out by the
CA, the defense failed to discharge the burden of proving the elements of the exempting
circumstance of accident that would otherwise free the accused-appellant from culpability. Aside
from the accused-appellant's self-serving statement, no other proof was adduced that will
substantiate his defense of accidental stabbing.

Further, contrary to what the accused-appellant wants the Court to believe, his actuations closely
after Auria was stabbed tell a different story.1avvphi1 If Auria was really accidentally stabbed by
him, the accused-appellant's natural reaction would have been to take the lead in bringing his
wife to a hospital. Instead, his priority was to come up with an improvised bladed weapon that he
could use to hurt himself. Additionally, the fact that the accused-appellant ran away from the
crime scene leaving Auria's relatives and neighbors to tend to his dying wife is indicative of his
guilt.

The CA took one step further when it examined the applicability of Article 247 of the Revised
Penal Code in this case. For this purpose, the CA assumed arguendo that there is another man
inside the bedroom with Auria.

Article 247 is an absolutory cause that recognizes the commission of a crime but for reasons of
public policy and sentiment there is no penalty imposed. 25 The defense must prove the
concurrence of the following elements: (1) that a legally married person surprises his spouse in
the act of committing sexual intercourse with another person; (2) that he kills any of them or both
of them in the act or immediately thereafter; and (3) that he has not promoted or facilitated the
prostitution of his wife (or daughter) or that he or she has not consented to the infidelity of the
other spouse.26 Among the three elements, the most vital is that the accused-appellant must
prove to the court that he killed his wife and her paramour in the act of sexual intercourse or
immediately thereafter.27

Having admitted the stabbing, the burden of proof is shifted to the defense to show the
applicability of Article 247.28As disclosed by the accused-appellant, when he saw Auria with a
man, the two were just seated beside each other and were simply talking. Evidently, the
absolutory cause embodied in Article 247 is not applicable in the present case.
In sum, the Court agrees with the trial and appellate courts that the evidence of the prosecution
has established the guilt of the accused-appellant beyond reasonable doubt.

Penalty and Pecuniary Liability

Article 246 of the Revised Penal Code provides that the imposable penalty for parricide
is reclusion perpetua to death.1âwphi1 With the enactment of Republic Act No. 9346 (RA 9346),
the imposition of the penalty of death is prohibited. Likewise significant is the provision found in
Article 63 of the Revised Penal Code stating that in the absence of mitigating and aggravating
circumstances in the commission of the crime, the lesser penalty shall be imposed. Applying
these to the case at bar and considering that there are no mitigating and aggravating
circumstances present, the penalty of reclusion perpetua was correctly imposed by the RTC and
CA.

Civil indemnity is automatically awarded upon proof of the fact of death of the victim and the
commission by the accused-appellant of the crime of parricide. 29 Current jurisprudence sets civil
indemnity in the amount of P75,000.00. As such, the Court finds it necessary to increase the civil
indemnity awarded by the trial and appellate courts from P50,000.00 to P75,000.00.

There is no question that Auria's heirs suffered mental anguish by reason of her violent death.
Consequently, the award of moral damages is in order. Similar to civil indemnity, prevailing
jurisprudence pegs moral damages in the amount of P75,000.00. On that account, the Court must
also adjust the moral damages from P50,000.00 to P75,000.00.

Given that this is a case of a husband killing his wife where relationship a qualifying
circumstance, the award of exemplary damages is justified. The exemplary damages of
P30,000.00 awarded by the CA is maintained as it is consistent with the latest rulings of the
Court.

Temperate damages may be recovered when some pecuniary loss has been suffered but definite
proof of its amount was not presented in court.30 In People v. De Leon,31 the Court awarded
P25,000.00 as temperate damages where the expenses for the funeral cannot be determined
with certainty because of the absence of receipts to prove them. In keeping with the said ruling,
the Court affirms the CA's award of P25,000.00 as temperate damages.

On a final note, the Court upholds the imposition of interest at the legal rate of 6% per annum on
all the monetary awards for damages reckoned from the date of finality of this Decision until fully
paid.32 This is in accordance with the Court's discretionary authority to levy interest as part of the
damages and in conformity with the latest Court policy on the matter.

WHEREFORE, the CA's decision dated June 28, 2013 in CA-G.R. CEB-CR H.C. No. 01209,
finding accused-appellant, Manuel Macal y Bolasco, guilty beyond reasonable doubt of the crime
of Parricide, is hereby AFFIRMED with MODIFICATIONS. Accused-appellant is sentenced to
suffer the penalty of reclusion perpetua and to pay the heirs of the victim, Auria Ytac Macal, the
amounts of P75,000.00 as civil indemnity, P75,000.00 as moral damages, P30,000.00 as
exemplary damages, and P25,000.00 as temperate damages. In addition, all the monetary
awards shall earn an interest at the legal rate of 6% per annum from the date of finality of this
Decision until fully paid.

SO ORDERED.
G.R. No. 179334 April 21, 2015

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT

ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.

RESOLUTION

PERALTA, J.:

For resolution is the Motion for Reconsideration1 filed by respondents-movants spouses Heracleo
and Ramona Tecson imploring the Court to take a second look at its July 1, 2013 Decision, the
dispositive portion of which reads:

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of

Appeals Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the
valuation of the subject property owned by respondents shall be P0.70 instead of ₱1,500.00 per
square meter, with interest at six percent (6%) per annum from the date of taking in 1940 instead
of March 17, 1995, until full payment.2

In view of the contrasting opinions of the members of the Third Division on the instant motion, and
the transcendental importance of the issue raised herein, the members of the Third Division opted
to refer the issue to the En Banc for resolution.

For a proper perspective, we briefly state the factual background of the case.

In 1940, the Department of Public Works and Highways (DPWH) took respondents-movants'
subject property without the benefit of expropriation proceedings for the construction of the
MacArthur Highway. In a letter dated December 15, 1994,respondents-movants demanded the
payment of the fair market value of the subject parcel of land. Celestino R. Contreras (Contreras),
then District Engineer of the First Bulacan Engineering District of the DPWH, offered to pay for
the subject land at the rate of Seventy Centavos (P0.70) per square meter, per Resolution of the
Provincial Appraisal Committee (PAC) of Bulacan. Unsatisfied with the offer, respondents-
movants demanded the return of their property, or the payment of compensation at the current
fair market value.3 Hence, the complaint for recovery of possession with damages filed by
respondents-movants. Respondents-movants were able to obtain favorable decisions in the
Regional Trial Court (RTC) and the Court of Appeals (CA), with the subject property valued at
One Thousand Five Hundred Pesos (₱1,500.00) per square meter, with interest at six percent
(6%) per annum.

Petitioners thus elevated the matter to this Court in a petition for review on certiorari. The only
issue resolved by the Court in the assailed decision is the amount of just compensation which
respondents-movants are entitled to receive from the government for the taking of their property.
Both the RTC and the CA valued the property at One Thousand Five Hundred Pesos (₱1,500.00)
per square meter, plus six percent (6%) interest from the time of the filing of the complaint until
full payment. We, however, did not agree with both courts and ruled instead that just
compensation should be based on the value of the property at the time of taking in 1940, which is
Seventy Centavos (P0.70) per square meter.4 In addition, and by way of compensation, we
likewise awarded an interest of six percent (6%) per annum from 1940 until full payment. 5
Aggrieved, respondents-movants hereby move for the reconsideration of said decision on the
following grounds:

A. THE HONORABLE COURT MAY LOOK INTO THE "JUSTNESS" OF THE

MISERABLE AMOUNT OF COMPENSATION BEING AWARDED TO THE HEREIN
RESPONDENTS; and

B. THE HONORABLE COURT MAY SETTLE FOR A HAPPY MIDDLE GROUND IN THE
NAME OF DOCTRINAL PRECISION AND SUBSTANTIAL JUSTICE.6

Citing the views of Justices Presbitero J. Velasco, Jr. and Marvic Mario Victor F. Leonen in their
Dissenting and Concurring Opinion and Separate Opinion, respectively, respondents-movants
insist that gross injustice will result if the amount that will be awarded today will be based simply
on the value of the property at the time of the actual taking. Hence, as proposed by Justice
Leonen, they suggest that a happy middle ground be achieved by meeting the need for doctrinal
precision and the thirst for substantial justice.7

We maintain our conclusions in the assailed July 1, 2013 Decision with modification on the
amount of interest awarded, as well as the additional grant of exemplary damages and attorney's
fees.

At the outset, it should be stressed that the matter of the validity of the State's exercise of the
power of eminent domain has long been settled. In fact, in our assailed decision, We have
affirmed the ruling of the CA that the pre-trial order issued on May 17, 2001 has limited the issues
as follows: (1) whether or not the respondents-movants are entitled to just compensation; (2)
whether or not the valuation would be based on the corresponding value at the time of the taking
or at the time of the filing of the action; and (3) whether or not the respondents-movants are
entitled to damages.8 Moreover, it was held that for failure of respondents-movants to question
the lack of expropriation proceedings for a long period of time, they are deemed to have waived
and are estopped from assailing the power of the government to expropriate or the public use for
which the power was exercised.9 What is, therefore, left for determination in the instant Motion for
Reconsideration, in accordance with our Decision dated July 1, 2013, is the propriety of the
amount awarded to respondents as just compensation.

At this juncture, We hold that the reckoning date for property valuation in determining the amount
of just compensation had already been addressed and squarely answered in the assailed
decision. To be sure, the justness of the award had been taken into consideration in arriving at
our earlier conclusion.

We have in the past been confronted with the same issues under similar factual and procedural
circumstances. We find no reason to depart from the doctrines laid down in the earlier cases as
we adopted in the assailed decision. In this regard, we reiterate the doctrines laid down in the
cases of Forfom Development Corporation (Forfom) v. Philippine National Railways
(PNR),10 Eusebio v. Luis,11 Manila International Airport Authority v. Rodriguez, 12 and Republic v.
Sarabia.13

In Forfom, PNR entered the property of Forfom in January 1973 for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation
proceedings. In 1990, Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio, respondent's parcel of land was taken in 1980 by the City of
Pasig and used as a municipal road without the appropriate expropriation proceedings. In1996,
respondent filed a complaint for reconveyance and/or damages against the city government and
the mayor. In MIAA, in the early 1970s, petitioner implemented expansion programs for its
runway, necessitating the acquisition and occupation of some of the properties surrounding its
premises. As to respondent's property, no expropriation proceedings were initiated. In 1997,
respondent initiated a case for accion reivindicatoriawith damages against petitioner. In Republic,
sometime in 1956, the Air Transportation Office (ATO) took possession and control of a portion of
a lot situated in Aklan, registered in the name of respondent, without initiating expropriation
proceedings. Several structures were erected thereon, including the control tower, the Kalibo
crash fire rescue station, the Kalibo airport terminal, and the Headquarters of the PNP Aviation
Security Group. In 1995,several stores and restaurants were constructed on the remaining
portion of the lot. In 1997, respondent filed a complaint for recovery of possession with damages
against the storeowners wherein ATO intervened claiming that the storeowners were its lessees.

These cases stemmed from similar background, that is, government took control and possession
of the subject properties for public use without initiating expropriation proceedings and without
payment of just compensation; while the landowners failed for a long period of time to question
such government act and later instituted actions for recovery of possession with damages. In
these cases, the Court has uniformly ruled that the fair market value of the property at the time of
taking is controlling for purposes of computing just compensation.

In Forfom, the payment of just compensation was reckoned from the time of taking in 1973;
in Eusebio, the Court fixed the just compensation by determining the value of the property at the
time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis
for the award of compensation to the owner; and, in Republic,the Court was convinced that the
taking occurred in 1956 and was thus the basis in fixing just compensation.

As in the aforementioned cases, just compensation due respondents-movants in this case

should, therefore, be fixed not as of the time of payment but at the time of taking in 1940 which is
Seventy Centavos (P0.70) per square meter, and not One Thousand Five Hundred Pesos
(₱1,500.00) per square meter, as valued by the RTC and CA.

While disparity in the above amounts is obvious and may appear inequitable to respondents-
movants as they would be receiving such outdated valuation after a very long period, it should be
noted that the purpose of just compensation is not to reward the owner for the property taken but
to compensate him for the loss thereof. As such, the true measure of the property, as upheld by a
plethora of cases, is the market value at the time of the taking, when the loss resulted. This
principle was plainly laid down in Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of
the Philippines,14 to wit:

x x x In Land Bank of the Philippines v. Orilla, a valuation case under our agrarian reform law, this
Court had occasion to state:

Constitutionally, "just compensation" is the sum equivalent to the market value of the property,
broadly described as the price fixed by the seller in open market in the usual and ordinary course
of legal action and competition, or the fair value of the property as between the one who receives
and the one who desires to sell, it being fixed at the time of the actual taking by the
government. Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. It has been repeatedly stressed by this Court
that the true measure is not the taker's gain but the owner's loss. The word "just" is used to
modify the meaning of the word "compensation" to convey the idea that the equivalent to be
given for the property to be taken shall be real, substantial, full and ample. [Emphasis
supplied.]15

Indeed, the State is not obliged to pay premium to the property owner for appropriating the latter's
property; it is only bound to make good the loss sustained by the landowner, with due
consideration of the circumstances availing at the time the property was taken. More, the concept
of just compensation does not imply fairness to the property owner alone. Compensation must
also be just to the public, which ultimately bears the cost of expropriation. 16

Notwithstanding the foregoing, we recognize that the owner's loss is not only his property but also
its income-generating potential.17 Thus, when property is taken, full compensation of its value
must immediately be paid to achieve a fair exchange for the property and the potential income
lost.18 Accordingly, in Apo, we held that the rationale for imposing the interest is to compensate
the petitioners for the income they would have made had they been properly compensated for
their properties at the time of the taking.19 Thus:

We recognized in Republic v. Court of Appeals the need for prompt payment and the necessity of
the payment of interest to compensate for any delay in the payment of compensation for property
already taken. We ruled in this case that:

The constitutional limitation of "just compensation" is considered to be the sum equivalent to the
market value of the property, broadly described to be the price fixed by the seller in open market
in the usual and ordinary course of legal action and competition or the fair value of the property
as between one who receives, and one who desires to sell, i[f] fixed at the time of the actual
taking by the government. Thus, if property is taken for public use before compensation is
deposited with the court having jurisdiction over the case, the final compensation must
include interest[s] on its just value to be computed from the time the property is taken to
the time when compensation is actually paid or deposited with the court. In fine, between
the taking of the property and the actual payment, legal interest[s] accrue in order to place
the owner in a position as good as (but not better than) the position he was in before the
taking occurred.[Emphasis supplied]20

In other words, the just compensation due to the landowners amounts to an effective forbearance
on the part of the State-a proper subject of interest computed from the time the property was
taken until the full amount of just compensation is paid-in order to eradicate the issue of the
constant variability of the value of the currency over time. 21 In the Court's own words:

The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value
of the property to be computed from the time petitioner instituted condemnation proceedings and
"took" the property in September 1969. This allowance of interest on the amount found to be
the value of the property as of the time of the taking computed, being an effective
forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation
and inflation of the value of the currency over time x x x. 22

On this score, a review of the history of the pertinent laws, rules and regulations, as well as the
issuances of the Central Bank (CB)or Bangko Sentral ng Pilipinas (BSP)is imperative in arriving
at the proper amount of interest to be awarded herein.

On May 1, 1916, Act No. 265523 took effect prescribing an interest rate of six percent (6%) or
such rate as may be prescribed by the Central Bank Monetary Board (CB-MB)for loans or
forbearance of money, in the absence of express stipulation as to such rate of interest, to wit:

Section 1. The rate of interest for the loan or forbearance of any money goods, or credits and the
rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be
six per centum per annum or such rate as may be prescribed by the Monetary Board of the
Central Bank of the Philippines for that purpose in accordance with the authority hereby
granted.
Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of
interest for the loan or renewal thereof or the forbearance of any money, goods or credits, and to
change such rate or rates whenever warranted by prevailing economic and social conditions.

In the exercise of the authority herein granted, the Monetary Board may prescribe higher
maximum rates for loans of low priority, such as consumer loans or renewals thereof as well as
such loans made by pawnshops finance companies and other similar credit institutions although
the rates prescribed for these institutions need not necessarily be uniform. The Monetary Board is
also authorized to prescribe different maximum rate or rates for different types of borrowings,
including deposits and deposit substitutes, or loans of financial intermediaries. 24

Under the aforesaid law, any amount of interest paid or stipulated to be paid in excess of that
fixed by law is considered usurious, therefore unlawful. 25

On July 29, 1974, the CB-MB, pursuant to the authority granted to it under the aforequoted
provision, issued Resolution No. 1622.1âwphi1 On even date, Circular No. 416 was issued,
implementing MB Resolution No. 1622, increasing the rate of interest for loans and forbearance
of money to twelve percent (12%) per annum, thus:

By virtue of the authority granted to it under Section 1 of Act No. 2655, as amended, otherwise
known as the "Usury Law," the Monetary Board, in its Resolution No. 1622 dated July 29, 1974,
has prescribed that the rate of interest for the loan or forbearance of any money, goods or
credits and the rate allowed in judgments, in the absence of express contract as to such
rate of interest, shall be twelve per cent (12%) per annum. 26

The foregoing rate was sustained in CB Circular No. 90527 which took effect on December 22,
1982, particularly Section 2 thereof, which states:

Sec. 2. The rate of interest for the loan or forbearance of any money, goods or credits and the
rate allowed in judgments, in the absence of express contract as to such rate of interest, shall
continue to be twelve per cent (12%) per annum.28

Recently, the BSP Monetary Board (BSP-MB),in its Resolution No. 796 dated May 16, 2013,
approved the amendment of Section 2 of Circular No. 905, Series of 1982, and accordingly,
issued Circular No. 799, Series of 2013, effective July 1, 2013, the pertinent portion of which
reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following
revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby
amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits
and the rate allowed in judgments, in the absence of an express contract as to such rate
of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.

This Circular shall take effect on 01 July 2013.29

Accordingly, the prevailing interest rate for loans and forbearance of money is six percent (6%)
per annum, in the absence of an express contract as to such rate of interest.
 In summary, the interest rates applicable to loans and forbearance of money, in the absence of an
express contract as to such rate of interest, for the period of 1940 to present are as follows:

Law, Rule and Regulations, Date of Effectivity Interest Rate

BSP Issuance

Act No. 2655 May 1, 1916 6%

CB Circular No. 416 July 29, 1974 12%

CB Circular No. 905 December 22, 1982 12%

CB Circular No. 799 July 1, 2013 6%

It is important to note, however, that interest shall be compounded at the time judicial demand is
made pursuant to Article 221230 of the Civil Code of the Philippines, and sustained in Eastern
Shipping Lines v. Court of Appeals,31then later on in Nacar v. Gallery Frames,32 save for the
reduction of interest rate to 6% for loans or forbearance of money, thus:

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 6% 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.33

Applying the foregoing law and jurisprudence, respondents-movants are entitled to interest in the
amount of One Million Seven Hundred Eighteen Thousand Eight Hundred Forty-Eight
Pesos and Thirty-Two Centavos (₱1,718,848.32) as of September 30, 2014,34 computed as
follows:

January 1, 194035 to July 28, 1974 P 10,553.4937

July 29, 1974 to March 16, 1995 26,126.3138

March 17, 199536to June 30, 2013 232,070.3339

July 1, 2013 to September 30, 2014 250,098.1940

Market Value of the Property at the time of

taking including interest P 518,848.32

Market value of the property at the time of

taking including interest P 518,848.32

Add: Exemplary damages 1,000.000.00

Attorney's fees 200,000.00

 Total Amount of Interest due to Respondents-
Movants as of September 30, 2014 ₱1,718,848.16

Considering that respondents-movants only resorted to judicial demand for the payment of the
fair market value of the land on March 17, 1995, it is only then that the interest earned shall itself
earn interest.

Lastly, from finality of the Court's Resolution on reconsideration until full payment, the total
amount due to respondents-movants shall earn a straight six percent (6%) legal interest, pursuant
to Circular No. 799 and the case of Nacar. Such interest is imposed by reason of the Court's
decision and takes the nature of a judicial debt.

Clearly, the award of interest on the value of the land at the time of taking in 1940 until full
payment is adequate compensation to respondents-movants for the deprivation of their property
without the benefit of expropriation proceedings. Such interest, however meager or enormous it
may be, cannot be inequitable and unconscionable because it resulted directly from the
application of law and jurisprudence-standards that have taken into account fairness and equity
insetting the interest rates due for the use or forbearance of money. 41 Thus, adding the interest
computed to the market value of the property at the time of taking signifies the real, substantial,
full and ample value of the property. Verily, the same constitutes due compliance with the
constitutional mandate on eminent domain and serves as a basic measure of fairness. In addition
to the foregoing interest, additional compensation shall be awarded to respondents-movants by
way of exemplary damages and attorney's fees in view of the government's taking without the
benefit of expropriation proceedings. As held in Eusebio v. Luis, 42 an irregularity in an
expropriation proceeding cannot ensue without consequence. Thus, the Court held that the
government agency's illegal occupation of the owner's property for a very long period of time
surely resulted in pecuniary loss to the owner, to wit:

However, in taking respondents' property without the benefit of expropriation proceedings and
without payment of just compensation, the City of Pasig clearly acted in utter disregard of
respondents' proprietary rights. Such conduct cannot be countenanced by the Court. For said
illegal taking, the City of Pasig should definitely be held liable for damages to
respondents. Again, in Manila International Airport Authority v. Rodriguez, the Court held that the
government agency's illegal occupation of the owner's property for a very long period of time
surely resulted in pecuniary loss to the owner. The Court held as follows:

Such pecuniary loss entitles him to adequate compensation in the form of actual or
compensatory damages, which in this case should be the legal interest (6%) on the value
of the land at the time of taking, from said point up to full payment by the MIAA. This is
based on the principle that interest "runs as a matter of law and follows from the right of the
landowner to be placed in as good position as money can accomplish, as of the date of the
taking."

The award of interest renders unwarranted the grant of back rentals as extended by the
courts below. In Republic v. Lara, et al., the Court ruled that the indemnity for rentals is
inconsistent with a property owner's right to be paid legal interest on the value of the property, for
if the condemn or is to pay the compensation due to the owners from the time of the actual taking
of their property, the payment of such compensation is deemed to retro act to the actual taking of
the property; and, hence, there is no basis for claiming rentals from the time of actual taking.
More explicitly, the Court held in Republic v. Garcellano that:
The uniform rule of this Court, however, is that this compensation must be, not in the form
of rentals, but by way of 'interest from the date that the company [or entity] exercising the
right of eminent domain take possession of the condemned lands, and the amounts
granted by the court shall cease to earn interest only from the moment they are paid to the
owners or deposited in court x x x.

xxxx

For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of
expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the lot
and negotiating with any of the owners of the property. To our mind, these are wanton and
irresponsible acts which should be suppressed and corrected. Hence, the award of
exemplary damages and attorneys fees is in order. However, while Rodriguez is entitled to
such exemplary damages and attorney's fees, the award granted by the courts below should be
equitably reduced. We hold that Rodriguez is entitled only to ₱200,000.00 as exemplary
damages, and attorney's fees equivalent to one percent (1%) of the amount due. 43

Similarly, in Republic v. CA,44 We held that the failure of the government to initiate an
expropriation proceeding to the prejudice of the landowner may be corrected with the awarding of
exemplary damages, attorney's fees and costs of litigation. Thus:

The Court will not award attorney's fees in light of respondent's choice not to appeal the CA
Decision striking down the award. However, we find it proper to award temperate and
exemplary damages in light of NIA's misuse of its power of eminent domain. Any arm of the
State that exercises the delegated power of eminent domain must wield that power with
circumspection and utmost regard for procedural requirements. A government instrumentality that
fails to observe the constitutional guarantees of just compensation and due process abuses the
authority delegated to it, and is liable to the property owner for damages.

Temperate or moderate damages may be recovered if pecuniary loss has been suffered but the
amount cannot be proved with certainty from the nature of the case.1âwphi1 Here, the trial and
appellate courts found that the owners were unable to plant palay on 96,655 square meters of the
Property for an unspecified period during and after NIA's construction of the canals in 1972. The
passage of time, however, has made it impossible to determine these losses with any certainty.
NIA also deprived the owners of the Property of possession of a substantial portion of their land
since 1972. Considering the particular circumstances of this case, an award of ₱150,000 as
temperate damages is reasonable.

NIA's irresponsible exercise of its eminent domain powers also deserves censure. For more than
three decades, NIA has been charging irrigation fees from respondent and other landowners for
the use of the canals built on the Property, without reimbursing respondent a single cent for the
loss and damage. NIA exhibits a disturbingly cavalier attitude towards respondent's property
rights, rights to due process of law and to equal protection of the laws. Worse, this is not the first
time NIA has disregarded the rights of private property owners by refusing to pay just
compensation promptly. To dissuade NIA from continuing this practice and to set an example for
other agencies exercising eminent domain powers, NIA is directed to pay respondent exemplary
damages of ₱250,000.45

Applying the aforequoted doctrines to the present case, considering that respondents-movants
were deprived of beneficial ownership over their property for more than seventy (70) years
without the benefit of a timely expropriation proceedings, and to serve as a deterrent to the State
from failing to institute such proceedings within the prescribed period under the law, a grant of
exemplary damages in the amount of One Million Pesos (₱1,000,000.00) is fair and reasonable.
Moreover, an award for attorney's fees in the amount of Two Hundred Thousand Pesos
(₱200,000.00) in favor of respondents-movants is in order.

In sum, respondents-movants shall be entitled to an aggregate amount of One Million Seven

Hundred Eighteen Thousand Eight Hundred Forty-Eight Pesos and Thirty-Two Centavos
(₱1,718,848.32) as just compensation as of September 30, 2014, computed as follows:

Market value of the property at the time P 518,848.32

of taking in 1940 including interest

Add: Exemplary Damages 1,000,000.00

Attorney's fees 200,000.00

Total Amount due to Respondents-

movants as of September 30, 2014 ₱1,718,848.32

This Court is not unaware that at present, stringent laws and rules are put in place to ensure that
owners of real property acquired for national government infrastructure projects are promptly paid
just compensation. Specifically, Section 4 of Republic Act No. 8974 (R.A. 8974), 46 which took
effect on November 26, 2000, provides sufficient guidelines for implementing an expropriation
proceeding, to wit:

Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real

property for the right-of-way or location for any national government infrastructure project through
expropriation, the appropriate implementing agency shall initiate the expropriation proceedings
before the proper court under the following guidelines:

(a) Upon the filing of the complaint, and after due notice to the defendant, the
implementing agency shall immediately pay the owner of the property the amount
equivalent to the sum of (1) one hundred percent (100%) of the value of the property
based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR);
and (2) the value of the improvements and/or structures as determined under Section 7
hereof;

(b) In provinces, cities, municipalities and other areas where there is no zonal valuation,
the BIR is hereby mandated within the period of sixty (60) days from the date of the
expropriation case, to come up with a zonal valuation for said area; and

(c) In case the completion of a government infrastructure project is of utmost urgency and
importance, and there is no existing valuation of the area concerned, the implementing
agency shall immediately pay the owner of the property its proffered value taking into
consideration the standards prescribed in Section 5 hereof.

Upon compliance with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of
the project.

Before the court can issue a Writ of Possession, the implementing agency shall present to the
court a certificate of availability of funds from the proper official concerned.

In the event that the owner of the property contests the implementing agency's proffered value,
the court shall determine the just compensation to be paid the owner within sixty (60) days from
the date of filing of the expropriation case. When the decision of the court becomes final and
executory, the implementing agency shall pay the owner the difference between the amount
already paid and the just compensation as determined by the court.

Failure to comply with the foregoing directives shall subject the government official or employee
concerned to administrative, civil and/or criminal sanctions, thus:

Section 11. Sanctions. - Violation of any provisions of this Act shall subject the government official
or employee concerned to appropriate administrative, civil and/or criminal sanctions, including
suspension and/or dismissal from the government service and forfeiture of benefits. While the
foregoing provisions, being substantive in nature or disturbs substantive rights, cannot be
retroactively applied to the present case, We trust that this established mechanism will surely
deter hasty acquisition of private properties in the future without the benefit of immediate payment
of the value of the property in accordance with Section 4 of R.A. 8974. This effectively addresses
J. Velasco's concerns that sustaining our earlier rulings on the matter would be licensing the
government to dispense with constitutional requirements in taking private properties. Moreover,
any gap on the procedural aspect of the expropriation proceedings will be remedied by the
aforequoted provisions.

In effect, R.A. 8974 enshrines a new approach towards eminent domain that reconciles the
inherent unease attending expropriation proceedings with a position of fundamental equity. 47

Despite the foregoing developments, however, We emphasize that the government's failure, to
initiate the necessary expropriation proceedings prior to actual taking cannot simply invalidate the
State's exercise of its eminent domain power, given that the property subject of expropriation is
indubitably devoted for public use, and public policy imposes upon the public utility the obligation
to continue its services to the public. To hastily nullify said expropriation in the guise of lack of due
process would certainly diminish or weaken one of the State's inherent powers, the ultimate
objective of which is to serve the greater good. Thus, the non-filing of the case for expropriation
will not necessarily lead to the return of the property to the landowner. What is left to the
landowner is the right of compensation.48

All told, We hold that putting to rest the issue on the validity of the exercise of eminent domain is
neither tantamount to condoning the acts of the DPWH in disregarding the property rights of
respondents-movants nor giving premium to the government's failure to institute an expropriation
proceeding. This Court had steadfastly adhered to the doctrine that its first and fundamental duty
is the application of the law according to its express terms, interpretation being called for only
when such literal application is impossible.49 To entertain other formula for computing just
compensation, contrary to those established by law and jurisprudence, would open varying
interpretation of economic policies - a matter which this Court has no competence to take
cognizance of. Time and again, we have held that no process of interpretation or construction
need be resorted to where a provision of law peremptorily calls for application. 50 Equity and
equitable principles only come into full play when a gap exists in the law and jurisprudence. 51 As
we have shown above, established rulings of this Court are in place for full application to the case
at bar, hence, should be upheld.

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.

SO ORDERED.
G.R. No. 187543

WERR CORPORATION INTERNATIONAL, Petitioner

vs.
HIGHLANDS PRIME INC., Respondent

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

G.R. No. 187580

HIGHLANDS PRIME, INC., Petitioner,

vs.
WERR CORPORATION INTERNATIONAL, Respondent.

DECISION

JARDELEZA, J.:

These are consolidated petitions1 seeking to nullify the Court of Appeals' (CA) February 9, 2009
Decision2 and April 16, 2009 Resolution3 in CA-G.R. SP No. 105013. The CA modified the August
11, 2008 Decision4 of the Construction Industry Arbitration Commission (CIAC) in CIAC Case No.
09-2008, viz.:

WHEREFORE, premises considered, the instant petition for review is PARTLY GRANTED. The
assailed Decision dated August 11, 2008 of the Construction Industry Arbitration Commission in
CIAC Case No. 09-2008 is hereby MODIFIED as follows:

1) Respondent Werr Corporation International shall pay petitioner Highlands Prime, Inc.
liquidated damages in the amount of ₱8,969,330.70;

2) Petitioner Highlands Prime, Inc. shall return to respondent Werr Corporation International the
balance of its retention money in the amount of ₱10,955,899.80 with the right to offset the award
for liquidated damages in the aforesaid amount of ₱8,969,330.70; and

3) The cost of arbitration shall be shared equally by the parties.

The rest of the decision stands.

SO ORDERED.5

Facts

Highlands Prime, Inc. (HPI) and Werr Corporation International (Werr) are domestic corporations
engaged in property development and construction, respectively. For the construction of 54
residential units contained in three clusters of five-storey condominium structures, known as "The
Horizon-Westridge Project," in Tagaytay Midlands Complex, Talisay, Batangas, the project owner,
HPI, issued a Notice of Award/Notice to Proceed6 to its chosen contractor, Werr, on July 22, 2005.
Thereafter, the parties executed a General Building Agreement 7 (Agreement) on November 17,
2005.8
Under the Agreement, Werr had the obligation to complete the project within 210 calendar days
from receipt of the Notice of Award/Notice to Proceed on July 22, 2005, or until February 19,
2006.9 For the completion of the project, HPI undertook to pay Werr a lump sum contract price of
₱271,797,900.00 inclusive of applicable taxes, supply and transportation of materials, and
labor.10 It was agreed that this contract price shall be subject to the following payment scheme:
(1) HPI shall pay 20% of the contract price upon the execution of the agreement and the
presentation of the necessary bonds and insurance required under the contract, and shall pay the
balance on installments progress billing subject to recoupment of downpayment and retention
money;11 (2) HPI shall retain 10% of the contract price in the form of retention bond provided by
Werr;12 (3) HPI may deduct or set off any sum against monies due Werr, including expenses for
the rectification of defects in the construction project; 13 and (4) HPI has the right to liquidated
damages in the event of delay in the construction of the project equivalent to 1/10 of 1% of the
contract price for every day of delay.14

Upon HPI's payment of the stipulated 20% downpayment in the amount of ₱54,359,580.00, Werr
commenced with the construction of the project. The contract price was paid and the retention
money was deducted, both in the progress billings. The project, however, was not completed on
the initial completion date of February 19, 2006, which led HPI to grant several extensions and a
final extension until October 15, 2006. On May 8, 2006, W err sought the assistance of HPI to pay
its obligations with its suppliers under a "Direct Payment Scheme" totaling ₱24,503,500.08, which
the latter approved only up to the amount of ₱18,762,541.67. The amount is to be charged
against the accumulated retention money. As of the last billing on October 25, 2006, HPI had
already paid the amount of ₱232,940,265.85 corresponding to 93.18% accomplishment rate of
the project and retained the amount of ₱25,738,258.01 as retention bond. 15

The project was not completed on the last extension given. Thus, HPI terminated its contract with
Werr on November 28, 2006, which the latter accepted on November 30, 2006. 16 No progress
billing was adduced for the period October 28, 2006 until the termination of the contract. 17

On October 3, 2007, Werr demanded from HPI payment of the balance of the contract price as
reflected in its financial status report which showed a conditional net payable amount of
₱36,078,652.90.18 On January 24, 2007, HPI informed Werr that based on their records, the
amount due to the latter as of December 31, 2006 is ₱14,834,926.71. 19 This amount was
confirmed by Werr.20 Not having received any payment, Werr filed a Complaint 21 for arbitration
against HPI before the CIAC to recover the ₱14,834,926.71 representing the balance of its
retention money.

In its Answer,22 HPI countered that it does not owe Werr because the balance of the retention
money answered for the payments made to suppliers and for the additional costs and expenses
incurred after termination of the contract. From the retention money of ₱25,738,258.0l, it
deducted (1) ₱18,762,541.67 as payment to the suppliers under the Direct Payment Scheme,
and (2) ₱7,548,729.15 as additional costs and expenses further broken down as follows: (a)
₱3,336,526.91 representing the unrecouped portion of the 20% downpayment; (b) ₱542,500.00
representing the remainder of Werr's unpaid advances; (c) ₱629,702.24 for the waterproofing
works done by Dubbel Philippines; and (d) ₱3,040,000.00 for the rectification works performed by
A.A. Manahan Construction after the termination of the contract. Deducting the foregoing from the
accumulated retention money resulted in a deficiency of ₱573,012.81 in its favor. 23 By way of
counterclaim, HPI prayed for the payment of liquidated damages in the amount of
₱11,959,107.60 for the 44-day delay in the completion of the project reckoned from October 15,
2006 up to the termination of the Agreement on November 28, 2006; for actual damages in the
sum of ₱573,012.81; and for attorney's fees of ₱500,000.00 and litigation expenses of
₱100,000.00.24

CIAC's Ruling
After due proceedings, the CIAC rendered its Decision 25 on August 11, 2008 where it granted
Werr's claim for the balance of the retention money in the amount of ₱10,955,899.79 and
arbitration costs. It also granted HPI's claim for liquidated damages in the amount of
₱2,535,059.0l equivalent to 9.327 days of delay, 26 but denied its counterclaim for damages,
attorney's fees, and litigation expenses.

From the claims of HPI, the CIAC only deducted the amounts of (1) ₱10,903,331.30 representing
the direct payments made from September 26, 2006 until December 31, 2006, 27 (2)
₱3,336,526.91 representing the unrecouped retention money, and (3) P542,500.00 representing
the unpaid cash advances from the ₱25,738,258.0l retention money. It disallowed the direct
payments charged by HPI in 2007 and 2008 for having been supplied after the termination of the
project, for not corresponding to the list of suppliers submitted, and for HPI failing to show that
Werr requested it to continue payments even after termination of the Agreement. It also
disallowed the amount of ₱629,702.24 for the waterproofing works done by Dubbel Philippines for
being works done after the termination of the contract. The ₱3,040,000.00 for the rectification
works performed after the termination of the contract was also disallowed because while HPI
presented its contract with A.A. Manahan Construction for rectification and completion works, it
failed to present proof of how much was specifically paid for rectification works only, as well as
the proof of its payment. Moreover, prior notice of such defective works was not shown to have
been given to Werr as required under the Agreement, and even noted that HPI's project manager
approved of the quality of the works up to almost 94%. 28

The CIAC further ruled that Werr incurred only 9.327 days of delay. Citing Article 1376 29 of the
Civil Code and considering the failure of the Agreement to state otherwise, it applied the industry
practice in the construction industry that liquidated damages do not accrue after achieving
substantial compliance. It held that delay should be counted from October 27, 2006 until the
projected date of substantial completion. Since the last admitted accomplishment is 93.18% on
October 27, 2006, the period it will take Werr to perform the remaining 1.82% is the period of
delay. Based on the past billings, since it took Werr 5 .128 days 30 to achieve 1% accomplishment,
it will therefore take it 9.327 days to achieve substantial completion. Thus, the CIAC concluded
that the period of delay until substantial completion of the project is 9.327 days. The liquidated
damages under the Agreement being 1/10 of 1% of the ₱271,797,900.00 or ₱271,797.90 per day
of delay, Werr is liable for liquidated damages in the amount of ₱2,535,048.95. 31

Since the liquidated damages did not exhaust the balance of the retention money, the CIAC
likewise denied the claim for actual damages.32

Thereafter, HPI filed its petition for review33 under Rule 43 with the CA on August 28,
2008.1âwphi1

CA's Ruling

The CA rendered the assailed decision, affirming the CIAC's findings on the allowable charges
against the retention money, and on the attorney's fees and litigation expenses. It, however,
disagreed with the CIAC decision as to the amount of liquidated damages and arbitration costs.
According to the CA, delay should be computed from October 27, 2006 until termination of the
contract on November 28, 2006, or 33 days, since the contract prevails over the industry practice.
Thus, the total liquidated damages is ₱8,969,330.70. As to the arbitration costs, it ruled that it is
more equitable that it be borne equally by the parties since the claims of both were considered
and partially granted. 34

Hence, these consolidated petitions.

Arguments
Werr argues that the CA erred in modifying the CIAC decision on the amount of liquidated
damages and arbitration costs. It insists that the appellate court disregarded Articles 1234, 1235,
and 1376 of the Civil Code and the industry practice (as evidenced by Clause 52.1 of the
Construction Industry Authority of the Philippines [CIAP] Document No. 101 or the "General
Conditions of Contract for Government Construction" and Article 20.11 of CIAP Document No.
102 or the "Uniform General Conditions of Contract for Private Construction") when it did not
apply the construction industry practice in computing liquidated damages only until substantial
completion of the project, and not until the termination of the contract. 35 Werr further emphasizes
that the CIAC, being an administrative agency, has expertise on the subject matter, and thus, its
findings prevail over the appellate court's findings. 36

On the other hand, HPI argues that Werr was unjustly enriched when the CA disallowed HPI' s
recovery of the amounts it paid to suppliers. HPI claims that: (1) payments made to suppliers
identified in the Direct Payment Scheme even after the termination of the contract should be
charged against the balance of the retention money, the same having been made pursuant to
Werr's express instructions; (2) the payments to Dubbel Philippines and the cost of the contract
with A.A. Manahan Construction are chargeable to the retention money, pursuant to the terms of
the Agreement; and (3) the expenses incurred in excess of the retention money should be paid by
Werr as actual damages. These payments, while made after the termination of the contract, were
for prior incurred obligations.37 HPI also argues that it is not liable for arbitration costs, and
reiterates its claims for actual damages, and payment of attorney's fees and litigation expenses. 38

Issues

I. Whether the payments made to suppliers and contractors after the termination of the contract
are chargeable against the retention money.

II. Whether the industry practice of computing liquidated damages only up to substantial
completion of the project applies in the computation of liquidated damages. Consequently,
whether delay should be computed until termination of the contract or until substantial completion
of the project.

III. Whether the cost of arbitration should be shouldered by both parties.

IV. Whether HPI is entitled to attorney's fees and litigation expenses.

Our Ruling

We deny the consolidated petitions.

I. Charges against the Retention Money

Anent the first issue, we emphasize that what is before us is a petition for review under Rule 45
where only questions of law may be raised.39 Factual issues, which involve a review of the
probative value of the evidence presented, such as the credibility of witnesses, or the existence
or relevance of surrounding circumstances and their relation to each other, may not be raised
unless it is shown that the case falls under recognized exceptions. 40

In cases of arbitral awards rendered by the CIAC, adherence to this rule is all the more
compelling.41 Executive Order No. 1008,42 which vests upon the CIAC original and exclusive
jurisdiction over disputes arising from, or connected with, contracts entered into by parties
involved in construction in the Philippines, clearly provides that the arbitral award shall be binding
upon the parties and that it shall be final and inappealable except on questions of law which shall
be appealable to the Supreme Court.43 This rule on the finality of an arbitral award is anchored on
the premise that an impartial body, freely chosen by the parties and to which they have
confidence, has settled the dispute after due proceedings:

Voluntary arbitration involves the reference of a dispute to an impartial body, the members of
which are chosen by the parties themselves, which parties freely consent in advance to abide by
the arbitral award issued after proceedings where both parties had the opportunity to be heard.
The basic objective is to provide a speedy and inexpensive method of settling disputes by
allowing the parties to avoid the formalities, delay, expense and aggravation which commonly
accompany ordinary litigation, especially litigation which goes through the entire hierarchy of
courts. Executive Order No. 1008 created an arbitration facility to which the construction industry
in the Philippines can have recourse. The Executive Order was enacted to encourage the early
and expeditious settlement of disputes in the construction industry, a public policy the
implementation of which is necessary and important for the realization of national development
goals.

Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and in
any other area for that matter, the Court will not assist one or the other or even both parties in any
effort to subvert or defeat that objective for their private purposes. The Court will not review the
factual findings of an arbitral tribunal upon the artful allegation that such body had
"misapprehended the facts" and will not pass upon issues which are, at bottom, issues of fact, no
matter how cleverly disguised they might be as "legal questions." The parties here had recourse
to arbitration and chose the arbitrators themselves; they must have had confidence in such
arbitrators. The Court will not, therefore, permit the parties to relitigate before it the issues of facts
previously presented and argued before the Arbitral Tribunal, save only where a very clear
showing is made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error
so egregious and hurtful to one party as to constitute a grave abuse of discretion resulting in lack
or loss of jurisdiction. Prototypical examples would be factual conclusions of the Tribunal which
resulted in deprivation of one or the other party of a fair opportunity to present its position before
the Arbitral Tribunal, and an award obtained through fraud or the corruption of arbitrators. Any
other, more relaxed, rule would result in setting at naught the basic objective of a voluntary
arbitration and would reduce arbitration to a largely inutile institution. 44

In this case, the issues of whether HPI was able to prove that payments made to suppliers and to
third party contractors are prior incurred obligations that should be charged against the retention
money, and whether HPI incurred expenses above the retention money that warrants actual
damages, are issues of facts beyond the review of the Court under Rule 45.

Moreover, even if we consider such factual issues, we are bound by the findings of fact of the
CIAC especially when affirmed by the CA.45 Factual findings by a quasi-judicial body like the
CIAC, which has acquired expertise because its jurisdiction is confined to specific matters, are
accorded not only with respect but even finality if they are supported by substantial
evidence.46 We recognize that certain cases require the expertise, specialized skills, and
knowledge of the proper administrative bodies because technical matters or intricate questions of
facts are involved.47

We nevertheless note that factual findings of the construction arbitrators are not beyond review,
such as when the petitioner affirmatively proves the following: (1) the award was procured by
corruption, fraud, or other undue means; (2) there was evident partiality or corruption of the
arbitrators or any of them; (3) the arbitrators were guilty of misconduct in refusing to hear
evidence pertinent and material to the controversy; (4) one or more of the arbitrators were
disqualified to act as such under Section 1048 of Republic Act No. 87649 and willfully refrained from
disclosing such disqualifications or of any other misbehavior by which the rights of any party have
been materially prejudiced; (5) the arbitrators exceeded their powers, or so imperfectly executed
them, that a mutual, final, and definite award upon the subject matter submitted to them was not
made; (6) when there is a very clear showing of grave abuse of discretion resulting in lack or loss
of jurisdiction as when a party was deprived of a fair opportunity to present its position before the
arbitral tribunal or when an award is obtained through fraud or the corruption of arbitrators; (7)
when the findings of the CA are contrary to those of the CIAC; or (8) when a party is deprived of
administrative due process.50 However, we do not find that HPI was able to show any of the
exceptions that should warrant a review and reversal of the findings made by the CIAC and the
CA.

Thus, we affirm the CIAC and CA's findings that direct payments charged by HPI in 2007 and
2008 were for materials supplied after the termination of the project and did not correspond to the
list of suppliers submitted; that the waterproofing works done by Dubbel Philippines in the amount
of ₱629,702.24 were for works done after the termination of the contract that were for the account
of the new contractor; and that the rectification works performed after the termination of the
contract worth ₱3,040,000.00 were not proven to have been paid, that it was for rectification
works only, and that prior notice of such defective works as required under the Agreement was
not proven. Accordingly, we affirm that the balance of the retention money is ₱10,955,899.79.

II. Delay in computing Liquidated Damages

On the other hand, the question on how liquidated damages should be computed based on the
Agreement and prevailing jurisprudence is a question of law that we may review.

The pertinent provision on liquidated damages is found in clause 41.5 of the Agreement, viz.:

41.5. Considering the importance of the timely completion of the WORKS on

the OWNER'S commitments to its clients, the CONTRACTOR agrees to pay
the OWNER liquidated damages in the amount of 1/10th of 1% of the amount of the Contract price
for every day of delay (inclusive of Sundays and holidays). 51

Werr, as contractor, urges us to apply the construction industry practice that liquidated damages
do not accrue after the date of substantial completion of the project, as evidenced in CIAP
Document No. 102, which provides that:

20.11 SUBSTANTIAL COMPLETION AND ITS EFFECT:

A. [a] There is substantial completion when the Contractor completes 95% of the Work, provided
that the remaining work and the performance of the work necessary to complete the Work shall
not prevent the normal use of the completed portion.

xxx

D. [a] No liquidated damages for delay beyond the Completion Time shall accrue after the date of
substantial completion of the Work.

We reject this claim of Werr and find that while this industry practice may supplement the
Agreement, Werr cannot benefit from it.

At the outset, we do not agree with the CA that industry practice be rejected because liquidated
damages is provided in the Agreement, autonomy of contracts prevails, and industry practice is
completely set aside. Contracting parties are free to stipulate as to the terms and conditions of
the contract for as long as they are not contrary to law, morals, good customs, public order or
public policy.52 Corollary to this rule is that laws are deemed written in every contract. 53
Deemed incorporated into every contract are the general provisions on obligations and
interpretation of contracts found in the Civil Code. The Civil Code provides:

Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover
as though there had been a strict and complete fulfillment, less damages suffered by the obligee.

Art. 1376. The usage or custom of the place shall be borne in mind in the interpretation of the
ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily
established.

In previous cases, we applied these provisions in construction agreements to determine whether

the project owner is entitled to liquidated damages. We held that substantial completion of the
project equates to achievement of 95% project completion which excuses the contractor from the
payment of liquidated damages.

In Diesel Construction Co., Inc. v. UPSI Property Holdings, Inc., 54 we applied Article 1234 of the
Civil Code. In determining what is considered substantial compliance, we used the CIAP
Document No. 102 as evidence of the construction industry practice that substantial compliance
is equivalent to 95% accomplishment rate. In that case, the construction agreement requires the
contractor "to pay the owner liquidated damages in the amount equivalent to one-fifth (1/5) of one
(1) percent of the total Project cost for each calendar day of delay." 55 We declared that the
contractor cannot be liable for liquidated damages because it already accomplished 97.56% of
the project.56 We reiterated this in Transcept Construction and Management Professionals, Inc. v.
Aguilar57 where we ruled that since the contractor accomplished 98.16% of the project, the project
owner is not entitled to the 10% liquidated damages. 58

Considering the foregoing, it: was error for the CA to immediately dismiss the application of
industry practice on the sole ground that there is an existing agreement as to liquidated damages.
As expressly stated under Articles 1234 and 1376, and in jurisprudence, the construction
industry's prevailing practice may supplement any ambiguities or omissions in the stipulations of
the contract.

Notably, CIAP Document N0. 102, by itself, was intended to have suppletory effect on private
construction contracts.1âwphi1 This is evident in CIAP Board Resolution No. 1-98,59 which states:

Sec. 9. Policy-Making Body, - The [CIAP], through the CIAP Executive Office and its various
Implementing Agencies, shall continuously monitor and study the operations of the construction
industry, both domestic and overseas operations, to identify its needs, problems and
opportunities, in order to provide for the pertinent policies and/or executive action and/or
legislative agenda necessary to implement plans, programs and measures required to support
the sustainable development of the construction industry, such as but not limited to the following:

xxx

9.05 The promulgation and adoption of Standard Conditions of Contract for the public
construction and private construction sector which shall have suppletory effect in cases where
there is a conflict in the internal documents of a construction contract or in the absence of the
general conditions of a construction agreement[.]

As the standard conditions for contract for private construction adopted and promulgated by the
CIAP, CIAP Document No. 102 applies suppletorily to private construction contracts to remedy
the conflict in the internal documents of, or to fill in the omissions in, the construction agreement.
In this case, clause 41.5 of the Agreement is undoubtedly a valid stipulation. However, while
clause 41.5 requires payment of liquidated damages if there is delay, it is silent as to the period
until when liquidated damages shall run. The Agreement does not state that liquidated damages
is due until termination of the project; neither does it completely reject that it is only due until
substantial completion of the project. This omission in the Agreement may be supplemented by
the provisions of the Civil Code, industry practice, and the CIAP Document No. 102. Hence, the
industry practice that substantial compliance excuses the contractor from payment of liquidated
damages applies to the Agreement.

Nonetheless, we find that Werr cannot benefit from the effects of substantial compliance.

Paragraph A.[a.], Article 20.11 of CIAP Document No. 102 requires that the
contractor completes 95% of the work for there to be substantial completion of the project. Also,
in those cases where we applied the industry practice to supplement the contracts and excused
payment from liquidated damages under Article 1234, the contractors there actually achieved
95% completion of the project. Neither the CIAC nor the courts assumed as to when substantial
compliance will be achieved by the contractor, but the contractors offered substantial evidence
that they actually achieved at least 95% completion of the project. Thus, the effects of substantial
completion only operate to relieve the contractor from the burden of paying liquidated damages
when it has, in reality, achieved substantial completion of the project.

While the case before us presents a different scenario, as the contractor here does not demand
total release from payment of liquidated damages, we find that in order to benefit from the effects
of the substantial completion of a project, the condition precedent must first be met-the contractor
must successfully prove by substantial evidence that it actually achieved 95% completion rate of
the project. As such, it is incumbent upon Werr to show that it had achieved an accomplishment
rate of 95% before or at the time of the termination of the contract.

Here, there is no dispute that Werr failed to prove that it completed 95% of the project before or at
the time of the termination of the contract. As found by CIAC, it failed to present evidence as to
what accomplishment it achieved from the time of the last billing until the termination of the
contract.60 What was admitted as accomplishment at the last billing is 93.18%. For this reason,
even if we adopt the rule that no liquidated damages shall run after the date of substantial
completion of the project, Werr cannot claim benefit for it failed to meet the condition
precedent, i.e., the contractor has successfully proven that it actually achieved 95% completion
rate.

More importantly, Werr failed to show that it is the construction industry's practice to project the
date of substantial completion of a project, and to compute the period of delay based on the rate
in past progress billings just as what the CIAC has done. Consequently, the CIAC erred when it
assumed that Werr continued to perform works, and if it did, that it performed them at the rate of
accomplishment of the previous works in the absence of evidence.

That the effects of substantial completion will only apply when actual substantial completion is
reached is apparent when we consider the reason behind the rules on substantial completion of
the project found in Section 20.1l[E] of the CIAP Document No. 102, viz.:

E. The purpose of this Article [ART. 20, WORK; 20.11: SUBSTANTIAL COMPLETION AND ITS
EFFECT] is to ensure that the Contractor is paid for Work completed and for the Owner to retain
such portion of the Contract Price which, together with the Performance Bond, is sufficient to
complete the Work without additional cost to the Owner.

The rules are intended to balance the allocation and burden of costs between the contractor and
the project owner so that the contractor still achieves a return for its completed work, and the
project owner will not incur further costs. To compute the period of delay when substantial
compliance is not yet achieved but merely on the assumption that it will eventually be achieved
would result in an iniquitous situation where the project owner will bear the risks and additional
costs for the period excused from liquidated damages.

From the foregoing, we affirm the CA' s conclusion that the period of delay in computing
liquidated damages should be reckoned from October 27, 2006 until the termination of the
contract or for 33 days, and not only until the projected substantial completion date. Consistent
with the CA's ruling that liquidated damages did not exceed the retention money, we therefore
affirm that HPI did not suffer actual damages in the amount of ₱573,012.81.

III. Arbitration Costs, Attorney's Fees, and Litigation Costs

Courts are allowed to adjudge which party may bear the cost of the suit depending on the
circumstances of the case.61 Considering the CA's findings that both parties were able to recover
their claims, and neither was guilty of bad faith, we do not find that the CA erred in dividing the
arbitration costs between the parties.

We also do not find the need to disturb the findings as to attorney's fees and expenses of
litigation, both the CIAC and the CA having found that there is no basis for the award of attorney's
fees and litigation expenses.62
WHEREFORE, the petitions are DENIED. The Court of Appeals' February 9, 2009 Decision and
April 16, 2009 Resolution are AFFIRMED. The net award in favor of Werr Corporation
International shall earn interest at the rate of 6% per annum from date of demand on October 3,
2007 until finality of this Decision. Thereafter, the total amount shall earn interest from finality of
this Decision until fully paid.
 G.R. No. 185765, September 28, 2016

PHILIPPINE ECONOMIC ZONE AUTHORITY, Petitioner, v. PILHINO SALES

CORPORATION, Respondent.

DECISION

LEONEN, J.:

Although the provisions of a contract are legally null and void, the stipulated method
of computing liquidated damages may be accepted as evidence of the intent of the
parties. The provisions, therefore, can be basis for finding a factual anchor for
liquidated damages. The liable party may nevertheless present better evidence to
establish a more accurate basis for awarding damages. In this case, the respondent
failed to do so.

This resolves a Petition for Review on Certiorari1 praying that the assailed May 2,
2008 Decision2 and November 25, 2008 Resolution3 of the Court of Appeals in CA
G.R. CV No. 86406 be reversed and set aside and that the Decision 4 dated November
2, 2005 of Branch 108 of the Regional Trial Court of Pasay City in Civil Case No. 00-
0343 be reinstated.

The Regional Trial Court's November 2, 2005 Decision ruled in favor of petitioner
Philippine Economic Zone Authority, which, as plaintiff, brought an action for
rescission of contract and damages against the defendant, now respondent Pilhino
Sales Corporation (Pilhino).5chanrobleslaw

The assailed Court of Appeals Decision partly granted Pilhino's appeal by reducing
the amount of liquidated damages due from it to the Philippine Economic Zone
Authority, and by deleting the forfeiture of its performance bond.6 The assailed Court
of Appeals Resolution denied the Philippine Economic Zone Authority's Motion for
Reconsideration.7chanrobleslaw

The facts are not disputed, and all that is in issue is the consequence of Pilhino's
contractual breach.

On October 4, 1997, the Philippine Economic Zone Authority published an invitation

to bid in the Business Daily for its acquisition of two (2) brand new fire truck units
"with a capacity of 4,000-5,000 liters [of] water and 500-1,000 liters [of chemical
foam,] with complete accessories."8chanrobleslaw

Three (3) companies participated in the bidding: Starbilt Enterprise, Inc., Shurway
Industries, Inc., and Pilhino.9 Pilhino secured the contract for the acquisition of the
fire trucks.10 The contract price was initially at P3,000,000.00 per truck, but this was
reduced after negotiation to P2,900,000.00 per truck.11chanrobleslaw

The contract awarded to Pilhino stipulated that Pilhino was to deliver to the Philippine
Economic Zone Authority two (2) FF3HP brand fire trucks within 45 days of receipt of
a purchase order from the Philippine Economic Zone Authority.12 A further stipulation
stated that "[i]n case of fail[u]re to deliver the . . . good on the date specified . . . ,
the Supplier agree[s] to pay penalty at the rate of 1/10 of 1% of the total contract
price for each days [sic] commencing on the first day after the date stipulated
above."13chanrobleslaw

The Philippine Economic Zone Authority furnished Pilhino with a purchase order
dated November 6, 1997.14 Pilhino failed to deliver the trucks as it had
committed.15 This prompted the Philippine Economic Zone Authority to make formal
demands on Pilhino on July 27, 199816 and on February 23, 1999.17 As Pilhino still
failed to comply, the Philippine Economic Zone Authority filed before the Regional
Trial Court of Pasay City a Complaint18 for rescission of contract and damages. This
was docketed as Civil Case No. 00-0343 and raffled to Branch 108.19chanrobleslaw

In its defense, Pilhino claimed that there was no starting date from which its
obligation to deliver could be reckoned, considering that the Complaint supposedly
failed to allege acceptance by Pilhino of the purchase order.20 Pilhino suggested that
there was not even a meeting of minds between it and the Philippine Economic Zone
Authority.21chanrobleslaw

In its November 2, 2005 Decision,22 the Regional Trial Court ruled for the Philippine
Economic Zone Authority. The dispositive portion of the Decision
reads:ChanRoblesVirtualawlibrary

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant ordering the latter to:

1. Pay the plaintiff in liquidated damages a[t] the rate of 1/10 of 1% of

the total contract price of Php 5,800,000.00 for each day of delay
commencing from June 19, 1998.

2. Pay the plaintiff exemplary damages in the amount of Php

100,00[0].00.

3. That the contract be declared rescinded and the performance bond

posted by the defendant be forfeited in favor of the plaintiff.

4. For defendant to pay the cost of the suit.

SO ORDERED.23chanroblesvirtuallawlibrary
Pilhino then appealed before the Court of Appeals.

In its assailed May 2, 2008 Decision,24 the Court of Appeals partly granted Pilhino's
appeal by deleting the forfeiture of Pilhino's performance bond and pegging the
liquidated damages due from it to the Philippine Economic Zone Authority in the
amount of P1,400,000.00.

The Court of Appeals debunked Pilhino's claim that there was no meeting of minds. It
emphasized that Pilhino "manifested its acquiescence . . . [to] the Purchase
Order . . . when it submitted to [the Philippine Economic Zone Authority] a
Performance Bond dated 02 June 1999 and Indemnity Agreement dated 09 June
1998 duly signed by its Vice President."25cralawred It added that in a subsequent
letter dated March 29, 199926 "signed by [Pilhino's] Hino Division Manager Edgar R.
Santiago and noted by VP-Operations Roberto R. Garcia, [Pilhino] admitted that it
can no longer meet the requirements regarding the specification on the two (2) units
of fire truck[s]."27chanrobleslaw

In this March 29, 1999 letter, Pilhino not only acknowledged its inability to meet its
obligations but also proposed a modified arrangement with the Philippine Economic
Zone Authority:ChanRoblesVirtualawlibrary
[P]lease allow us to submit our new proposal for your consideration (please see
attached specifications). Our price for this new specification if P3,600,000.00/unit.
However, we are willing to shoulder the difference between the original price of
P2,900,000.00/unit and P3,600,000.00 in lieu of the penalty. May we also request
your good office to stop the accumulation of the penalty
[.]28chanroblesvirtuallawlibrary
In calibrating the amount of liquidated damages, the Court of Appeals cited Articles
122929 and 222730of the Civil Code. It reasoned that through its March 29, 1999
letter, Pilhino made an attempt at rectification or
mitigation:ChanRoblesVirtualawlibrary
In the instant case, we consider the supervening reality that after appellant's failure
to deliver to appellee the two (2) brand new units of fire trucks in accordance with
the specifications previously agreed upon, appellant nevertheless tried to remedy the
situation by offering to appellee new specifications at P3,600,000.00 per unit; and
expressed willingness to shoulder the difference between the original price (based on
the contract) of P2,900,000.00 per unit and the price corresponding to the new
specifications. Further, it is undisputed that appellee has not paid any amount to
appellant in connection with said undelivered two (2) brand new units of fire trucks.
We thus equitably reduce said liquidated damages to P1,400,000.00, which is the
difference between the contract price of P5,800,000.00 and P7,200,000.00 based on
the new specifications for two (2) new units of fire
trucks.31chanroblesvirtuallawlibrary
The Philippine Economic Zone Authority moved for reconsideration of the
modifications to the Regional Trial Court's award. As this Motion was denied in the
Court of Appeals' assailed November 25, 2008 Resolution,32 the Philippine Economic
Zone Authority filed the present Petition.

Petitioner asks for the reinstatement of the Regional Trial Court's award asserting
that it already suffered damage when respondent Pilhino Sales Corporation failed to
deliver the trucks on time;33 that the contractually stipulated penalty of 1/10 of 1%
of the contract price for every day of delay was neither unreasonable 34 nor contrary
to law, morals, or public order;35 that the stipulation on liquidated damages was
freely entered into by it and respondent;36 and that the Court of Appeals'
computation had no basis in fact and law.37 Regarding respondent's supposed
attempt at mitigation, petitioner notes that by the time the offer was made, the
Complaint for rescission and damages had already been filed38 and was, therefore,
inconsequential and hardly a remedy.

Commenting on petitioner's Petition,39 respondent raises the question

of:ChanRoblesVirtualawlibrary
Whether or not a contract can be rescinded and declared void ab initio, and then
thus rescinded, can a stipulation for liquidated damages or penalty contained in that
very same contract be given separate life, force and effect, that is, separate and
distinct from the rescinded and voided contract itself?40chanroblesvirtuallawlibrary
Therefore, respondent suggests that with the rescission of its contract with petitioner
must have come the negation of the contractual stipulation on liquidated damages
and the obliteration of its liability for such liquidated damages.41chanrobleslaw
We resolve the twin issues of:

chanRoblesvirtualLawlibraryFirst, the propriety of an award based on contractually

stipulated liquidated damages notwithstanding the rescission of the same contract
stipulating it; and cralawlawlibrary

Second, on the assumption that such award is proper, the propriety of the Court of
Appeals' reduction of the liquidated damages due to petitioner.

Respondent's intimation that with the rescission of a contract necessarily and

inexorably follows the obliteration of liability for what the same contracts stipulates
as liquidated damages42 is entirely misplaced.

A contract of. sale, such as that entered into by petitioner and respondent, entails
reciprocal obligations. As explained in Spouses Velarde v. Court of Appeals,43 "[i]n a
contract of sale, the seller obligates itself to transfer the ownership of and deliver a
determinate thing, and the buyer to pay therefor a price certain in money or its
equivalent."44chanrobleslaw

Rescission on account of breach of reciprocal obligations is provided for in Article

1191 of the Civil Code:ChanRoblesVirtualawlibrary
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.

This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
(Emphasis supplied)
Respondent correctly notes that rescission under Article 1911 results in mutual
restitution. Jurisprudence has long settled that the restoration of the contracting
parties to their original state is the very essence of rescission. In Spouses
Velarde:ChanRoblesVirtualawlibrary
Considering that the rescission of the contract is based on Article 1191 of the Civil
Code, mutual restitution is required to bring back the parties to their original
situation prior to the inception of the contract. Accordingly, the initial payment of
P800,000 and the corresponding mortgage payments . . . should be returned by
private respondents, lest the latter unjustly enrich themselves at the expense of the
former.

Rescission creates the obligation to return the object of the contract. It can be
carried out only when the one who demands rescission can return whatever he may
be obliged to restore. To rescind is to declare a contract void at its inception and to
put an end to it as though it never was. It is not merely to terminate it and release
the parties from further obligations to each other, but to abrogate it from the
beginning and restore the parties to their relative positions as if no contract has been
made.45 (Citations omitted)
Laperal v. Solid Homes, Inc.46 has explained how the restitution spoken of in
rescission under Article 1385 of the Civil Code equally holds true for rescission under
Article 1191 of the Civil Code:ChanRoblesVirtualawlibrary
Despite the fact that Article 1124 of the old Civil Code from whence Article 1191 was
taken, used the term "resolution", the amendment thereto (presently, Article 1191)
explicitly and clearly used the term "rescission". Unless Article 1191 is subsequently
amended to revert back to the term "resolution", this Court has no alternative but to
apply the law, as it is written.

Again, since Article 1385 of the Civil Code expressly and clearly states that
"rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its interest," the Court finds no
justification to sustain petitioners' position that said Article 1385 does not apply to
rescission under Article 1191.

In Palay, Inc. vs. Clave, this Court applied Article 1385 in a case involving
"resolution" under Article 1191, thus:ChanRoblesVirtualawlibrary
Regarding the second issue on refund of the installment payments made by private
respondent. Article 1385 of the Civil Code provides:ChanRoblesVirtualawlibrary
"ART. 1385. Rescission creates the obligation to return the things which were the
object of the contract, together with their fruits, and the price with its interest;
consequently, it can be carried out only when he who demands rescission can return
whatever he may be obliged to restore.

"Neither shall rescission take place when the things which are the object of the
contract are legally in the possession of third persons who did not act in bad faith.

"In this case, indemnity for damages may be demanded from the person causing the
loss."
As a consequence of the resolution by petitioners, rights to the lot should be restored
to private respondent or the same should be replaced by another acceptable lot.
However, considering that the property had already been sold to a third person and
there is no evidence on record that other lots are still available, private respondent is
entitled to the refund of installments paid plus interest at the legal rate of 12%
computed from the date of the institution of the action. It would be most inequitable
if petitioners were to be allowed to retain private respondent's payments and at the
same time appropriate the proceeds of the second sale to another.
Applying the clear language of the law and the consistent jurisprudence on the
matter, therefore, the Court rules that rescission under Article 1191 in the present
case, carries with it the corresponding obligation of restitution. 47 (Citations omitted)
Contrary to respondent's assertion, mutual restitution under Article 1191 is,
however, no license for the negation of contractually stipulated liquidated damages.

Article 1191 itself clearly states that the options of rescission and specific
performance come with "with the payment of damages in either case." The very
same breach or delay in performance that triggers rescission is what makes damages
due.

When the contracting parties, by their own free acts of will, agreed on what these
damages ought to be, they established the law between themselves. Their
contemplation of the consequences proper in the event of a breach has been
articulated. When courts are, thereafter, confronted with the need to award damages
in tandem with rescission, courts must not lose sight of how the parties have
explicitly stated, in their own language, these consequences. To uphold both Article
1191 of the Civil Code and the parties' will, contractually stipulated liquidated
damages must, as a rule,48 be maintained.

What respondent purports to be the ensuing nullification of liquidated damages is not

a novel question in jurisprudence. This matter has been settled, and respondent's
position has been rebuked. In Laperal:ChanRoblesVirtualawlibrary
This notwithstanding, the Court does not agree with the Court of Appeals that, as a
consequence of the obligation of mutual restitution in this case, petitioners should
return the amount of P5,200,833.27 to respondent.

Article 1191 states that "the injured party may choose between fulfillment and
rescission of the obligation, with the payment of damages in either case." In other
words, while petitioners are indeed obliged to return the said amount to respondent
under Article 1385, assuming said figure is correct, respondent is at the same time
liable to petitioners in the same amount as liquidated damages by virtue of the
forfeiture/penalty clause as freely stipulated upon by the parties in the Addendum,
paragraphs 1 and 2 of which respectively read:ChanRoblesVirtualawlibrary
WHEREAS, included as part of said agreement are the following:

chanRoblesvirtualLawlibrary1. Further to the stipulations on paragraph 10, upon

default of performances, violations and/or non-compliance with the terms and
conditions herein agreed upon by the DEVELOPER wherein it appears that the
DEVELOPER deliberately abandoned or discontinued the work on the project, said
party shall lose any entitlement, if any, to any refund and/or advances it may have
incurred in connection with or relative to previous development works in the
subdivision; likewise, all improvements of whatever nature and kind introduced by
the DEVELOPER on the property, existing as of the date of default or violation, shall
automatically belong to the OWNER without obligation on his part to pay for the
costs thereof.

2. Similarly with the same condition of default or violation obtaining, as stated in

paragraph 10 of said agreement, all advances made and remittances of proceeds
from reservations and sales given by the DEVELOPER to the OWNER as provided for
in this agreement shall be deemed absolutely forfeited in favor of the OWNER,
resulting to waiver of DEVELOPER'S rights, if any, with respect to said amount(s).
If this Court recognized the right of the parties to stipulate on an extrajudicial
rescission under Article 1191, there is no reason why this Court will not allow the
parties to stipulate on the matter of damages in case of such rescission under Book
IV, Title VIII, Chapter 3, Section 2 of the Civil Code governing liquidated
damages.49 (Citations omitted)
We see no reason for departing from this. It is true that Laperal involved
extrajudicial rescission, while this case involves rescission through judicial action.
The distinction between judicial and extrajudicial rescission is in how extrajudicial
rescission is possible only when the contract has an express stipulation to that
effect.50 This distinction does not diminish the rights of a contracting party under
Article 1191 of the Civil Code and is immaterial for purposes of the availability of
liquidated damages.

To sustain respondent's claim would be to sustain an absurdity and an injustice.

Respondent's position suggests that with rescission must necessarily come the
obliteration of the punitive consequence which, to begin with, was the product of its
own (along with the other contracting party's) volition. Its position turns delinquency
into a profitable enterprise, enabling contractual breach to itself be the means for
evading its own fallout. It is a position we cannot tolerate.

II

In calibrating the amount of liquidated damages, the Court of Appeals relied on how
respondent supposedly attempted to rectify things "by offering to [petitioner] new
specifications at P3,600,000.00 per unit; and expressed willingness to shoulder the
difference between the original price (based on the contract) of P2,900,000.00 per
unit and the price corresponding to the new specifications." 51chanrobleslaw

As underscored by petitioner, however, this offer was inconsequential and hardly a

remedy to the predicament it found itself in.

Petitioner already suffered damage by respondent's mere delay. Philippine Economic

Zone Authority Director General Lilia B. De Lima's internal memorandum to its Board
of Directors emphasized what was, at the time, the specific urgency of obtaining fire
trucks:ChanRoblesVirtualawlibrary
1. With the increase in the number of locator-enterprises at the regular zones, there
is a need for additional units of fire trucks to address any eventuality. The onset of
the El Niño phenomena further makes it imperative that PEZA be more prepared.

2. At present, there are only six (6) units of serviceable fire trucks distributed as
follows:

chanRoblesvirtualLawlibrary
Bataan EZ 2
Baguio City EZ 1
Cavite EZ 1
Mactan EZ 252 (Emphasis supplied)
The Court of Appeals itself recognized that "time was of the essence when the
contract . . . was awarded to [respondent] and the non-compliance therewith
exposed [petitioner's] operations [at] risk."53chanrobleslaw

Respondent's attempt at rectification came too late and under such circumstances
that petitioner was no longer even in a position to accept respondent's offer. As
petitioner notes, by the time respondent made its offer, the Complaint for rescission
and damages had already been filed before the Regional-Trial Court of Pasay
City.54 If at all, the offer was nothing more than a belated reaction to undercut
litigation.

By the time respondent made its attempt at rectification, petitioner was no longer
capable of accommodating contractual modifications. Jurisprudence has established
the impropriety of modifying awarded contracts that were previously subjected to
public bidding, such as that between petitioner and
respondent:ChanRoblesVirtualawlibrary
An essential element of a publicly bidded contract is that all bidders must be on
equal footing. Not simply in terms of application of the procedural rules and
regulations imposed by the relevant government agency, but more importantly, on
the contract bidded upon. Each bidder must be able to bid on the same thing. The
rationale is obvious. If the winning bidder is allowed to later include or modify
certain provisions in the contract awarded such that the contract is altered in any
material respect, then the essence of fair competition in the public bidding is
destroyed. A public bidding would indeed be a farce if after the contract is awarded,
the winning bidder may modify the contract and include provisions which are
favorable to it that were not previously made available to the other bidders.
Thus:ChanRoblesVirtualawlibrary
It is inherent in public biddings that there shall be a fair competition among the
bidders. The specifications in such biddings provide the common ground or basis for
the bidders. The specifications should, accordingly, operate equally or
indiscriminately upon all bidders.
The same rule was restated by Chief Justice Stuart of the Supreme Court of
Minnesota:ChanRoblesVirtualawlibrary
The law is well settled that where, as in this case, municipal authorities can only let a
contract for public work to the lowest responsible bidder, the proposals and
specifications therefore must be so framed as to permit free and full
competition. Nor can they enter into a contract with the best bidder containing
substantial provisions beneficial to him, not included or contemplated in the terms
and specifications upon which the bids were invited.55 (Emphasis supplied)
By definition, liquidated damages are a penalty, meant to impress upon defaulting
obligors the graverconsequences of their own culpability. Liquidated damages must
necessarily make non-compliance more cumbersome than compliance. Otherwise,
contracts might as well make no threat of a penalty at all:ChanRoblesVirtualawlibrary
Liquidated damages are those that the parties agree to be paid in case of a breach.
As worded, the amount agreed upon answers for damages suffered by the owner due
to delays in the completion of the project. Under Philippine laws, these damages take
the nature of penalties. A penal clause is an accessory undertaking to assume
greater liability in case of a breach. It is attached to an obligation in order to ensure
performance.56(Citations omitted)
Respondent cannot now balk at the natural result of its own breach. As for the Court
of Appeals, we find it to be in error in frustrating the express terms of the contract
that respondent actively endeavored to be awarded to it. The exigencies that
impelled petitioner to obtain fire trucks made it imperative for respondent to act with
dispatch. Instead, it dragged its feet, left petitioner with inadequate means for
addressing the very emergencies that engendered the need for fire trucks, and
forced it into litigation to enforce its rights.

WHEREFORE, the Petition is GRANTED. The assailed May 2, 2008 Decision and
November 25, 2008 Resolution of the Court of Appeals in CA G.R. CV No. 86406
are REVERSED and SET ASIDE. The Decision dated November 2, 2005 of Branch
108 of the Regional Trial Court of Pasay City in Civil Case No. 00-0343
is REINSTATED.

SO ORDERED.chanRoblesvirtualLawlibrary
G.R. No. 187930 February 23, 2015

NEW WORLD DEVELOPERS AND MANAGEMENT, INC., Petitioner,

vs.
AMA COMPUTER LEARNING CENTER, INC., Respondent.

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

G.R. No. 188250

AMA COMPUTER LEARNING CENTER, INC., Petitioner.

vs.
NEW WORLD DEVELOPERS AND MANAGEMENT, INC., Respondent,

DECISION

SERENO, CJ:

Before us are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Court of Appeals (CA) Decision1 dated 22 January 2009 and Resolution2 dated 18
May 2009 in CA-G.R. CV No. 89483.

The CA Decision ordered AMA Computer Learning Center, Inc. (AMA) to pay New World
Developers and Management, Inc. (New World) unpaid rentals for 2 months, as well asliquidated
damages equivalent to 4 months’ rent. The CA Resolution denied the separate motions for
reconsideration filed by the parties.

FACTS

New World is the owner of a commercial building located at No. 1104-1118 España corner
Paredes Streets, Sampaloc, Manila.3 In 1998, AMA agreed to lease the entire second floor of the
building for its computer learning center, and the parties entered into a Contract of
Lease4 covering the eight-year period from 15 June 1998 to 14 March 2006.

The monthly rental for the first year was set at ₱181,500, with an annual escalation rate
equivalent to 15% for the succeeding years. 5 It was also provided that AMA may preterminate the
contract by sending notice in writing to New World at least six months before the intended
date.6 In case of pretermination, AMA shall be liable for liquidated damages in an amount
equivalent to six months of the prevailing rent.

In compliance with the contract, AMA paid New World the amount of ₱450,000 as advance rental
and another ₱450,000 as security deposit.7

For the first three years, AMA paid the monthly rent as stipulated in the contract, with the required
adjustment in accordance with the escalation rate for the second and the third years. 8

In a letter dated 18 March 2002, AMA requested the deferment of the annual increase in the
monthly rent by citing financial constraints brought about by a decrease in its enrollment. New
World agreed to reduce the escalation rate by 50% for the next six months. The following year,
AMA again requested the adjustment of the monthly rent and New World obliged by granting a
45% reduction of the monthly rent and a 5% reduction of the escalation rate for the remaining
term of the lease. For this purpose, the parties entered into an Addendum to the Contract of
Lease.9

On the evening of 6 July 2004, AMA removed all its office equipment and furniture from the
leased premises. The following day, New World received a letter from AMA dated 6 July
200410 stating that the former had decided to preterminate the contract effective immediately on
the ground of business losses due to a drastic decline in enrollment. AMA also demanded the
refund of its advance rental and security deposit.

New World replied in a letter dated 12 July 2004,11 to which was attached a Statement of
Account12 indicating the following amounts to be paid by AMA: 1) unpaid two months’ rent in the
amount of ₱466,620; 2) 3% monthly interest for the unpaid rent in the amount of ₱67,426.59; 3)
liquidated damages equivalent to six months of the prevailing rent in the amount of ₱1,399,860;
and 4) damage to the leased premises amounting to ₱15,580. The deduction of the advance
rental and security deposit paid by AMA still left an unpaid balance in the amount of
₱1,049,486.59.

Despite the meetings between the parties, they failed to arrive at a settlement regarding the
payment of the foregoing amounts.13

On 27 October 2004, New World filed a complaint for a sum of money and damages against AMA
before the Regional Trial Court of Marikina City, Branch 156 (RTC). 14

RULING OF THE RTC

In a Decision15 dated 31 January 2007, the RTC ordered AMA to pay New World ₱466,620 as
unpaid rentals plus 3% monthly penalty interest until payment; ₱1,399,860 as liquidated damages
equivalent to six months’ rent, with the advance rental and security deposit paid by AMA to be
deducted therefrom; ₱15,580 for the damage to the leased premises; ₱100,000 as attorney’s
fees; and costs of the suit.

According to the RTC, AMA never denied that it had arrearages equivalent to two months’ rent.
Other than its allegation that it did not participate in the preparation of the Statement of Account,
AMA did not proffer any evidence disputing the unpaid rent. For its part, New World clearly
explained the existence of the arrears.

While sympathizing with AMA in view of its business losses, the RTC ruled that AMA could not
shirk from its contractual obligations, which provided that it had to pay liquidated damages
equivalent to six months’ rent in case of a pretermination of the lease.

The RTC provided no bases for awarding ₱15,580 for the damage to the leased premises and
₱100,000 for attorney’s fees, while denying the prayer for exemplary and moral damages.

Upon the denial of its motion for reconsideration, AMA filed an appeal before the CA. 16

RULING OF THE CA

In the assailed Decision dated 22 January 2009, the CA ordered AMA to pay New World
₱466,620 for unpaid rentals and ₱933,240 for liquidated damages equivalent to four months’ rent,
with the advance rental and security deposit paid by AMA to be deducted therefrom. 17

The appellate court ruled that the RTC erred in imposing a 3% monthly penalty interest on the
unpaid rent, because there was no stipulation either in the Contract of Lease or in the Addendum
to the Contract of Lease concerning the imposition of interest in the event of a delay in the
payment of the rent.18 Thus, the CA ruled that the rent in arrears should earn interest at the rate of
6% per annum only, reckoned from the date of the extrajudicial demand on 12 July 2004 until the
finality of the Decision. Thereafter, interest at the rate of12% per annum shall be imposed until full
payment.

The CA also ruled that the RTC’s imposition of liquidated damages equivalent to six months’ rent
was iniquitous.19While conceding that AMA was liable for liquidated damages for preterminating
the lease, the CA also recognized that stipulated penalties may be equitably reduced by the
courts based on its sound discretion. Considering that the unexpired portion of the term of lease
was already less than two years, and that AMA had suffered business losses rendering it
incapable of paying for its expenses, the CA deemed that liquidated damages equivalent to four
months’ rent was reasonable.20

The appellate court deleted the award for the damage to the leased premises, because no proof
other than the Statement of Account was presented by New World. 21 Furthermore, noting that the
latter was already entitled to liquidated damages, and that the trial court did not give any
justification for attorney’s fees, the CA disallowed the award thereof. 22

Both parties filed their respective motions for reconsideration, which were denied in the assailed
Resolution dated 10 May 2009.

Hence, the present petitions for review on certiorari. On 3 August 2009, the Court resolved to
consolidate the petitions, considering that they involve the same parties and assail the same CA
Decision and Resolution.23

PARTIES’ POSITIONS

According to New World, when parties freely stipulate on the manner by which one may
preterminate the lease, that stipulation has the force of law between them and should be
complied with in good faith.24 Since AMA preterminated the lease, it became liable to liquidated
damages equivalent to six months’ rent. Furthermore, its failure to give notice to New World six
months prior to the intended pretermination of the contract and its leaving the leased premises in
the middle of the night, with all its office equipment and furniture, smacked of gross bad faith that
renders it undeserving of sympathy from the courts.25 Thus, the CA erred in reducing the
liquidated damages from an amount equivalent to six months’ rent to only four months.

New World also challenges the CA Decision and Resolution for disallowing the imposition of the
3% monthly interest on the unpaid rentals. It is argued that AMA never disputed the imposition of
the 3% monthly interest; rather, it only requested that the interest rate be reduced. 26

On the other hand, AMA assails the CA ruling for not recognizing the fact that compensation took
place between the unpaid rentals and the advance rental paid by AMA. 27 Considering that the
obligation of AMA as to the arrears has been extinguished by operation of law, there would be no
occasion for the imposition of interest.28

AMA also prays for the further reduction of the liquidated damages to an amount equivalent to
one month’s rent up to one and a half months, arguing that four months’ worth of rent is still
iniquitous on account of the severe financial losses it suffered. 29

ISSUES

1. Whether AMA is liable to pay six months’ worth of rent as liquidated damages.
 2. Whether AMA remained liable for the rental arrears.

OUR RULING

I.

AMA is liable for six months’ worth of rent as liquidated damages.

Item No. 14 of the Contract of Lease states:

That [AMA] may pre-terminate this Contract of Lease by notice in writing to [New World] at least
six (6) months before the intended date of pretermination, provided, however, that in such case,
[AMA] shall be liable to [New World] for an amount equivalent to six (6) months current rental as
liquidated damages;30

Quite notable is the fact that AMA never denied its liability for the payment of liquidated damages
in view of its pretermination of the lease contract with New World. What it claims, however, is that
it is entitled to the reduction of the amount due to the serious business losses it suffered as a
result of a drastic decrease in its enrollment.

This Court is, first and foremost, one of law. While we are also a court of equity, we do not employ
equitable principles when well-established doctrines and positive provisions of the law clearly
apply.31

The law does not relieve a party from the consequences of a contract it entered into with all the
required formalities.32 Courts have no power to ease the burden of obligations voluntarily
assumed by parties, just because things did not turn out as expected at the inception of the
contract.33 It must also be emphasized that AMA is an entity that has had significant business
experience, and is not a mere babe in the woods.

Articles 1159 and 1306 of the Civil Code state:

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith.

xxxx

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy.

The fundamental rule is that a contract is the law between the parties. Unless it has been shown
that its provisions are wholly or in part contrary to law, morals, good customs, public order, or
public policy, the contract will be strictly enforced by the courts. 34

In rebuttal, AMA invokes Article 2227 of the Civil Code, to wit:

Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.

In Ligutan v. CA, we held that the resolution of the question of whether a penalty is reasonable, or
iniquitous or unconscionable would depend on factors including but not limited to the type, extent
and purpose of the penalty; the nature of the obligation; the mode of the breach and its
consequences; the supervening realities; and the standing and relationship of the parties. 35 The
appreciation of these factors is essentially addressed to the sound discretion of the court. 36

It is quite easy to understand the reason why a lessor would impose liquidated damages in the
event of the pretermination of a lease contract. Pretermination is effectively the breach of a
contract, that was originally intended to cover an agreed upon period of time. A definite period
assures the lessor a steady income for the duration. A pretermination would suddenly cut short
what would otherwise have been a longer profitable relationship. Along the way, the lessor is
bound to incur losses until it is able to find a new lessee, and it is this loss of income that is
sought to be compensated by the payment of liquidated damages.

There might have been other ways to work around its difficult financial situation and lessen the
impact of the pretermination to both parties. However, AMA opted to do the following:

1. It preterminated the lease without notifying New World at least six months before the
intended date.

2. It removed all its office equipment and left the premises in the middle of the night.

3. Only after it had cleared the premises did it send New World a notice of pretermination
effective immediately.

4. It had the gall to demand a full refund of the advance rental and security deposit, albeit
without prejudice to their removal of the improvements introduced in the premises.

We cannot understand the inability of AMA to be forthright with New World, considering that the
former had been transparent about its business losses in its previous requests for the reduction of
the monthly rental. The drastic decrease in AMA’s enrollment had been unfolding since 2002.
Thus, it cannot be said that the business losses had taken it by surprise. It is also highly unlikely
that the decision to preterminate the lease contract was made at the last minute. The cancellation
of classes, the transfer of students, and administrative preparations for the closure of the
computer learning center and the removal of office equipment therefrom should take at least
weeks, if not months, of logistic planning. Had AMA come clean about the impending
pretermination, measures beneficial to both parties could have been arrived at, and the instant
cases would not have reached this Court. Instead, AMA forced New World to share in the
former’s losses, causing the latter to scramble for new lessees while the premises remained
untenanted and unproductive.

In the sphere of personal and contractual relations governed by laws, rules and regulations
created to promote justice and fairness, equity is deserved, not demanded. The application of
equity necessitates a balancing of the equities involved in a case, 37 for "[h]e who seeks equity
must do equity, and he who comes into equity must come with clean hands." 38 Persons in dire
straits are never justified in trampling on other persons’ rights. Litigants shall be denied relief if
their conduct has been inequitable, unfair and dishonest as to the controversy in issue. 39 The
actions of AMA smack of bad faith.

We cannot abide by the prayer for the further reduction of the liquidated damages. We find that, in
view of the surrounding circumstances, the CA even erred in reducing the liquidated damages to
four month’s worth of rent. Under the terms of the contract, and in light of the failure of AMA to
show that it is deserving of this Court’s indulgence, the payment of liquidated damages in an
amount equivalent to six months’ rent is proper.

Also proper is an award of exemplary damages. Article 2234 of the Civil Code provides:
Art. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must
show that he is entitled to moral, temperate or compensatory damages before the court may
consider the question of whether or not exemplary damages should be awarded. In case
liquidated damages have been agreed upon, although no proof of loss is necessary in order that
such liquidated damages may be recovered, nevertheless, before the court may consider the
question of granting exemplary in addition to the liquidated damages, the plaintiff must show that
he would be entitled to moral, temperate or compensatory damages were it not for the stipulation
for liquidated damages. (Emphasis supplied)

In this case, it is quite clear that New World sustained losses as a result of the unwarranted acts
of AMA. Further, were it not for the stipulation in the contract regarding the payment of liquidated
damages, we would be awarding compensatory damages to New World.

"Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that
is socially deleterious in its consequence by creating negative incentives or deterrents against
such behaviour."40 As such, they may be awarded even when not pleaded or prayed for. 41 In order
to prevent the commission of a similar act in the future, AMA shall pay New World exemplary
damages in the amount of ₱100,000.

II.

AMA’s liability for the rental arrears has already been extinguished.

AMA assails the CA ruling mainly for the imposition of legal interest on the rent in arrears. AMA
argues that the advance rental has extinguished its obligation as to the arrears. Thus, it says,
there is no more basis for the imposition of interest at the rate of 6% per annum from the date of
extrajudicial demand on 12 July 2004 until the finality of the Decision, plus interest at the rate of
12% per annum from finality until full payment.

At this juncture, it is necessary to look into the contract to determine the purpose of the advance
rental and security deposit.

Item Nos. 2, 3 and 4 of the Contract of Lease provide:

xxxx

2. That [AMA] shall pay to [New World] in advance within the first 5 days of each calendar
month a monthly rental in accordance with the following schedule for the entire term of
this Contract of Lease;

PERIOD MONTHLY RENTAL RATES

Year 1 June 15, 1998 – Mar 14, 1999 181,500.00

Year 2 Mar 15, 1999 – Mar 14, 2000 ₱208,725.00

Year 3 Mar 15, 2000 – Mar 14, 2001 ₱240,033.75

Year 4 Mar 15, 2001 – Mar 14, 2002 ₱276,038.81

Year 5 Mar 15, 2002 – Mar 14, 2003 ₱317,444.63

Year 6 Mar 15, 2003 – Mar 14, 2004 ₱365,061.33

 Year 7 Mar 15, 2004 – Mar 14, 2005 ₱419,820.53

Year 8 Mar 15, 2005 – Mar 14, 2006 ₱482,793.61

(₱482,793.61 – 37,500 =
₱445,293.61)

The monthly rentals referred to above were computed at an escalation rate of Fifteen
Percent (15%) every year for the entire duration of this lease contract.

3. Upon signing of this Contract, [AMA] shall pay advance rental in the amount of FOUR
HUNDRED FIFTY THOUSAND PESOS (₱450,000.00); Said advance rental shall be
applied as part of the rental for the last year of the Contract with a remaining balance of
Four Hundred Forty Five Thousand Two Hundred Ninety Three and 61/100 Pesos
(₱445,293.61) as monthly rental for the tenth [sic] and last year of the lease term;

4. Upon signing of the Contract, [AMA] shall pay [New World] a Security Deposit in the
amount of FOUR HUNDRED FIFTY THOUSAND PESOS (₱450,000.00) which shall be
applied for any unpaid rental balance and damages on the leased premises, and the
balance of which shall be refunded by [New World] to [AMA] within sixty (60) days after
the termination of the Contract, it being understood that such balance is being held by
[New World] in trust for [AMA].42

Based on Item No. 4, the security deposit was paid precisely to answer for unpaid rentals that
may be incurred by AMA while the contract was in force. The security deposit was held in trust by
New World, and whatever may have been left of it after the termination of the lease shall be
refunded to AMA.

Based on Item No. 3 in relation to Item No. 2, the parties divided the advance rental of ₱450,000
by 12 months. They came up with ₱37,500, which they intended to deduct from the monthly
rental to be paid by AMA for the last year of the lease term. Thus, unlike the security deposit, no
part of the advance rental was ever meant to be refunded to AMA. Instead, the parties intended to
apply the advance rental, on a staggered basis, to a portion of the monthly rental in the last year
of the lease term.

Considering the pretermination of the lease contract in the present case, this intent of the parties
as regards the advance rental failed to take effect. The advance rental, however, retains its
purpose of answering for the outstanding amounts that AMA may owe New World.

We now delve into the actual application of the security deposit and the advance rental.

At the time of the pretermination of the contract of lease, the monthly rent stood at ₱233,310,
inclusive of taxes;43hence, the two-month rental arrears in the amount of ₱466,620.

Applying the security deposit of ₱450,000 to the arrears will leave a balance of ₱16,620 in New
World’s favor.1âwphi1Given that we have found AMA liable for liquidated damages equivalent to
six months’ rent in the amount of ₱1,399,860 (monthly rent of ₱233,310 multiplied by 6 months),
its total liability to New World is ₱1,416,480.

We then apply the advance rental of ₱450,000 to this amount to arrive at a total extinguishment
of the liability for the unpaid rentals and a partial extinguishment of the liability for liquidated
damages. This shall leave AMA still liable to New World in the amount of ₱966,480 (₱1,416,480
total liability less ₱450,000 advance rental).
Not constituting a forbearance of money,44 this amount shall earn interest pursuant to Item
II(2)45 of our pronouncement in Eastern Shipping Lines v. CA. 46 This item remained unchanged by
the modification made in Nacar v. Gallery Frames.47 Interest at the rate of 6% per annum is
hereby imposed on the amount of 966,480 from the time of extrajudicial demand on 12 July 2004
until the finality of this Decision.

Thereafter – this time pursuant to the modification in Nacar– the amount due shall earn interest at
the rate of 6% per annum until satisfaction, this interim period being deemed to be by then
equivalent to a forbearance of credit.48

Considering the foregoing, there was no occasion for the unpaid two months’ rental to earn
interest. Besides, we cannot sanction the imposition of 3% monthly penalty interest thereon. We
quote with approval the ruling of the CA on this issue:

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.

In the instant case, the Contract of Lease and the Addendum to the Contract of Lease do not
specify any interest in the event of delay of payment of rentals. Accordingly, there being no
stipulation concerning interest, the trial court erred in imposing 3% interest per month on the two-
month unpaid rentals.

[New World] argues that the said3% interest per month on the unpaid rentals was agreed upon by
the parties as allegedly shown in Exhibits "A-4", "A-5", "A-6", "B-4", and "B-5".

We are not persuaded.

[New World’s] letter dated 12 July 2004 to [AMA], Statement of Account dated 07 July 2004; and
another Statement of Account dated 27 October 2004 were all prepared by [New World], with no
participation or any indication of agreement on [AMA’s] part. The alleged proposal of [AMA] as
contained in the Schedule of Receivable/Payable is just a computer print-out and does not
contain any signature showing [AMA’s] conformity to the same. 49

Having relied on the Contract of Lease for its demand for payment of liquidated damages, New
World should have also referred to the contract to determine the proper application of the
advance rental and security deposit. Had it done so in the first instance, it would have known that
there is no occasion for the imposition of interest, 3% or otherwise, on the unpaid rentals.
WHEREFORE, the Court of Appeals Decision dated 22 January 2009 and Resolution dated 10
May 2009 in CA-G.R. CV No. 89483 is AFFIRMED with MODIFICATION.

AMA Computer Learning Center, Inc. is ordered to pay New World Developers and Management,
Inc. the amount of ₱966,480, with interest at the rate of 6% per annum from 12 July 2004 until full
payment.

In addition, AMA shall pay New World exemplary damages in the amount of ₱100,000, which
shall earn interest at the rate of 6% per annum from the finality of this Decision until full payment.

SO ORDERED.
 G.R. No. 194605, June 14, 2016

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MARIANO OANDASAN,

JR., Accused-Appellant.

DECISION

BERSAMIN, J.:

This case involves a shooting incident that resulted in the deaths of two victims and
the frustrated killing of a third victim. Although the trial court properly appreciated
the attendance of treachery and pronounced the accused guilty of murder for the
fatal shooting of the first victim, it erroneously pronounced the accused guilty of
homicide and frustrated homicide as to the second and third victims on the basis that
treachery was not shown to be attendant. The Court of Appeals (CA) concurred with
the trial court's characterization of the felonies.

We disagree with both lower courts because treachery was competently shown to be
attendant in the shooting of each of the three victims. Thus, we pronounce the
accused guilty of two counts of murder and one count of frustrated murder.

Antecedents

Three informations were filed against the accused, two of which were for murder
involving the fatal shooting of Edgardo Tamanu and Danilo Montegrico, and the third
was for frustrated homicide involving the near-fatal shooting of Mario Paleg.

The informations, docketed as Criminal Case No. 11-9259, Criminal Case No. 11-
9260, and Criminal Case No. 11-9261 of the Regional Trial Court in Tuguegarao City
(RTC), averred as follows:

Criminal Case No. II-92591

That on or about July 29, 2003, in the municipality of Gattaran, province of Cagayan,
and within the jurisdiction of this Honorable Court, the above-named accused armed
with a gun, with intent to kill, with evident premeditation and with treachery,
conspiring together and helping one another, did then and there willfully, unlawfully
and feloniously assault, attack and shot (sic) one Edgardo Tamanu y Palattao,
inflicting upon the latter a gunshot wound which caused his death.

Criminal Case No. II-92602

That on or about July 29, 2003, in the municipality of Gattaran, province of Cagayan,
and within the jurisdiction of this Honorable Court, the above-named accused armed
with a gun, with intent to kill, with evident premeditation and with treachery,
conspiring together and helping one another, did then and there willfully, unlawfully
and feloniously assault, attack and shot (sic) one Danilo Montegrico, inflicting upon
the latter a gunshot wound which caused his death.

Criminal, Case No. II-92613

That on or about July 29, 2003, in the municipality of Gattaran, province of Cagayan,
and within the jurisdiction of this Honorable Court, the above-named accused armed
with a gun, with intent to kill, with evident premeditation and with treacher[y],
conspiring together and helping one another, did then and there willfully, unlawfully
and feloniously assault, attack and shot (sic) one Engr. Mario Paleg y Ballad,
inflicting upon the latter a gunshot wound.

That the accused had performed all the acts of execution which would have produce
(sic) the crime of Homicide as a consequence, but which, nevertheless, did not
produce it by reason of causes independent of his own will.

The CA summarized the facts in its assailed judgment, to wit:

Ferdinand Cutaran, 37 years old, driver at Navarro Construction, testified that on

July 29, 2003 between 8:00 to 9:00 in the evening, he and his companions Jose
Ifurung, Arthur Cutaran and victim Danny Montegrico were having a drinking spree
outside the bunkhouse of Navarro Construction at Barangay Pena Weste, Gattaran,
Cagayan. Suddenly, appellant who appeared from back of a dump truck, aimed and
fired his gun at Montegrico. Cutaran ran away after seeing the appellant shoot
Mentegrico. He did not witness the shooting of the other two victims Edgar Tamanu
and Mario Paleg. When he returned to the crime scene, he saw the bodies of
Montegrico, Tamanu and Paleg lying on the ground. Cutaran and his companions
rushed the victims to Lyceum of Aparri Hospital.

As a result of the shooting incident, Danilo Montegrico, 34, and Edgardo Tamanu, 33,
died; while Mario Paleg survived. The Medical Certificate dated August 13, 2003
issued by Lyceum of Aparri Hospital disclosed that Paleg was confined from July 29-
30, 2003 for treatment of a gun shot wound on his right anterior hind spine.

Prudencio Bueno, 68 years old, a checker at Navarro Construction and a resident of

Centro 14 Aparri, Cagayan, stated that after having dinner with Cutaran and the
others on the date and time in question, he went inside the bunkhouse to drink
water. Suddenly, he heard successive gun reports (sic). When he peeped through a
window he saw the accused approaching from the back of a dump truck holding
something, and going to the table where they were eating. He confessed that he did
not actually see the appellant fire his gun at the victims.

Dr. Nida Rosales, Municipal Health Officer of Gattaran, Cagayan testified that she
conduced a post-mortem examination on the body of Montegrico; that Montegrico
sustained a single gunshot wound below the ribs; and that the injury caused his
death.

The accused-appellant raised the defense of denial and alibi. Accused-appellant, 38

years old, a native of Bulala Sur, Aparri, Cagayan, testified that from July up to
October 2003, he was staying at his sister's house in Imus, Cavite. He was hired by
SERG Construction, Inc. as a mason to work on a subdivision project in Rosario,
Cavite. On that fateful day of July 29, 2003, he reported for work from 7:00 a.m. up
to 5:00 p.m. To bolster his claim, he presented an Employment Certificate dated
January 20, 2007 issued by Engr. Renato Bustamante of SERG Construction and a
time record sheet dated July 29, 2003. He went back to Aparri in October 2003 after
the completion of his project in Cavite. He further stated that he worked at Navarro
Construction in February, 2003; that he had a previous misunderstanding with his
former co-workers witnesses Cutaran and Bueno when he caught the two stealing
sacks of cement from the company; that as a result, Cutaran and Bueno were
transferred to another project and their employer assigned him as checker in
replacement of Bueno; that the two planned to kill him as he prevented them from
doing their fraudulent act; and that he resigned between the months of March and
May 2003 because the two kept on disturbing him.

Fred Escobar, 48 years old, a resident of Pallagao, Baggao, Cagayan, testified that
on July 29, 2003, he was having a drink with Montegrieo and three other men whom
he did not know; that when he was about to go home at around 8:00 p.m., a
stranger appeared and fired his gun at Montegrieo; that the assailant whom he did
not know fired his gun several times. He asserted that appellant was not the
assailant since the latter was shorter in stature.4ChanRoblesVirtualawlibrary

Judgment of the RTC

On June 1, 2009, the RTC rendered its judgment,5 to wit:

WHEREFORE, the Court finds the accused Mariano Oandasan, Jr. guilty beyond
reasonable doubt as principal:

a) in Criminal Case No. 11-9260, for Murder for killing Danilo Montegrieo and
sentences accused with the penalty of reclusion perpetua and to pay the heirs of
Danilo Montegrieo the sum of One Flundred Fifty Thousand Pesos (P150,000.00);

b) in Criminal Case No. 11-9259, for Homicide for killing Edgardo Tamanu and
sentences accused with the indeterminate penalty of six (6) years and one (1) day of
prision mayor as minimum to seventeen (17) years and four (4) months of reclusion
temporal as maximum and to pay the heirs of Edgardo Tamanu the sum of Fifty
Thousand Pesos (P50,000.00); and

c) in Criminal Case No. 11-9261, for Frustrated Homicide for wounding Mario Paleg,
and sentences the accused with the penalty of two (2) years and one (1) day of
prision correccional as minimum to eight (8) years and one (1) day of prision mayor
as maximum.

SO ORDERED.6ChanRoblesVirtualawlibrary

Decision of the CA

On appeal, the CA affirmed the judgment of the RTC through its decision
promulgated on June 29, 2010,7 to wit:

WHEREFORE, premises considered, the appeal is DENIED. The Judgment dated

June 1, 2009 of the RTC, Branch 6 of Aparri, Cagayan is AFFIRMED with
MODIFICATION in that appellant is ORDERED to pay the heirs of Edgardo Tamanu
the amounts of P75,000.00 as civil indemnity and P75,000.00 as moral damages,
and Mario Paleg, the sum of P50,000.00 as moral damages.

SO ORDERED.8

Hence, this ultimate appeal, with the accused still insisting on the reversal of his
convictions.
 Ruling of the Court

This appeal opens the entire record to determine whether or not the findings against
the accused should be upheld or struck down in his favor. Nonetheless, he bears the
burden to show that the trial and the appellate courts had overlooked,
misapprehended or misinterpreted facts or circumstances that, if properly considered
and appreciated, would significantly shift the outcome of the case in his favor. His
failure to discharge this burden notwithstanding, the Court still reviewed the record
conformably with the tenet that every appeal in a criminal case opens the record for
review.9 Thus, after evaluating the record, the Court affirms the finding of his being
criminally responsible for the killing of Montegrico and Tamanu, and the frustrated
killing of Paleg, subject to the rectification of the characterization of the felonies as to
Tamanu and Paleg.

I
Denial and alibi do not overcome
positive identification of the accused

There is no doubt that Prosecution witness Ferdinand Cutaran positively identified

the accused as the person who had shot Montegrico. Considering that Cutaran's
credibility as an eyewitness was unassailable in the absence of any showing or hint
of ill motive on his part to falsely incriminate the accused, such identification of the
accused as the assailant of Montegrico prevailed over the accused's weak denial and
alibi. As such, the CA properly rejected the denial and alibi of the accused as
unworthy, and we adopt the following stated reasons of the CA for the rejection, to
wit:

As for the defense of alibi, for it to prosper, it must be established by positive, clear
and satisfactory proof that it was physically impossible for the accused to have been
at the scene of the crime at the time of its commission, and not merely that the
accused was somewhere else. Physical impossibility refers to the distance between
the place where the accused was when the crime happened and the place where it
was committed, as well as the facility of the access betwee the two places. In the
case at bar, appellant failed to prove the element of physical impossibility for him to
be at the scene of the crime at the time it took place. His alibi that he was in Cavite
and the employment certificate and time record sheet which he presented cannot
prevail over the positive and categorical testimonies of the prosecution witnesses.
Alibi is the weakest defense not only because it is inherently weak and unreliable,
but also because it is easy to fabricate. It is generally rejected when the accused is
positively identified by a witness.10

We reiterate that denial and alibi do not prevail over the positive identification of the
accused by the State's witnesses who are categorical and consistent and bereft of ill
motive towards the accused. Denial, unless substantiated by clear and convincing
evidence, is undeserving of weight in law for being negative and self-serving.
Moreover, denial and alibi cannot be given greater evidentiary value than the
testimony of credible witnesses who testify on affirmative matters. 11

II
Treachery also attended the shooting
of Tamanu and Paleg; hence, the accused
is guilty of two counts of murder and
one count of frustrated murder
The CA and the RTC appreciated the attendance of treachery only in the fatal
shooting of Montegrico (Criminal Case No. 11-9260). Although no witness positively
identified the accused as the person who had also shot Tamanu and Paleg, the
record contained sufficient circumstantial evidence to establish that the accused was
also criminally responsible for the fatal shooting of Tamanu and the near-fatal
shooting of Paleg. Indeed, the CA declared the accused as "the lone assailant" of the
victims based on its following analytical appreciation, to wit:

The evidence in this case shows that the attack was unexpected and swift.
Montegrico and his friends were just drinking outside the bunkhouse when the
appellant suddenly appeared from the back of a dump truck, walked towards their
table and, without any warning, fired at Montegrico. This shot was followed by more
shots directed at Montegrico's friends, Tamanu and Paleg. Indisputably, Montegrico
was caught off guard by the sudden and deliberate attack coming from the appellant,
leaving him with no opportunity to raise any defense against the attack. Also,
appellant deliberately and consciously adopted his mode of attack by using a gun
and made sure that Montegrico, who was unarmed, would have no chance to defend
himself.

We hold that the circumstantial evidence available was enough to convict accused-
appellant. Circumstantial evidence is competent to establish guilt as long as it is
sufficient to establish beyond a reasonable doubt that the accused, and not someone
else, was responsible for the killing. For circumstantial evidence to suffice to convict
an accused, the following requisites must concur: (1) there is more than one
circumstance; (2) the facts from which the inferences are derived are proven; and
(3) the combination of all the circumstances is such as to produce a conviction
beyond reasonable doubt. In this case, these requisites for circumstantial evidence to
sustain a conviction are present. First, the witnesses unanimously said that they saw
appellant coming from the back of a dump truck and shoot Montegrico
pointblank. Second, appellant fired his gun several times. Third, immediately after
the shooting incident, three victims were found lying on the ground and rushed to
the hospital. Fourth, the Certificates of Death of Montegrico and Tamanu and the
Medical Certificate of Paleg revealed that they all sustained gun shot wounds. Thus,
it can be said with certitude that appellant was the lone assailant. The foregoing
circumstances are proven facts, and the Court finds no reason to discredit the
testimonies of the prosecution's witnesses. Well-entrenched is the rule that the trial
court's assessment of the credibility of witnesses is accorded great respect and will
not be disturbed on appeal, inasmuch as the court a quo was in a position to observe
the demeanor of the witnesses while testifying. The Court does not find any
arbitrariness or error on the part of the RTC as would warrant a deviation from this
rule.12

Although the CA and the RTC correctly concluded that the accused had been directly
responsible for the shooting of Tamanu and Paleg, we are perplexed why both lower
courts only characterized the killing of Tamanu and the near-killing of Paleg as
homicide and frustrated homicide while characterizing the killing of Montegrico as
murder because of the attendance of treachery. The distinctions were unwarranted.
The fact that the shooting of the three victims had occurred in quick succession fully
called for a finding of the attendance of treachery in the attacks against all the
victims. Montegrico, Tamanu and Paleg were drinking together outside their
bunkhouse prior to the shooting when the accused suddenly appeared from the rear
of the dump truck, walked towards their table and shot Montegrico without any
warning. That first shot was quickly followed by more shots. In that situation, none
of the three victims was aware of the imminent deadly assault by the accused, for
they were just enjoying their drinks outside their bunkhouse. They were unarmed,
and did not expect to be shot, when the accused came and shot them.

The attack was mounted with treachery because the two conditions in order for this
circumstance to be appreciated concurred, namely: (a) that the means, methods and
forms of execution employed gave the person attacked no opportunity to defend
themselves or to retaliate; and (b) that such means, methods and forms of
execution were deliberately and consciously adopted by the accused without danger
to his person.13 The essence of treachery lay in the attack that came without
warning, and was swift, deliberate and unexpected, affording the hapless, unarmed
and unsuspecting victims no chance to resist, or retaliate, or escape, thereby
ensuring the accomplishment of the deadly design without risk to the aggressor, and
without the slightest provocation on the part of the victims.

What was decisive is that the execution of the attack made it impossible for the
victims to defend themselves or to retaliate. Jurisprudence has been illustrative of
this proposition. In People v. Flora,14 for instance, treachery was appreciated as an
attendant circumstance in the killing of two victims, and in the attempted killing of a
third victim, warranting the conviction of the accused for two murders and attempted
murder, notwithstanding that although the accused had first fired at his Intended
victim, he had missed and had instead hit the two other victims, with the Court
observing that the three victims were all nonetheless "helpless to defend
themselves." In a nother illustrative ruling, People v. Pinto, Jr.,15 treachery was held
to attend the three killings and the wounding of a fourth victim because the attack
was sudden and the victims were defenseless; hence, the killings were murders, and
the wounding frustrated murder.

Treachery as an aggravating or attendant circumstance must be established beyond

reasonable doubt. This quantum is hardly achieved if there is no testimony
showing how the accused actually commenced the assault against the victim. But to
absolutely require such testimony in all cases would cause some murders committed
without eyewitnesses to go unpunished by the law. To avoid that most undesirable
situation, the Rules of Court permits a resort not only to direct evidence but also to
circumstantial evidence. Indeed, the proof competent to achieve the quantum is not
confined to direct evidence from an eyewitness, who may be unavailable.
Circumstantial evidence can just as efficiently and competently achieve the quantum.
The Rules of Court nowhere expresses a preference for direct evidence of a fact to
evidence of circumstances from which the existence of a fact may be properly
inferred. The Rules of Court has not also required a greater degree of certainty when
the evidence is circumstantial than when it is direct, for, in either case, the trier of
fact must still be convinced beyond a reasonable doubt of the guilt of the
accused.16 The quantity of circumstances sufficient to convict an accused has not
been fixed as to be reduced into some definite standard to be followed in every
instance. As the Court has observed in People v. Modesto:17

The standard postulated by this Court in the appreciation of circumstantial evidence

is well set out in the following passage from People vs. Ludday:18 "No general rule
can be laid down as to the quantity of circumstantial evidence which in any case will
suffice. All the circumstances proved must be consistent with each other, consistent
with the hypothesis that the accused is guilty, and at the same time inconsistent with
the hypothesis that he is innocent, and with every other rational hypothesis except
that of guilt."

It is of no consequence, therefore, that Cutaran, who had meanwhile fled to safety

upon hearing the shot that had felled Montegrico, did not witness the actual shooting
of Tamanu and Paleg; or that Paleg, although surviving the assault against him and
Tamanu, did not testify during the trial. What is of consequence is that the records
unquestionably and reliably showed that Tamanu and Paleg were already prostrate
on the ground when Cutaran returned to the scene; and that the gunshots had been
fired in quick succession, thereby proving with moral certainty that the accused was
the same person who also shot Tamanu and Paleg.

The averment in the second paragraph of the information filed Criminal Case No. 11-
9261 (in relation to the shooting of Paleg) that homicide was the consequence of the
acts of execution by the appellant19does not prevent finding the accused guilty of
frustrated murder. The rule is that the allegations of the information on the nature of
the offense charged, not the nomenclature given it by the Office of the Public
Prosecutor, are controlling in the determination of the offense charged. Accordingly,
considering that the information stated in its first paragraph that the accused,
"armed with a gun, with intent to kill, with evident premeditation and with
treacher[y], conspiring together and helping one another, did then and there
willfully, unlawfully and feloniously assault, attack and shot (sic) one Engr. Mario
Paleg y Ballad, inflicting upon the latter a gunshot wound," the accused can be
properly found guilty of frustrated murder, a crime sufficiently averred in the
information.

II
Criminal Liabilities

As a consequence, the accused was criminally liable for two counts of murder for the
fatal shooting of Montegrico and Tamanu, and for frustrated murder for the near-
fatal shooting of Paleg. In the absence of any modifying circumstances, reclusion
perpetua is the penalty for each count of murder, while reclusion temporal in its
medium period is the penalty for frustrated murder. The indeterminate sentence for
the frustrated murder is eight years of prision mayor, as the minimum, to 14 years,
eight months and one day of reclusion temporal, as the maximum.

IV
Civil Liability

For death caused by a crime or quasi-delict, Article 2206 of the Civil

Code enumerates the damages that may be recovered from the accused or
defendant, to wit:

Article 2206. The amount of damages for death caused by a crime or quasi-delict
shall be at least three thousand pesos, even though there may have been mitigating
circumstances. In addition:

(l)The defendant shall be liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter; such indemnity shall in
every case be assessed and awarded by the court, unless the deceased on account of
permanent physical disability not caused by the defendant, had no earning capacity
at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article
291, the recipient who is not an heir called to the decedent's inheritance by the law
of testate or intestate succession, may demand support from the person causing the
death, for a period not exceeding five years, the exact duration to be fixed by the
court;

(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.

The first item of civil liability is the civil indemnity for death, or death indemnity.

Civil indemnity comes under the general provisions of the Civil Code on damages,
and refers to the award given to the heirs of the deceased as a form of monetary
restitution or compensation for the death of the victim at the hands of the accused.
Its grant is mandatory and a matter of course, and without need of proof other than
the fact of death as the result of the crime or quasi-delict,20 and the fact that the
accused was responsible therefor. The mandatory character of civil indemnity in case
of death from crime or quasi-delict derives from the legal obligation of the accused
or the defendant to fully compensate the heirs of the deceased for his death as the
natural consequence of the criminal or quasi-delictual act or omission. This legal
obligation is set in Article 2202 of the Civil Code, viz.:

Article 2202. In crimes and quasi-delicts, the defendant shall be liable for all
damages which are the natural and probable consequences of the act or omission
complained of. It is not necessary that such damages have been foreseen or could
have reasonably been foreseen by the defendant.

Article 2206 of the Civil Code, supra, has fixed the death indemnity to be "at least
three thousand pesos, even though there may have been mitigating circumstances."
Yet, the granting of civil indemnity was not introduced by the Civil Code, for the
courts had granted death indemnity to the heirs of the victims even long prior to
August 30, 1950, the date of the effectivity of the Civil Code. The award of civil
indemnity dated back to the early years of the Court.21 There was also legislation on
the matter, starting with Commonwealth Act No. 284, approved on June 3, 1938,
which provided in its Section 1 the following:

Section 1. — The civil liability or the death of a person shall be fixed by the
competent court at a reasonable sum, upon consideration of the pecuniary situation
of the party liable and other circumstances, but it shall in no case be less than two
thousand pesos.

In fixing the civil indemnity, the Legislature thereby set a minimum. The Civil Code,
in Article 2206, took the same approach by specifying the amount to be at
least P3,000.00, which was directly manifesting the legislative intent of enabling the
courts to increase the amount whenever the circumstances would warrant.

Civil indemnity for death has been increased through the years from the minimum of
P2,000.00 to as high as P100,000.00. The increases have been made to consider the
economic conditions, primarily the purchasing power of the peso as the Philippine
currency. In 1948, in People v. Amansec,22 the Court awarded to the heirs of the
victim of homicide the amount of P6,000.00 as death indemnity, raising the
P2,000.00 allowed by the trial court, the legal minimum at the-time, and justified the
increase by adverting to the "difference between the value of the present currency
and that at the time when the law fixing a minimum indemnity of P2,000.00 was
enacted."23 Later on, in 1968, the Court, in People v. Pantoja,24 saw a significant
need to further upgrade the civil indemnity for death to PI 2,000.00. To justify the
upgrade, the Court included a review of the more recent history of civil indemnity for
death in this jurisdiction, to wit:

In 1947, when the Project of Civil Code was drafted, the Code Commission fixed the
sum of P3,000 as the minimum amount of compensatory damages for death caused
by a crime or quasi-delict. The Project of Civil Code was approved by both Houses of
the Congress in 1949 as the New Civil Code of the Philippines, which took effect in
1950. In 1948 in the case of People vs. Amansec, 80 Phil. 424, the Supreme Court
awarded P6,000 as compensatory damages for death caused by a crime "considering
the difference between the value of the present currency and that at the time when
the law fixing a minimum indemnity of P2,000 was enacted." The law referred to was
Commonwealth Act No. 284 which took effect in 1938. In 1948, the purchasing
power of the Philippine peso was one-third of its pre-war purchasing power. In 1950,
when the New Civil Code took effect, the minimum amount of compensatory
damages for death caused by a crime or quasi-delict was fixed in Article 2206 of the
Code at P3,000. The article repealed by implication Commonwealth Act No. 284.
Hence, from the time the New Civil Code took effect, the Courts could properly have
awarded P9,000 as compensatory damages for death caused by a crime or quasi-
delict. It is common knowledge that from 1948 to the present (1968), due to
economic circumstances beyond governmental control, the purchasing power of the
Philippine peso has declined further such that the rale of exchange now in the free
market is U.S. $1.00 to almost £4.00 Philippine pesos. This means that the present
purchasing power of the Philippine peso is one-fourth of its pre-war purchasing
power. We are, therefore, of the considered opinion that the amount of award of
compensatory damages for death caused by a crime or quasi-delict should now be
P12,000.25 (Italics supplied)

Increases were made from time to time until the death indemnity reached the
threshold of P50,000.00, where it remained for a long time.26 In that time, however,
the Court occasionally granted P75,000.00 as civil indemnity for death. 27 The Court
retained the death indemnity at P75,000.00 in subsequent cases, as in People v.
Dela Cruz (2007)28 and People v. Buban.29 In People v. Anod,30 decided on August 5,
2009, the Court clarified that the award of P75,000.00 was appropriate only if the
imposable penalty was death but reduced to reclusion perpetua by virtue of the
enactment of Republic Act No. 9346 (An Act Prohibiting the Imposition of Death
Penalty). Hence, where the proper imposable penalty was reclusion perpetua, death
indemnity in murder remained at P50,000.00. Yet, the Court, in an apparent self-
contradiction less than a month after Anod, promulgated People v.
Arbalate,31 wherein it fixed P75,000.00 as death indemnity despite the imposable
penalty being reclusion perpetua, with the Court holding that death indemnity should
be P75,000.00 regardless of aggravating or mitigating circumstances provided the
penalty prescribed by law was death or reclusion perpetua,.

Death indemnity of P75,000.00 became the standard in murder where the penalty
was reclusion perpetua. This standard has been borne out by People v.
Soriano,32People v. Jadap,33 and People v. Sanchez (2010).34 But the consistency in
applying the standard was broken in 2010, when the Court, in People v.
Gutierrez (2010),35 a murder case, reverted to P50,000.00 as civil indemnity. People
v. Gutierrez (2010) was followed by People v. Apacible,36 also for murder, with the
Court, citing People v. Anod,37 reducing the civil indemnity from P75,000.00, the
amount originally awarded by the lower court, to P50,000.00. Oddly enough, on June
29, 2010, or two months before the promulgation of Apacible, the Court
promulgated People v. Orias38 and therein awarded P75,000.00 as civil indemnity
and even made a sweeping declaration that such amount was given automatically in
cases of murder and homicide. It is notable, however, that People v.
Ocampo39 and People v. Amodia,40 the two rulings cited as authority for the
declaration, involved charges and convictions for murder, not homicide.

The Court reverted to the flat amount of P50,000.00 as death indemnity in murder
where the proper imposable penalty was reclusion perpetua in People v. Dela
Cruz (2010),41Talampas v. People42 and People v. Gabrino.43 Subsequently, the Court
went back to P75,000.00 in People v. Mediado44 and People v. Anti camara45 both
murder cases. In People v. Escleto46 the Court, prescribing reclusion perpetua upon
not finding any aggravating circumstance to be attendant, imposed P75,000.00 as
civil indemnity for the death of the victim. The Court did the same thing in People v.
Camat47 and People v. Laurio48 where the Court, prescribing only reclusion perpetua
due to lack of any aggravating circumstance, awarded P75,000.00 as civil indemnity
for death. In People v. Buyagan49 the Court, in awarding P75,000.00 as civil
indemnity for the deaths of each of the victims, said that the civil indemnity should
be increased from P50,000.00 to P75,000.00 inasmuch as the imposable penalty
against the appellant would have been death had it not been for the enactment of
Republic Act No. 9346.

In 2013, the Court once again changed its mind and awarded only P50,000.00 as
civil indemnity in murder. Thus, in People v. Pondivida50 and People v. Alawig,51 the
Court sentenced the accused to reclusion perpetua and awarded only P50,000.00 as
civil indemnity.

Incidentally, the civil indemnity for homicide remained pegged at P50,000.00 for
almost two decades [e.g., Lozano v. Court of Appeals52People v.
Gutierrez (2002),53People v. Dagani,54Seguritan v. People55People v. Valdez,56People
v. Lagman57 and Sombol v. People.]58 In attempted robbery with homicide (People v.
Barra, the civil indemnity was P50,000.00.59

It is again timely to raise the civil indemnity for death arising from crime or quasi-
delict. We start by reminding that human life, which is not a commodity, is priceless.
The value of human life is incalculable, for no loss of life from crime or quasi-delict
can ever be justly measured. Yet, the law absolutely requires every injury, especially
loss of life, to be compensated in the form of damages. For this purpose, damages
may be defined as the pecuniary compensation, recompense, or satisfaction for an
injury sustained, or, as otherwise expressed, the pecuniary consequences that the
law imposes for the breach of some duty or the violation of some right. 60 As such,
damages refer to the amount in money awarded by the court as a remedy for the
injured.61 Although money has been accepted as the most frequently used means of
punishing, deterring, compensating and regulating injury throughout the legal
system,62it has been explained that money in the context of damages is not awarded
as a replacement for other money, but as substitute for that which is generally more
important than money; it is the best thing that a court can do.63 Regardless, the civil
indemnity for death, being compensatory in nature, must attune to
contemporaneous economic realities; otherwise, the desire to justly indemnify would
be thwarted or rendered meaningless. This has been the legislative justification for
pegging the minimum, but not the maximum, of the indemnity.

The reasoning in Pantoja,64supra, has been premised on the pronouncement

in People v. Amansec65 to the effect that the increase to P6,000.00 in "compensatory
damages for death caused by a crime" from the legally imposed minimum indemnity
of P2,000.00 under Commonwealth Act No. 284 (which took effect in 1938) was in
consideration of "the difference between the value of the present currency and that
at the time when the law fixing a minimum indemnity of P2,000 was enacted." The
Pantoja Court thus raised the amount of death indemnity to P12,000.00 by taking
judicial cognizance of the fact "that from 1948 to the present (1968), due to
economic circumstances beyond governmental control, the purchasing power of the
Philippine peso has declined further such that the rate of exchange now in the free
market is U.S. $1.00 to almost £4.00 Philippine pesos. This means that the present
purchasing power of the Philippine peso is one-fourth of its pre-war purchasing
power." Subsequent increases have been similarly justified.

On April 5, 2016, the Court promulgated its decision in People v. Jugueta (G.R. No.
202124), whereby it adopted certain guidelines on fixing the civil liabilities in crimes
resulting in the death of the victims taking into proper consideration the stages of
execution and gravity of the offenses, as well as the number of victims in composite
crimes. Other factors were weighed by the Court. In the case of murder where the
appropriate penalty is reclusion perpetna, the Court has thereby fixed P75,000.00 for
moral damages, P75,000.00 for exemplary damages, and P75,000.00 for civil
indemnity as the essential civil liabilities,- in addition to others as the records of each
case will substantiate. Hence, we impose herein the same amounts for such items of
damages in each count of murder.

It appears that the accused and the heirs of Montegrico stipulated that the civil
indemnity of the accused in case of conviction should not exceed P150,000.00.66 The
stipulation cannot stand because the civil indemnity arising from each murder should
only be P75,000.00. In crimes in which death of the victim results, civil indemnity is
granted even in the absence of allegation and proof. Similarly, moral damages are
allowed even without allegation and proof, it being a certainty that the victims' heirs
were entitled thereto as a matter of law.

Also in accordance with People v. Jugueta, supra, temperate damages of P50,000.00

should further be granted to the heirs of Montegrico and Tamanu considering that
they were presumed to have spent for the interment of each of the deceased. It
would be unjust to deny them recovery in the form of temperate damages just
because they did not establish with certainty the actual expenditure for the
interment of their late-lamented family members.67

In this respect, we mention that Article 2230 of the Civil Code authorizes the grant of
exemplary damages if at least one aggravating circumstance attended the
commission of the crime. For this purpose, exemplary damages of P75,000.00 are
granted to the heirs of Montegrico and Tamanu, respectively, based on the attendant
circumstance of treachery. Whether treachery was a qualifying or attendant
circumstance did not matter, for, as clarified in People v. Catubig:68

The term "aggravating circumstances'" used by the Civil Code, the law not having
specified otherwise, is to be understood in its broad or generic sense. The
commission of an offense has a two-pronged effect, one on the public as it breaches
the social order and the other upon the private victim as it causes personal
sufferings, each of which is addressed by, respectively, the prescription of heavier
punishment for the accused and by an award of additional damages to the victim,
(lie increase of the penalty or a shift to a graver felony underscores the exacerbation
of the offense by the attendance of aggravating circumstances, whether ordinary or
qualifying, in its commission.

Unlike the criminal liability which is basically a State concern, the award of damages,
however, is likewise, if not primarily, intended for the offended party who suffers
thereby. It would make little sense for an award of exemplary damages to be due
the private offended party when the aggravating circumstance is ordinary but to be
withheld when it is qualifying. Withal, the ordinary or qualifying nature of an
aggravating circumstance is a distinction that should only be ol consequence to the
criminal, rather than to the civil, liability of the offender. In fine, relative to the civil
aspect of the case, an aggravating circumstance, whether ordinary or qualifying,
should entitle the offended party to an award of exemplary damages within the
unbridled meaning of Article 2230 of the Civil Code.69

On his part, Paleg, being the victim of frustrated murder, is entitled to P50,000.00 as
moral damages, P50,000.00 as civil indemnity, and P50,000.00 as exemplary
damages, P25,000.00 as temperate damages (for his hospitalization and related
expenses). This quantification accords with the pronouncement in People v. Jugueta,
supra.

In line with pertinent jurisprudence,70 interest of 6% per annum shall be charged on

all the items of civil liability imposed herein, computed from the date of the finality of
this decision until fully paid.chanrobleslaw

WHEREFORE, the Court FINDS and DECLARES accused MARIANO OANDASAN,

JR. GUILTY beyond reasonable doubt of TWO COUNTS OF MURDER in Criminal
Case No. 11-9259 and Criminal Case No. 11-9260 for the killing of Edgardo Tamanu
and Danilo Montegrico, respectively; and of FRUSTRATED MURDER in Criminal
Case No. II-9261 for the frustrated killing of Mario Paleg,
and, ACCORDINGLY, SENTENCES him to suffer RECLUSION PERPETUA in
Criminal Case No. 11-9259 and in Criminal Case No. 11-9260, and
the INDETERMINATE SENTENCE OF EIGHT YEARS OF PRISION MAYOR, AS
THE MINIMUM, TO 14 YEARS, EIGHT MONTHS AND ONE DAY OF RECLUSION
TEMPORAL, AS THE MAXIMUM, in Criminal Case No. 11-9261; and to pay the
following by way of civil liability, to wit:

1) To the heirs of Danilo Montegrico, civil indemnity of P75,000.00; moral damages

of P75,000.00; exemplary damages of P75,000.00; and temperate damages of
P50,000.00;

2) To the heirs of Edgardo Tamanu, civil indemnity of P75,000.00; moral damages of

P75,000.00; exemplary damages of P75,000.00; and temperate damages of
P50,000.00; and

3) To Mario Paleg, civil indemnity of P50,000.00; moral damages of P50,000.00;

exemplary damages of P50,000.00; and temperate damages of P25,000.00.
All monetary awards for damages shall earn interest at the legal rate of 6% per
annum from the finality of this decision until fully paid
The accused shall pay the costs of suit.
G.R. No. 201595

ALLAN M. MENDOZA, Petitioner,

vs.
OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU), namely, EDUARDO B.
BORELA, BUENAVENTURA QUEBRAL, ELIZABETH COMETA, ALEJANDRO TORRES,
AMORSOLO TIERRA, SOLEDAD YEBAN, LUIS RENDON, VIRGINIA APILADO, TERESITA
BOLO, ROGELIO BARBERO, JOSE CASAÑAS, ALFREDO MAGA, EMILIO FERNANDEZ,
ROSITA BUENA VENTURA, ALMENIO CANCINO, ADELA IMANA, MARIO MANCENIDO,
WILFREDO MANDILAG, ROLANDO MANLAP AZ, EFREN MONTEMAYOR, NELSON
PAGULAYAN, CARLOS VILLA, RIC BRIONES, and CHITO BERNARDO, Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the April 24, 2012 Decision2 of the Court of Appeals
(CA) which dismissed the Petition for Certiorari3 in CA-G.R. SP No. 115639.

Factual Antecedents

Petitioner was a member of the Manila Water Employees Union (MWEU), a Department of Labor
and Employment (DOLE)-registered labor organization consisting of rank-and-file employees
within Manila Water Company (MWC). The respondents herein named – Eduardo B. Borela
(Borela), Buenaventura Quebral (Quebral), Elizabeth Cometa (Cometa), Alejandro Torres
(Torres), Amorsolo Tierra (Tierra), Soledad Yeban (Yeban), Luis Rendon (Rendon), Virginia
Apilado (Apilado), Teresita Bolo (Bolo), Rogelio Barbero (Barbero), Jose Casañas (Casañas),
Alfredo Maga (Maga), Emilio Fernandez (Fernandez), Rosita Buenaventura (Buenaventura),
Almenio Cancino (Cancino), Adela Imana, Mario Mancenido (Mancenido), Wilfredo Mandilag
(Mandilag), Rolando Manlapaz (Manlapaz), Efren Montemayor (Montemayor), Nelson Pagulayan,
Carlos Villa, Ric Briones, and Chito Bernardo – were MWEU officers during the period material to
this Petition, with Borela as President and Chairman of the MWEU Executive Board, Quebral as
First Vice-President and Treasurer, and Cometa as Secretary. 4

In an April 11, 2007 letter,5 MWEU through Cometa informed petitioner that the union was unable
to fully deduct the increased P200.00 union dues from his salary due to lack of the required
December 2006 check-off authorization from him. Petitioner was warned that his failure to pay the
union dues would result in sanctions upon him. Quebral informed Borela, through a May 2, 2007
letter,6 that for such failure to pay the union dues, petitioner and several others violated Section
1(g), Article IX of the MWEU’s Constitution and By-Laws. 7 In turn, Borela referred the charge to
the MWEU grievance committee for investigation.

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled hearing.
On June 6, 2007, the MWEU grievance committee recommended that petitioner be suspended
for 30 days.

In a June 20, 2007 letter,8 Borela informed petitioner and his corespondents of the MWEU
Executive Board’s "unanimous approval"9 of the grievance committee’s recommendation and
imposition upon them of a penalty of 30 days suspension, effective June 25, 2007.

In a June 26, 2007 letter10 to Borela, petitioner and his co-respondents took exception to the
imposition and indicated their intention to appeal the same to the General Membership Assembly
in accordance with Section 2(g), Article V of the union’s Constitution and By-Laws, 11 which grants
them the right to appeal any arbitrary resolution, policy and rule promulgated by the Executive
Board to the General Membership Assembly. In a June 28, 2007 reply, 12 Borela denied
petitioner’s appeal, stating that the prescribed period for appeal had expired.

Petitioner and his co-respondents sent another letter13 on July 4, 2007, reiterating their arguments
and demanding that the General Membership Assembly be convened in order that their appeal
could be taken up. The letter was not acted upon.

Petitioner was once more charged with non-payment of union dues, and was required to attend
an August 3, 2007 hearing.14 Thereafter, petitioner was again penalized with a 30-day suspension
through an August 21, 2007 letter15by Borela informing petitioner of the Executive Board’s
"unanimous approval"16 of the grievance committee recommendation to suspend him effective
August 24, 2007, to which he submitted a written reply, 17 invoking his right to appeal through the
convening of the General Membership Assembly. However, the respondents did not act on
petitioner’s plea.

Meanwhile, MWEU scheduled an election of officers on September 14, 2007. Petitioner filed his
certificate of candidacy for Vice-President, but he was disqualified for not being a member in
good standing on account of his suspension.

On October 2, 2007, petitioner was charged with non-payment of union dues for the third time. He
did not attend the scheduled hearing. This time, he was meted the penalty of expulsion from the
union, per "unanimous approval"18 of the members of the Executive Board. His pleas for an
appeal to the General Membership Assembly were once more unheeded. 19

In 2008, during the freedom period and negotiations for a new collective bargaining agreement
(CBA) with MWC, petitioner joined another union, the Workers Association for Transparency,
Empowerment and Reform, All-Filipino Workers Confederation (WATER-AFWC). He was elected
union President. Other MWEU members were inclined to join WATER-AFWC, but MWEU director
Torres threatened that they would not get benefits from the new CBA. 20

The MWEU leadership submitted a proposed CBA which contained provisions to the effect that in
the event of retrenchment, non-MWEU members shall be removed first, and that upon the signing
of the CBA, only MWEU members shall receive a signing bonus. 21

Ruling of the Labor Arbiter

On October 13, 2008, petitioner filed a Complaint 22 against respondents for unfair labor practices,
damages, and attorney’s fees before the National Labor Relations Commission (NLRC), Quezon
City, docketed as NLRC Case No. NCR-10-14255-08. In his Position Paper and other written
submissions,23 petitioner accused the respondents of illegal termination from MWEU in
connection with the events relative to his non-payment of union dues; unlawful interference,
coercion, and violation of the rights of MWC employees to self-organization – in connection with
the proposed CBA submitted by MWEU leadership, which petitioner claims contained provisions
that discriminated against non-MWEU members. Petitioner prayed in his Supplemental Position
Paper that respondents be held guilty of unfair labor practices and ordered to indemnify him
moral damages in the amount of P100,000.00, exemplary damages amounting to P50,000.00,
and 10% attorney’s fees.

In their joint Position Paper and other pleadings, 24 respondents claimed that the Labor Arbiter had
no jurisdiction over the dispute, which is intra-union in nature; that the Bureau of Labor Relations
(BLR) was the proper venue, in accordance with Article 226 of the Labor Code 25 and Section 1,
Rule XI of Department Order 40-03, series of 2003, of the DOLE; 26 and that they were not guilty
of unfair labor practices, discrimination, coercion or restraint.
On May 29, 2009, Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision 27 which decreed
as follows:

Indeed the filing of the instant case is still premature. Section 5, Article X-Investigation
Procedures and Appeal Process of the Union Constitution and By-Laws provides that:

Section 5. Any dismissed and/or expelled member shall have the rights to appeal to the Executive
Board within seven (7) days from the date of notice of the said dismissal and/or expulsion, which
in [turn] shall be referred to the General Membership Assembly. In case of an appeal, a simple
majority of the decision of the Executive Board is imperative. The same shall be
approved/disapproved by a majority vote of the general membership assembly in a meeting duly
called for the purpose.

On the basis of the foregoing, the parties shall exhaust first all the administrative remedies before
resorting to compulsory arbitration. Thus, instant case is referred back to the Union for the
General Assembly to act or deliberate complainant’s appeal on the decision of the Executive
Board.

WHEREFORE PREMISES CONSIDERED, instant case is referred back to the Union level for the
General Assembly to act on complainant’s appeal.

SO ORDERED.28

Ruling of the National Labor Relations Commission

Petitioner appealed before the NLRC, where the case was docketed as NLRC LAC No. 07-
001913-09. On March 15, 2010, the NLRC issued its Decision, 29 declaring as follows:

Complainant30 imputes serious error to the Labor Arbiter when she decided as follows:

a. Referring back the subject case to the Union level for the General Assembly to
act on his appeal.

b. Not ruling that respondents are guilty of ULP as charged.

c. Not granting to complainant moral and exemplary damages and attorney’s

fees.

Complainant, in support of his charges, claims that respondents restrained or coerced him in the
exercise of his right as a union member in violation of paragraph "a", Article 249 of the Labor
Code,31particularly, in denying him the explanation as to whether there was observance of the
proper procedure in the increase of the membership dues from P100.00 to P200.00 per month.
Further, complainant avers that he was denied the right to appeal his suspension and expulsion in
accordance with the provisions of the Union’s Constitution and By-Laws. In addition, complainant
claims that respondents attempted to cause the management to discriminate against the
members of WATER-AFWC thru the proposed CBA.

Pertinent to the issue then on hand, the Labor Arbiter ordered that the case be referred back to
the Union level for the General Assembly to act on complainant’s appeal. Hence, these appeals.

After a careful look at all the documents submitted and a meticulous review of the facts, We find
that this Commission lacks the jurisdictional competence to act on this case.
Article 217 of the Labor Code,32 as amended, specifically enumerates the cases over which the
Labor Arbiters and the Commission have original and exclusive jurisdiction. A perusal of the
record reveals that the causes of action invoked by complainant do not fall under any of the
enumerations therein. Clearly, We have no jurisdiction over the same.

Moreover, pursuant to Section 1, Rule XI, as amended, DOLE Department Order No. 40-03 in
particular, Item A, paragraphs (h) and (j) and Item B, paragraph (a)(3), respectively, provide:

"A. Inter-Intra-Union disputes shall include:

"(h) violation of or disagreements over any provision of the Constitution and By-
Laws of a Union or workers’ association.

"(j) violation of the rights and conditions of membership in a Union or workers’

association.

"B. Other Labor Relations disputes, not otherwise covered by Article 217 of the Labor Code, shall
include –

"3. a labor union and an individual who is not a member of said union."

Clearly, the above-mentioned disputes and conflict fall under the jurisdiction of the Bureau of
Labor Relations, as these are inter/intra-union disputes.

WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009 is hereby declared
NULL and VOID for being rendered without jurisdiction and the instant complaint is DISMISSED.

SO ORDERED.33

Petitioner moved for reconsideration,34 but in a June 16, 2010 Resolution,35 the motion was
denied and the NLRC sustained its Decision.

Ruling of the Court of Appeals

In a Petition for Certiorari36 filed with the CA and docketed as CA-G.R. SP No. 115639, petitioner
sought to reverse the NLRC Decision and be awarded his claim for damages and attorney’s fees
on account of respondents’ unfair labor practices, arguing among others that his charge of unfair
labor practices is cognizable by the Labor Arbiter; that the fact that the dispute is inter- or intra-
union in nature cannot erase the fact that respondents were guilty of unfair labor practices in
interfering and restraining him in the exercise of his right to self-organization as member of both
MWEU and WATER-AFWC, and in discriminating against him and other members through the
provisions of the proposed 2008 CBA which they drafted; that his failure to pay the increased
union dues was proper since the approval of said increase was arrived at without observing the
prescribed voting procedure laid down in the Labor Code; that he is entitled to an award of
damages and attorney’s fees as a result of respondents’ illegal acts in discriminating against him;
and that in ruling the way it did, the NLRC committed grave abuse of discretion.

On April 24, 2012, the CA issued the assailed Decision containing the following pronouncement:

The petition lacks merit.

Petitioner’s causes of action against MWEU are inter/intra-union disputes cognizable by the BLR
whose functions and jurisdiction are largely confined to union matters, collective bargaining
registry, and labor education. Section 1, Rule XI of Department Order (D.O.) No. 40-03, Series of
2003, of the Department of Labor and Employment enumerates instances of inter/intra-union
disputes, viz:

Section 1. Coverage. – Inter/intra-union disputes shall include:

xxxx

(b) conduct of election of union and workers’ association officers/nullification of election of union
and workers’ association officers;

(c) audit/accounts examination of union or workers’ association funds;

xxxx

(g) validity/invalidity of impeachment/ expulsion of union and workers’ association officers and
members;

xxxx

(j) violations of or disagreements over any provision in a union or workers’ association constitution
and by-laws;

xxxx

(l) violations of the rights and conditions of union or workers’ association membership;

xxxx

(n) such other disputes or conflicts involving the rights to self-organization, union membership
and collective bargaining –

(1) between and among legitimate labor organizations;

(2) between and among members of a union or workers’ association.

In brief, "Inter-Union Dispute" refers to any conflict between and among legitimate labor unions
involving representation questions for purposes of collective bargaining or to any other conflict or
dispute between legitimate labor unions. "Intra-Union Dispute" refers to any conflict between and
among union members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision of the union’s
constitution and by-laws, or disputes arising from chartering or affiliation of union. On the other
hand, the circumstances of unfair labor practices (ULP) of a labor organization are stated in
Article 249 of the Labor Code, to wit:

Article 249. Unfair labor practices of labor organizations. It shall be unlawful for labor
organization, its officers, agents, or representatives to commit any of the following unfair labor
practices:

(a) To restrain or coerce employees in the exercise of their right to self-

organization; Provided, That the labor organization shall have the right to
prescribe its own rules with respect to the acquisition or retention of membership;
 (b) To cause or attempt to cause an employer to discriminate against an
employee, including discrimination against an employee with respect to whom
membership in such organization has been denied or terminated on any ground
other than the usual terms and conditions under which membership or
continuation of membership is made available to other members;

xxxx

Applying the aforementioned rules, We find that the issues arising from petitioner’s right to
information on the increased membership dues, right to appeal his suspension and expulsion
according to CBL provisions, and right to vote and be voted on are essentially intra-union
disputes; these involve violations of rights and conditions of union membership. But his claim that
a director of MWEU warned that non-MWEU members would not receive CBA benefits is an inter-
union dispute. It is more of an "interference" by a rival union to ensure the loyalty of its members
and to persuade non-members to join their union. This is not an actionable wrong because
interfering in the exercise of the right to organize is itself a function of self-organizing. 37 As long as
it does not amount to restraint or coercion, a labor organization may interfere in the employees’
right to self-organization.38 Consequently, a determination of validity or illegality of the alleged acts
necessarily touches on union matters, not ULPs, and are outside the scope of the labor arbiter’s
jurisdiction.

As regards petitioner’s other accusations, i.e., discrimination in terms of meting out the penalty of
expulsion against him alone, and attempt to cause the employer, MWC, to discriminate against
non-MWEU members in terms of retrenchment or reduction of personnel, and signing bonus,
while We may consider them as falling within the concept of ULP under Article 249(a) and (b),
still, petitioner’s complaint cannot prosper for lack of substantial evidence. Other than his bare
allegation, petitioner offered no proof that MWEU did not penalize some union members who
failed to pay the increased dues. On the proposed discriminatory CBA provisions, petitioner
merely attached the pages containing the questioned provisions without bothering to reveal the
MWEU representatives responsible for the said proposal. Article 249 mandates that "x x x only
the officers, members of the governing boards, representatives or agents or members of labor
associations or organizations who have actually participated in, authorized or ratified unfair labor
practices shall be held criminally liable." Plain accusations against all MWEU officers, without
specifying their actual participation, do not suffice. Thus, the ULP charges must necessarily fail.

In administrative and quasi-judicial proceedings, only substantial evidence is necessary to

establish the case for or against a party. Substantial evidence is that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion. Petitioner failed to
discharge the burden of proving, by substantial evidence, the allegations of ULP in his complaint.
The NLRC, therefore, properly dismissed the case.

FOR THESE REASONS, the petition is DISMISSED.

SO ORDERED.39

Thus, the instant Petition.

Issue

In an August 28, 2013 Resolution,40 this Court resolved to give due course to the Petition, which
claims that the CA erred:

A. IN DECLARING THAT THE PRESENCE OF INTER/INTRA-UNION CONFLICTS NEGATES

THE COMPLAINT FOR UNFAIR LABOR PRACTICES AGAINST A LABOR ORGANIZATION
AND ITS OFFICERS, AND IN AFFIRMING THAT THE NLRC PROPERLY DISMISSED THE
CASE FOR ALLEGED LACK OF JURISDICTION.

B. IN NOT RULING THAT RESPONDENTS ARE GUILTY OF UNFAIR LABOR PRACTICES

UNDER ARTICLE 249(a) AND (b) OF THE LABOR CODE.

C. IN DECLARING THAT THE THREATS MADE BY A UNION OFFICER AGAINST MEMBERS

OF A RIVAL UNION IS (sic) MERELY AN "INTERFERENCE" AND DO NOT AMOUNT TO
"RESTRAINT" OR "COERCION".

D. IN DECLARING THAT PETITIONER FAILED TO PRESENT SUBSTANTIAL EVIDENCE IN

PROVING RESPONDENTS’ SPECIFIC ACTS OF UNFAIR LABOR PRACTICES.

E. IN NOT RULING THAT RESPONDENTS ARE SOLIDARILY LIABLE TO PETITIONER FOR

MORAL AND EXEMPLARY DAMAGES, AND ATTORNEY’S FEES.41

Petitioner’s Arguments

Praying that the assailed CA dispositions be set aside and that respondents be declared guilty of
unfair labor practices under Article 249(a) and (b) and adjudged liable for damages and attorney’s
fees as prayed for in his complaint, petitioner maintains in his Petition and Reply 42 that
respondents are guilty of unfair labor practices which he clearly enumerated and laid out in his
pleadings below; that these unfair labor practices committed by respondents fall within the
jurisdiction of the Labor Arbiter; that the Labor Arbiter, the NLRC, and the CA failed to rule on his
accusation of unfair labor practices and simply dismissed his complaint on the ground that his
causes of action are intra- or inter-union in nature; that admittedly, some of his causes of action
involved intra- or inter-union disputes, but other acts of respondents constitute unfair labor
practices; that he presented substantial evidence to prove that respondents are guilty of unfair
labor practices by failing to observe the proper procedure in the imposition of the increased
monthly union dues, and in unduly imposing the penalties of suspension and expulsion against
him; that under the union’s constitution and by-laws, he is given the right to appeal his
suspension and expulsion to the general membership assembly; that in denying him his rights as
a union member and expelling him, respondents are guilty of malice and evident bad faith; that
respondents are equally guilty for violating and curtailing his rights to vote and be voted to a
position within the union, and for discriminating against non-MWEU members; and that the totality
of respondents’ conduct shows that they are guilty of unfair labor practices.

Respondent’s Arguments

In their joint Comment,43 respondents maintain that petitioner raises issues of fact which are
beyond the purview of a petition for review on certiorari; that the findings of fact of the CA are final
and conclusive; that the Labor Arbiter, NLRC, and CA are one in declaring that there is no unfair
labor practices committed against petitioner; that petitioner’s other allegations fall within the
jurisdiction of the BLR, as they refer to intra- or inter-union disputes between the parties; that the
issues arising from petitioner’s right to information on the increased dues, right to appeal his
suspension and expulsion, and right to vote and be voted upon are essentially intra-union in
nature; that his allegations regarding supposed coercion and restraint relative to benefits in the
proposed CBA do not constitute an actionable wrong; that all of the acts questioned by petitioner
are covered by Section 1, Rule XI of Department Order 40-03, series of 2003 as intra-/inter-union
disputes which do not fall within the jurisdiction of the Labor Arbiter; that in not paying his union
dues, petitioner is guilty of insubordination and deserved the penalty of expulsion; that petitioner
failed to petition to convene the general assembly through the required signature of 30% of the
union membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s Constitution
and By-Laws or by a petition of the majority of the general membership in good standing under
Article VI, Section 3; and that for his failure to resort to said remedies, petitioner can no longer
question his suspension or expulsion and avail of his right to appeal.

Our Ruling

The Court partly grants the Petition.

In labor cases, issues of fact are for the labor tribunals and the CA to resolve, as this Court is not
a trier of facts. However, when the conclusion arrived at by them is erroneous in certain respects,
and would result in injustice as to the parties, this Court must intervene to correct the error. While
the Labor Arbiter, NLRC, and CA are one in their conclusion in this case, they erred in failing to
resolve petitioner’s charge of unfair labor practices against respondents.

It is true that some of petitioner’s causes of action constitute intra-union cases cognizable by the
BLR under Article 226 of the Labor Code.

An intra-union dispute refers to any conflict between and among union members, including
grievances arising from any violation of the rights and conditions of membership, violation of or
disagreement over any provision of the union’s constitution and by-laws, or disputes arising from
chartering or disaffiliation of the union. Sections 1 and 2, Rule XI of Department Order No. 40-03,
Series of 2003 of the DOLE enumerate the following circumstances as inter/intra-union disputes x
x x.44

However, petitioner’s charge of unfair labor practices falls within

the original and exclusive jurisdiction of the Labor Arbiters, pursuant to Article 217 of the Labor
Code. In addition, Article 247 of the same Code provides that "the civil aspects of all cases
involving unfair labor practices, which may include claims for actual, moral, exemplary and other
forms of damages, attorney’s fees and other affirmative relief, shall be under the jurisdiction of the
Labor Arbiters."

Unfair labor practices may be committed both by the employer under Article 248 and by labor
organizations under Article 249 of the Labor Code,45 which provides as follows:

ART. 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice for a
labor organization, its officers, agents or representatives:

(a) To restrain or coerce employees in the exercise of their right to self-organization.

However, a labor organization shall have the right to prescribe its own rules with respect
to the acquisition or retention of membership;

(b) To cause or attempt to cause an employer to discriminate against an employee,

including discrimination against an employee with respect to whom membership in such
organization has been denied or to terminate an employee on any ground other than the
usual terms and conditions under which membership or continuation of membership is
made available to other members;

(c) To violate the duty, or refuse to bargain collectively with the employer, provided it is
the representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver
any money or other things of value, in the nature of an exaction, for services which are
not performed or not to be performed, including the demand for fee for union
negotiations;
 (e) To ask for or accept negotiation or attorney’s fees from employers as part of the
settlement of any issue in collective bargaining or any other dispute; or

(f) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers, members of
governing boards, representatives or agents or members of labor associations or organizations
who have actually participated in, authorized or ratified unfair labor practices shall be held
criminally liable. (As amended by Batas Pambansa Bilang 130, August 21, 1981).

Petitioner contends that respondents committed acts constituting unfair labor practices – which
charge was particularly laid out in his pleadings, but that the Labor Arbiter, the NLRC, and the CA
ignored it and simply dismissed his complaint on the ground that his causes of action were intra-
or inter-union in nature. Specifically, petitioner claims that he was suspended and expelled from
MWEU illegally as a result of the denial of his right to appeal his case to the general membership
assembly in accordance with the union’s constitution and by-laws. On the other hand,
respondents counter that such charge is intra-union in nature, and that petitioner lost his right to
appeal when he failed to petition to convene the general assembly through the required signature
of 30% of the union membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s
Constitution and By-Laws or by a petition of the majority of the general membership in good
standing under Article VI, Section 3.

Under Article VI, Section 2(a) of MWEU’s Constitution and By-Laws, the general membership
assembly has the power to "review revise modify affirm or repeal [sic] resolution and decision of
the Executive Board and/or committees upon petition of thirty percent (30%) of the Union in good
standing,"46 and under Section 2(d), to "revise, modify, affirm or reverse all expulsion
cases."47 Under Section 3 of the same Article, "[t]he decision of the Executive Board may be
appealed to the General Membership which by a simple majority vote reverse the decision of said
body. If the general Assembly is not in session the decision of the Executive Board may be
reversed by a petition of the majority of the general membership in good standing." 48 And, in
Article X, Section 5, "[a]ny dismissed and/or expelled member shall have the right to appeal to the
Executive Board within seven days from notice of said dismissal and/or expulsion which, in [turn]
shall be referred to the General membership assembly. In case of an appeal, a simple majority of
the decision of the Executive Board is imperative. The same shall be approved/disapproved by a
majority vote of the general membership assembly in a meeting duly called for the purpose." 49

In regard to suspension of a union member, MWEU’s Constitution and By-Laws provides under
Article X, Section 4 thereof that "[a]ny suspended member shall have the right to appeal within
three (3) working days from the date of notice of said suspension. In case of an appeal a simple
majority of vote of the Executive Board shall be necessary to nullify the suspension."

Thus, when an MWEU member is suspended, he is given the right to appeal such suspension
within three working days from the date of notice of said suspension, which appeal the MWEU
Executive Board is obligated to act upon by a simple majority vote. When the penalty imposed is
expulsion, the expelled member is given seven days from notice of said dismissal and/or
expulsion to appeal to the Executive Board, which is required to act by a simple majority vote of
its members. The Board’s decision shall then be approved/ disapproved by a majority vote of the
general membership assembly in a meeting duly called for the purpose.1avvphi1

The documentary evidence is clear that when petitioner received Borela’s August 21, 2007 letter
informing him of the Executive Board’s unanimous approval of the grievance committee
recommendation to suspend him for the second time effective August 24, 2007, he immediately
and timely filed a written appeal. However, the Executive Board – then consisting of respondents
Borela, Tierra, Bolo, Casañas, Fernandez, Rendon, Montemayor, Torres, Quebral, Pagulayan,
Cancino, Maga, Cometa, Mancenido, and two others who are not respondents herein – did not
act thereon. Then again, when petitioner was charged for the third time and meted the penalty of
expulsion from MWEU by the unanimous vote of the Executive Board, his timely appeal was
again not acted upon by said board – this time consisting of respondents Borela, Quebral, Tierra,
Imana, Rendon, Yeban, Cancino, Torres, Montemayor, Mancenido, Mandilag, Fernandez,
Buenaventura, Apilado, Maga, Barbero, Cometa, Bolo, and Manlapaz.

Thus, contrary to respondents’ argument that petitioner lost his right to appeal when he failed to
petition to convene the general assembly through the required signature of 30% of the union
membership in good standing pursuant to Article VI, Section 2(a) of MWEU’s Constitution and By-
Laws or by a petition of the majority of the general membership in good standing under Article VI,
Section 3, this Court finds that petitioner was illegally suspended for the second time and
thereafter unlawfully expelled from MWEU due to respondents’ failure to act on his written
appeals. The required petition to convene the general assembly through the required signature of
30% (under Article VI, Section 2[a]) or majority (under Article VI, Section 3) of the union
membership does not apply in petitioner’s case; the Executive Board must first act on his two
appeals before the matter could properly be referred to the general membership. Because
respondents did not act on his two appeals, petitioner was unceremoniously suspended,
disqualified and deprived of his right to run for the position of MWEU Vice-President in the
September 14, 2007 election of officers, expelled from MWEU, and forced to join another union,
WATER-AFWC. For these, respondents are guilty of unfair labor practices under Article 249 (a)
and (b) – that is, violation of petitioner’s right to self-organization, unlawful discrimination, and
illegal termination of his union membership – which case falls within the original and exclusive
jurisdiction of the Labor Arbiters, in accordance with Article 217 of the Labor Code.

The primary concept of unfair labor practices is stated in Article 247 of the Labor Code, which
states:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. –– Unfair
labor practices violate the constitutional right of workers and employees to self-organization, are
inimical to the legitimate interests of both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect,
disrupt industrial peace and hinder the promotion of healthy and stable labor-management
relations.

"In essence, [unfair labor practice] relates to the commission of acts that transgress the workers’
right to organize."50"[A]ll the prohibited acts constituting unfair labor practice in essence relate to
the workers’ right to self-organization."51 "[T]he term unfair labor practice refers to that gamut of
offenses defined in the Labor Code which, at their core, violates the constitutional right of workers
and employees to self-organization."52

Guaranteed to all employees or workers is the ‘right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective bargaining.’ This is
made plain by no less than three provisions of the Labor Code of the Philippines. Article 243 of
the Code provides as follows:

ART. 243. Coverage and employees’ right to self-organization. — All persons employed in
commercial, industrial and agricultural enterprises and in religious, charitable, medical, or
educational institutions whether operating for profit or not, shall have the right to self-organization
and to form, join, or assist labor organizations of their own choosing for purposes or collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed people, rural workers and
those without any definite employers may form labor organizations for their mutual aid and
protection.
Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to
‘interfere with, restrain or coerce employees in the exercise of their right to self-organization.’
Similarly, Article 249 (a) makes it an unfair labor practice for a labor organization to ‘restrain or
coerce employees in the exercise of their rights to self-organization . . .’

xxxx

The right of self-organization includes the right to organize or affiliate with a labor union or
determine which of two or more unions in an establishment to join, and to engage in concerted
activities with co-workers for purposes of collective bargaining through representatives of their
own choosing, or for their mutual aid and protection, i.e., the protection, promotion, or
enhancement of their rights and interests.53

As members of the governing board of MWEU, respondents are presumed to know, observe, and
apply the union’s constitution and by-laws. Thus, their repeated violations thereof and their
disregard of petitioner’s rights as a union member – their inaction on his two appeals which
resulted in his suspension, disqualification from running as MWEU officer, and subsequent
expulsion without being accorded the full benefits of due process – connote willfulness and bad
faith, a gross disregard of his rights thus causing untold suffering, oppression and, ultimately,
ostracism from MWEU. "Bad faith implies breach of faith and willful failure to respond to plain and
well understood obligation."54This warrants an award of moral damages in the amount of
P100,000.00. Moreover, the Civil Code provides:

Art. 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and
liberties of another person shall be liable to the latter for damages:

xxxx

(12) The right to become a member of associations or societies for purposes not contrary to law;

In Vital-Gozon v. Court of Appeals,55 this Court declared, as follows:

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. They may be
recovered if they are the proximate result of the defendant’s wrongful act or omission. The
instances when moral damages may be recovered are, inter alia, ‘acts and actions referred to in
Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code,’ which, in turn, are found in the
Chapter on Human Relations of the Preliminary Title of the Civil Code. x x x

Under the circumstances, an award of exemplary damages in the amount of P50,000.00, as

prayed for, is likewise proper. "Exemplary damages are designed to permit the courts to mould
behavior that has socially deleterious consequences, and their imposition is required by public
policy to suppress the wanton acts of the offender." 56 This should prevent respondents from
repeating their mistakes, which proved costly for petitioner.1âwphi1

Under Article 2229 of the Civil Code, ‘[e]xemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.’ As this court has stated in the past: ‘Exemplary damages are designed
by our civil law to permit the courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against such behaviour.’ 57
Finally, petitioner is also entitled to attorney’s fees equivalent to 10 per cent (10%) of the total
award. The unjustified acts of respondents clearly compelled him to institute an action primarily to
vindicate his rights and protect his interest. Indeed, when an employee is forced to litigate and
incur expenses to protect his rights and interest, he is entitled to an award of attorney’s fees. 58

WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed April 24, 2012 Decision of
the Court of Appeals in CA-G.R. SP No. 115639 is hereby MODIFIED, in that all of the
respondents - except for Carlos Villa, Ric Briones, and Chito Bernardo - are declared guilty of
unfair labor practices and ORDERED TO INDEMNIFY petitioner Allan M. Mendoza the amounts
of Pl00,000.00 as and by way of moral damages, PS0,000.00 as exemplary damages, and
attorney's fees equivalent to 10 per cent (10%) of the total award.

SO ORDERED.
 G.R. No. 173134, September 02, 2015

BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. TARCILA

FERNANDEZ, Respondent.; DALMIRO SIAN, THIRD PARTY, Respondent.

DECISION

BRION, J.:

We resolve the Petition for Review on Certiorari filed by the petitioner Bank of the
Philippine Islands (BPI) under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) July 14, 2005 Decision1 and the June 14, 2006 Resolution2 in CA-G.R.
CV No. 61764.

The Factual Antecedents

The present case arose from respondent Tarcila "Baby" Fernandez's (Tarcila) claim to
her proportionate share in the proceeds of four joint AND/OR accounts that the
petitioner BPI released to her estranged husband Manuel G. Fernandez (Manuel)
without the presentation of the requisite certificates of deposit. The facts leading to
this dispute are outlined below.

In 1991, Tarcila together with her husband, Manuel and their children Monique
Fernandez and Marco Fernandez, opened the following AND/OR deposit accounts
with the petitioner BPI, Shaw Blvd. Branch:chanRoblesvirtualLawlibrary

1) Peso Time Certificate of Deposit No. 2425545 issued on June 27, 1991 in the
name(s) of Manuel G. Fernandez Sr. or Baby Fernandez or Monique
Fernandez in the amount of P1,684,661.40, with a term of 90 days and a
corresponding interest at 17.5% per annum;3
2) Peso Time Certificate of Deposit No. 2425556 issued on July 1, 1991 in the
name(s) of Manuel G. Fernandez Sr. or Marco Fernandez or Tarcila
Fernandez, in the amount of P1,534,335.10, with a term of 92 days and
interest at 17.5% per annum;4
3) FCDU Time Certificate of Deposit No. 449059 issued on August 27, 1991 in the
name(s) of Manuel or Tarcila Fernandez in the amount of US$36,219.53, with
a term of 30 days and interest at 5.3125% per annum;
4) Deposit under SA No. 3301-0145-61 issued on September 10, 1991 in the
name(s) of Manuel Fernandez or Baby Fernandez or Monique
Fernandez in the amount of P11,369,800.78 with interest at 5% per annum.5

The deposits were subject to the following conditions:

"x x x

2. Pre-termination of deposits prior to maturity shall be subject to discretion of

[BPI] and if pre-termination is allowed, it is subject to an interest penalty to
be determined on the date of pre-termination;ChanRoblesVirtualawlibrary

3. Endorsement and presentation of the Certificate of Deposit is

necessary for the renewal or termination of the deposit"
On September 24, 1991, Tarcila went to the BPI Shaw Blvd. Branch to pre-terminate
these joint AND/OR accounts. She brought with her the certificates of time deposit
and the passbook, and presented them to the bank. BPI, however, refused the
requested pre-termination despite Tarcila's presentation of the covering certificates.
Instead, BPI, through its branch manager, Mrs. Elma San Pedro Capistrano
(Capistrano), insisted on contacting Manuel, alleging in this regard that this
is an integral part of its standard operating procedure.6

Shortly after Tarcila left the branch, Manuel arrived and likewise requested the pre-
termination of the joint AND/OR accounts.7 Manuel claimed that he had lost the same
certificates of deposit that Tarcila had earlier brought with her. 8 BPI, through
Capistrano, this time acceded to the pre-termination requests, blindly believed
Manuel's claim,9 and requested him to accomplish BPI's pro-forma affidavit of loss.10

Two days after, Manuel returned to BPI, Shaw Blvd. Branch to pre-terminate the
joint AND/OR accounts. He was accompanied by Atty. Hector Rodriguez, the
respondent Dalmiro Sian (Sian), and two (2) alleged National Bureau of Investigation
(NBI) agents.

In place of the actual certificates of deposit, Manuel submitted BPI's pro-forma

affidavit of loss that he previously accomplished and an Indemnity Agreement that
he and Sian executed on the same day. The Indemnity Agreement discharged BPI
from any liability in connection with the pre-termination.11Notably, none of the co-
depositors were contacted in carrying out these transactions.

On the same day, the proceeds released to Manuel were funneled to Sian's newly
opened account with BPI. Immediately thereafter, Capistrano requested Sian
to sign blank withdrawal slips, which Manuel used to withdraw the funds
from Sian's newly opened account.12Sian's account, after its use, was closed
on the same day.13

A few days after these transactions, Tarcila filed a petition for "Declaration of Nullity
of Marriage, etc." against Manuel, with the Regional Trial Court (RTC) of Pasig,
docketed as JRDC No. 2098.14 Based on the records, this civil case has been
archived.15

Tarcila never received her proportionate share of the pre-terminated

deposits,16 prompting her to demand from BPI the amounts due her as a co-
depositor in the joint AND/OR accounts. When her demands remained unheeded,
Tarcila initiated a complaint for damages with the Regional Trial Court (RTQ of Makati
City, Branch 59, docketed as Civil Case No. 95-671.

In her complaint, Tarcila alleged that BPI's payments to Manuel of the pre-
terminated deposits were invalid with respect to her share.17She argued that BPI was
in bad faith for allowing the pre-termination of the time deposits based on Manuel's
affidavit of loss when the bank had actual knowledge that the certificates of deposit
were in her possession.18

In its answer, BPI alleged that the accounts contained conjugal funds that Manuel
exclusively funded.19BPI further argued that Tarcila could not ask for her share of the
pre-terminated deposits because her share in the conjugal property is considered
inchoate until its dissolution.20 BPI further denied refusing Tarcila's request for pre-
termination as it processed her request but she left the branch before BPI could even
contact Manuel.

BPI likewise filed a third-party complaint against Sian and Manuel on the basis of the
Indemnity Agreement they had previously executed. As summons against Manuel
remained unserved,21 only BPI's complaint against Sian proceeded to trial.

During the pre-trial, the parties admitted, among others, the conjugal nature of
the funds deposited with BPI.

After trial on the merits, the RTC of Makati, Branch 59, ruled in favor of Tarcila and
awarded her the following amounts: 1.) 1/2 of US$36,379.87; 2.) 1/3 of
P11,3369,800.78; 3.) 1/3 of Php1,684,661.40; and 1/3 of P1,534,335.10. The RTC
likewise ordered BPI to pay Tarcila the amount of P50,000.00 representing
exemplary damages and P500,000.00 as attorney's fees.

In its decision,22 the RTC opined that the AND/OR nature of the accounts indicate an
active solidarity that thus entitled any of the account holders to demand from BPI
payment of their proceeds. Since Tarcila made the first demand upon BPI, payments
should have been made to her23 under Article 1214 of the Civil Code, which provides:
"Art. 1214. The debtor may pay any one of the solidary creditors; but if any demand,
judicial or extrajudicial, has been made by one of them, payment should be made to
him."
The RTC did not find merit either in BPI's third-party complaint against Sian on the
ground that he was merely coerced into signing the Indemnity Agreement.24 BPI
appealed the RTC ruling with the CA.

CA Ruling

On July 14, 2005, the CA denied BPFs appeal through the decision25 that BPI now
challenges before this Court. The CA ruled that as a co-depositor and a solidary
creditor of joint "AND/OR" accounts, BPI did not enjoy the prerogative to determine
the source of the deposited funds and to refuse payment to Tarcila on this basis.

The CA also found that BPI had acted in bad faith in allowing Manuel to pre-
terminate the certificates of deposits and in facilitating the swift funneling of the
funds to Sian's account, which allowed Manuel to withdraw them.26 The CA noted
that the transactions were accomplished in one sitting for the purpose of misleading
anyone who would try to trace Manuel's deposit accounts.27

The CA likewise upheld the RTC's dismissal of BPFs third-party complaint against
Sian. It affirmed the factual finding that intimidation and undue influence vitiated
Sian's consent in signing the Indemnity Agreement.28

BPI moved for the reconsideration of the CA ruling, but the appellate court denied its
motion in its June 14, 2006 Resolution.29 BPI then filed the present petition for
review on certiorari under Rule 45 with this Court.

The Petition and Comment

BPI insists in its present petition30 that the CA and the court a quo erred in applying
the provisions of Article 1214 of the Civil Code to the present case. It believes that
the CA should have relied on the conjugal partnership of gains provision in view of
the existing marriage between the spouses. Accordingly, BPI argues that Tarcila
could not have suffered any damage from its payment of the proceeds to Manuel
inasmuch as the proceeds of the pre-terminated accounts formed part of the
conjugal partnership of gains.

BPI likewise claims that it did not breach its obligations under the certificates of
deposit; it processed Tarciia's pre-termination request but she left the branch before
her request could be completed. Moreover, assuming without conceding that BPI
indeed declined Tarciia's request, it posits that it possessed the discretion to do so
since the request for pre-termination was done prior to their maturity dates. Thus,
BPI firmly believes that it could not be accused of wanton, fraudulent, reckless, or
malevolent conduct as it was merely exercising its rights.

Finally, BPI insists that Sian's consent was not vitiated when he signed the Indemnity
Agreement. According to BPI, the records are bereft of any proof that Sian was
actually threatened to sign the Indemnity Agreement. Thus, BPI maintains that it
may validly invoke the Agreement to release itself from any liability.

In her Comment,31 Tarcila points out that the petition raised questions of fact that
are not proper issues in a petition for review on certiorari.32 She also argues that
BPI's acts were not mere precautionary steps but were indicia of bias and bad faith.
Finally, Tarcila adds that the issue of who has management, control, and custody of
conjugal property cannot be set up to justify BPI's patent bad faith.

Sian failed to file his Comment on the petition. Nevertheless, he filed a

Memorandum33 in compliance with the Court's September 22, 2008 Resolution.34 He
alleged that Manuel forced and intimidated him to sign the Indemnity Agreement.

THE COURT'S RULING

We deny the petition for lack of merit.

BPI breached its obligation under the certificates of deposit.

A certificate of deposit is defined as a written acknowledgment by a bank or banker

of the receipt of a sum of money on deposit which the bank or banker promises to
pay to the depositor, to the order of the depositor, or to some other person or his
order, whereby the relation of debtor and creditor between the bank and the
depositor is created.35 In particular, the certificates of deposit contain provisions
on the amount of interest, period of maturity, and manner of termination.
Specifically, they stressed that endorsement and presentation of the certificate of
deposit is indispensable to their termination. In other words, the accounts may
only be terminated upon endorsement and presentation of the certificates of
deposit. Without the requisite presentation of the certificates of deposit, BPI may
not terminate them.

BPI thus may only terminate the certificates of deposit after it has diligently
completed two steps. First, it must ensure the identity of the account
holder. Second, BPI must demand the surrender of the certificates of deposit.

This is the essence of the contract entered into by the parties which serves as an
accountability measure to other co-depositors. By requiring the presentation of
the certificates prior to termination, the other depositors may rely on the
fact that their investments in the interest-yielding accounts may not be
indiscriminately withdrawn by any of their co-depositors. This protective
mechanism likewise benefits the bank, which shields it from liability upon
showing that it released the funds in good faith to an account holder who
possesses the certificates. Without the presentation of the certificates of deposit,
BPI may not validly terminate the certificates of deposit.

With these considerations in mind, we find that BPI substantially breached its
obligations to the prejudice of Tarcila. BPI allowed the termination of the accounts
without demanding the surrender of the certificates of deposits, in the ordinary
course of business. Worse, BPI even had actual knowledge that the certificates
of deposit were in Tarcila's possession and yet it chose to release the
proceeds to Manuel on the basis of a falsified affidavit of loss, in gross
violation of the terms of the deposit agreements.

As we have stressed in the case of FEBTC v. Querimit:36

"x x x A bank acts at its peril when it pays deposits evidenced by a
certificate of deposit, without its production and surrender after proper
indorsement. As a rule, one who pleads payment has the burden of proving it. Even
where the plaintiff must allege non-payment, the general rule is that the burden
rests on the defendant to prove payment, rather than on the plaintiff to prove
payment. The debtor has the burden of showing with legal certainty that the
obligation has been discharged by payment, x x x Petitioner should not have
paid respondent's husband or any third party without requiring the
surrender of the certificates of deposit."37
BPI tried to muddle the issue by claiming that the funds subject of the deposits were
conjugal in character. This contention, however, is misleading. The principal issue
involved in the present case is BPFs breach of its obligations under the express terms
of the certificates of deposit and the consequent damage that Tarcila suffered as a
co-depositor because of BPI's acts.

Notably, BPI effectively deprived Tarcila and the other co-depositors of their share in
the proceeds of the certificates of deposits. As the CA noted in the assailed
Decision, the series of transactions were accomplished in one sitting for the
purpose of misleading anyone who would try to trace the proceeds of
[Manuel]'s deposit accounts.38 As the court a quo likewise observed:
"Aside from the affidavit of loss, the bank required [Manuel] to execute an Indemnity
Agreement. Hence, on September 26, 1991, [Manuel] returned to the bank. This
time, Dalmiro Sian, his son-in-law, Atty. Hector Rodriguez, his lawyer, and two NBI
agents were with him. There, the bank required him and Sian to sign an Indemnity
Agreement whereby they undertook "to hold the bank free and harmless from all
liabilities arising from said [pre-termination]." The agreement was prepared by one
of the officers of the bank. At the same time, Sian was told to open a new account
under his name. The opening of a new account N. 3305-0539-44 in the name
of Sian was facilitated. The proceeds of the four deposit accounts were then
transferred or deposited to this new account in the name of Sian. x x x Sian
also signed two blank withdrawal slips. With the use of these withdrawal slips,
[Manuel] Fernandez withdrew all the proceeds deposited under the name of
Sian. Shortly thereafter, account no. 3305-0539-44 was closed." 39
It appears that BPI connived with Manuel to allow him to divest his co-depositors of
their share in proceeds. Worse, it cooperated with Manuel in trying to conceal this
fraudulent conduct by making it appear that the funds were withdrawn from another
account.
The CA correctly ruled that BPI is guilty of bad faith.

We affirm the CA and the trial court's findings that BPI was guilty of bad faith in
these transactions. Bad faith imports a dishonest purpose and conscious
wrongdoing.40 It means a breach of a known duty through some motive or interest or
ill will.41

A review of the records of the case show ample evidence supporting BPI's bad faith,
as shown by the clear bias it had against Tarcila. As the CA observed:
"The bias and bad faith on the part of [BPI]'s officers become readily
apparent in the face of the fact that [BPI]'s officers did not require the
presentation of the certificates of deposit from [Manuel] but even assisted
and facilitated the pre-termination transaction by the latter on the basis of a
mere pro-forma and defective affidavit of loss, which the bank itself
supplied, despite the fact that [BPI]'s officers were fully aware that the
certificates were not lost but in the possession of [Tarcila]. Moreover, given
the fact that said affidavit of loss was executed by [Manuel] just a few minutes after
[Tarcila] had presented the certificates of deposit to [BPI], it taxes one's credulity to
say that [BPI] believed in good faith that the certificates were indeed lost." 42
Similarly, the trial court observed:
"It is quite alarming to note the eagerness and haste by which the defendant bank
accommodated [Manuel] 's request for the pre-termination of the questioned account
deposits and the subsequent release to him of the full proceeds thereof, to the
exclusion of the [Tarcila]. The prejudice of the officers of [BPI] against the [Tarcila]
is very apparent. Elma Capistrano, branch manager, categorically testified that
[Tarcila] is a client of the bank only in name; and that she does not consider
[Tarcila] as a primary depositor to the account because the source of the money
being deposited and being transacted was [Manuel]."43
BPI argues that it merely took precautionary steps when it insisted on contacting
Manuel as a form of standard operating procedure. This assertion, however, is belied
by BPI's own witness. During her testimony, Capistrano narrated:
"x x x
Q: Can you tell us why it was necessary for the branch to get in touch with Mr.
Manuel Fernandez?
A: Because he is the one that handles and is in control of all the money
deposited in the branch44
xxx
Q: I heard you mentioned the word "primary depositor" does that mean that Mrs.
Tarcila Fernandez is not a primary depositor?
A: Personally, I do not really consider her as the primary depositor to the
account because the source of the money being deposited and being transacted
was Mr. Manuel Fernandez.45
xxx
Q: Were you the one who recommended that Mr. Manuel Fernandez prepare this
affidavit of loss?
A: That is the usual things that we tell our clients if the original of the certificates of
deposits (sic) or passbook or checkbooks are missing.
Q: But is it not a fact that earlier a few minutes before Mr. Fernandez came,
you were aware that the certificates were not actually missing but were
in the possession of Mrs. [Tarcila] Fernandez, is it not?
A: Yes Sir.
Q: And yet when this affidavit of loss was later prepared and presented to
 you, did you give due course to this affidavit of loss? Did you accept the
truth of the contents of this affidavit of loss?
A: Because it is Mr. [Manuel] Fernandez who is in possession of all the
certificates, and if he is missing it, I believed that it is really missing."46
The records thus abound with evidence that BPI clearly favored Manuel. BPI
considered Manuel as the primary depositor despite the clear import of the nature of
their AND/OR account, which permits either or any of the co-depositors to transact
with BPI, upon the surrender of the certificates of deposit. Worse, BPI
facilitated the scheme in order to allow Manuel to obtain the proceeds and conceal
any evidence of wrongdoing.

BPI did not only fail to exercise that degree of diligence required by the
nature of its business, it also exercised its functions with bad faith and
manifest partiality against Tarcila. The bank even recognized an affidavit of
loss whose allegations, the bank knew, were false. This aspect of the
transactions opens up other issues that we do not here decide because they
are outside the scope of the case before us.

One aspect is criminal in nature because Manuel swore to a falsity and the
act was with the knowing participation of bank officers. The other issue is
administrative in character as these bank officers betrayed the trust
reposed in them by the bank. We mention all these because these are
disturbing acts to observe in a banking institution as large as the BPI.

BPI is sternly reminded that the business of banks is impressed with public interest.
The fiduciary nature of their relationship with their depositors requires it to treat the
accounts of its clients with the highest degree of integrity, care and respect. In the
present case, the manner by which BPI treated Tarcila also transgresses the general
banking law47 and Article 19 of the Civil Code, which directs every person, in the
exercise of his rights, "to give everyone his due, and observe honesty and good
faith."

BPI could not invoke the Indemnity Agreement.

BPI assails the CA's declaration voiding the Indemnity Agreement that would allow it
to hold Sian liable for the withdrawn deposits.48 It argues that Sian's allegation of
vitiation of consent should not be recognized as it is based solely on the presence of
Manuel's lawyer and two (2) alleged NBI Agents.49 BPI thus claims that "mere
presence" of law enforcement officers cannot be reasonably equated as imminent
threat.50

This particular issue involves a factual determination of vitiated consent, which is a

question of fact and one which is not generally appropriate in a petition for review
on certiorari under Rule 45. We, however, are not precluded from again examining
the evidence introduced and considered with respect to this factual issue where the
CA's finding of vitiated consent is both speculative and mistaken.51

We agree with BPFs observation on this point that there is nothing in the records
that even remotely resembles vitiation of consent. In order that intimidation may
vitiate consent, it is essential that the intimidation was the moving cause for giving
consent.52 Moreover, the threatened act must be unjust or unlawful.53 In
addition, the threat must be real or serious, and must produce well-grounded
fear from the fact that the person making the threat has the necessary means or
ability to inflict the threat.54

Nothing in the records supports this conclusion. In fact, we find it difficult to believe
that the presence of Manuel, his lawyer, and two (2) NBI agents could amount to
intimidation in the absence of any act or threatened injury on Sian. If he did
sign the Indemnity Agreement with reluctance, vitiation of consent is still negated,
as we held in Vales v. Villa:55
"There must, then, be a distinction to be made between a case where a person gives
his consent reluctantly and even against his good sense: and judgment, and where
he, in reality, gives no consent at all, as where he executes a contract or performs
an act against his will under a pressure which he cannot resist. It is clear that one
acts as voluntarily and independently in the eye of the law when he acts reluctantly
and with hesitation as when he acts spontaneously and joyously. Legally speaking he
acts as voluntarily and freely when he acts wholly against his better sense and
judgment as when he acts in conformity with them. Between the two acts there is no
difference in law. But when his sense, judgment, and his will rebel and he refuses
absolutely to act as requested, but is nevertheless overcome by force or intimidation
to such an extent that he becomes a mere automation and acts mechanically only, a
new element enters, namely, a disappearance of the personality of the actor. He
ceases to exist as an independent entity with faculties and judgment, and in his
place is substituted another — the one exercising the force or making use of
intimidation. While his hand signs, the will which moves it is another's. While a
contract is made, it has, in reality and in law, only one party to it; and, there being
only one party, the one using the force or the intimidation, it is unenforceable for
lack of a second party.

From these considerations it is clear that every case of alleged intimidation must be
examined to determine within which class it falls. If it is within the first class it is not
duress in law, if it falls in the second, it is."
This notwithstanding, we hold that BPI may still not invoke the provisions of the
Indemnity Agreement on the basis of in pari delicto - it was equally at fault. In pari
delicto is a legal doctrine resting on the theory that courts will not aid parties who
base their cause of action on their own immoral or illegal acts.56When two parties,
acting together, commit an illegal or wrongful act, the party held responsible for
the act cannot recover from the other, because both have been equally culpable and
the damage resulted from their joint offense.57

In the present case, equity dictates that BPI should not be allowed to claim from
Sian on the basis of the Indemnity Agreement. The facts unmistakably show that
both BPI and Sian participated in the deceptive scheme to allow Manuel to withdraw
the funds. As succinctly admitted by Capistrano during her testimony:
xxx
Q: I see, in other words, the same certificates of deposit earlier presented
by Mrs. Tarcila were recognized by the bank as having been lost and
thereafter transactions were made in favor of Mr. Manuel Fernandez,
that was what happened?
A: Yes Sir, because of the representation of Mr. Manuel Fernandez that he lost it.
Q: You accepted, the bank immediately accepted in face value that representation?
A: Yes Sir.58
BPI knew very well the irregularity in Manuel's transaction for it had actual
knowledge that the certificates of deposit were in Tarcila's
possession. Because of this knowledge, it entertained the possibility of reprisal from
the co-depositors. Thus, it took shrewdly calculated steps and required Manuel
and Sian to execute an Indemnity Agreement, hoping that this instrument would
absolve it from liability.

BPI and Sian are in pari delicto, thus, no affirmative relief should be given to one
against the other. BPI came to court with unclean hands; for which reason, it cannot
obtain relief and thereby gain from its indispensable participation in the irregular
transaction. One who seeks equity and justice must come to court with clean
hands.59chanroblesvirtuallawlibrary

Award of exemplary damages proper

Exemplary or corrective damages are imposed by way of example or correction for

the public good, in addition to moral, temperate, liquidated, or compensatory
damages.60 In quasi-delicts, exemplary damages may be granted if the defendant
acted with gross negligence.61

In the present case, BPI's bias and bad faith unquestionably caused prejudice to
Tarcila. The law allows the grant of exemplary damages in cases such as this to
serve as a warning to the public and as a deterrent against the repetition of this kind
of deleterious actions.62 From this perspective, we find that the CA did not err in
affirming the RTC's award of P50,000.00 by way of exemplary damages.

Attorney's fees in order

In view of the award of exemplary damages, we find that that the CA did not err in
confirming the RTC's award of attorney's fees, in accordance with Article 2208 (1) of
the Civil Code. We find the award of attorney's fees, equivalent to P500,000.00, to
be just and reasonable under the circumstances.

WHEREFORE, premises considered, the petition is hereby DENIED.

Costs against the petitioner.

SO ORDERED.