[G.R. No. 88561. April 20, 1990.

]
DR.
HERMAN ARMOVIT,
DORA ARMOVIT AND
JACQUELINE ARMOVIT, petitioners, vs. COURT
OF
APPEALS,
AND
NORTHWEST
AIRLINES,
INC., respondents.
Facts: In October 1981, the petitioners decided to
spend their Christmas holidays with relatives and friends
in the Philippines, so they purchased from private
respondent, three (3) round trip airline tickets from the
U.S. to Manila and back, plus three (3) tickets for the
rest of the children.
On their return trip from Manila to the U.S. scheduled on
January 17, 1982, petitioner arrived at the check-in
counter of respondent 9:15 in the morning, which is a
good one (1) hour and fifteen (15) minutes ahead of the
10:30 A.M. scheduled flight time recited in their tickets.
Petitioners were rudely informed that they cannot be
accommodated inasmuch as Flight 002 scheduled at
9:15 a.m. was already taking off and the 10:30 A.M.
flight time entered in their plane tickets was erroneous.
Herein petitioner Dr. Armovit protested in extreme
agitation that because of the bump-off he will not be
able to keep his appointments with his patients in the
U.S. Petitioners suffered anguish, wounded feelings, and
serious anxiety day and night of January 17th until the
morning of January 18th when they were finally informed
that seats will be available for them on the flight that
day.
Because of the refusal of the private respondent to heed
the repeated demands of the petitioners for
compensatory damages, petitioners were compelled to
file an action for damages in the Regional Trial Court of
Manila.
decision was rendered on July 2, 1985, the dispositive
part of which reads as follows: "WHEREFORE, in view of
the foregoing considerations, judgment is hereby
rendered ordering defendant to pay plaintiffs actual,
moral, exemplary and nominal damages, plus attorney's
fees..
Not satisfied therewith, private respondent interposed
an appeal to the Court of Appeals wherein in due course
a decision was rendered:
On the allowance of damages, the trial court
has discretion to grant and fix the amounts. In
this case, there was gross negligence on the
part of defendant-appellant in reconfirming the
time and date of departure of Flight No. 002
Appellees' actual damages in the amount of
P1,300.00 is maintained for being unrebutted
by the Appellant.
However, We modify the allowance of the other
awards made by the trial court.
The moral damages of P900,000.00 awarded to
Appellees must be eliminated considering the
following: llcd
-That the appellees did not take the witness
stand to testify on their "social humiliation,
wounded feelings and anxiety" and the breach
of contract was not malicious or fraudulent.
- Furthermore,
moral
damages,
though
incapable of pecuniary estimation, are in the

category of an award designed to compensate

the claimant for actual injury suffered and not
to impose a penalty on the wrongdoer.
-However, there is no question that appellant
acted with negligence in not informing
appellees about the change of hour of
departure. To provide an example or correction
for the public good, therefore, the award of
exemplary damages is proper. Nonetheless, the
awards granted by the trial court are far too
exorbitant and excessive compared to the
actual loss of P1,300.00. The authority of the
Court of Appeals to modify or change the
amounts of awards has been upheld in a long
line of decisions. We reduce the award of
exemplary damages...
The award of nominal damages has to be
eliminated since we are already awarding
actual loss. Nominal damages cannot co-exist
with actual or compensatory damages.
The award of 5% of the total damages as
attorney's fees is reasonable.
WHEREFORE, with the above modifications, the
decision appealed from is hereby AFFIRMED in
all other respects." 6
A motion for reconsideration thereof filed by the
petitioners was denied in a resolution dated May 29,
1989. 7
Both petitioners and private respondent elevated the
matter to this Court for review by certiorari.
Issue: Whether or not Petitioners are entitled to
moral damages; WON the breach of contract was
malicious or fraudulent.
Held: The petition is impressed with merit.
The appellate court observed that private respondent
was guilty of gross negligence not only in the issuance
of the tickets by the erroneous entry of the date of
departure and without changing or correcting the error
when the said three (3) tickets were presented for reconfirmation. Nevertheless it deleted the award of moral
damages on the ground that petitioners did not take the
witness stand to testify on "their social humiliation,
wounded feelings and anxiety, and that the breach of
contract was not malicious or fraudulent." 8
We disagree.
In Air France vs. Carrascoso, 9 Lopez vs. Pan American
World Airways, 10 and Zulueta vs. Pan American World
Airways, 11 this Court awarded damages for the gross
negligence of the airline which amounted to malice and
bad faith and which tainted the breach of air
transportation contract.
The gross negligence committed by private respondent
in the issuance of the tickets with entries as to the time
of the flight, the failure to correct such erroneous entries
and the manner by which petitioners were rudely
informed
that
they
were
bumped
off
are
clear indicia of such malice and bad faith and
establish that private respondent committed a
breach of contract which entitles petitioners to
moral damages.

The appellate court overlooked, that the failure of the

petitioner to appear in court to testify was explained by
them. The assassination of Senator Benigno Aquino, Jr.
on August 21, 1983 following the year they were
bumped off caused a turmoil in the country.
Nevertheless, Atty. Raymund Armovit, brother of
petitioner Dr. Armovit, took the witness stand as he was
with the petitioners from the time they checked in up to
the time of their ultimate departure.
No doubt Atty. Raymund Armovit's testimony adequately
and sufficiently established the serious anxiety,
wounded feelings and social humiliation that petitioners
suffered upon having been bumped off. However,
considering the circumstances of this case whereby the
private respondent attended to the plight of the
petitioners, taking care of their accommodations while
waiting and boarding them in the flight back to the U.S.
the following day, the Court finds that the petitioners are
entitled to moral damages in the amount of P100,000.00
each.
By the same token to provide an example for the public
good, an award of exemplary damages is also
proper. 14 The award of the appellate court is
adequate. llcd
Nevertheless, the deletion of the nominal damages by
the appellate court is well-taken since there is an award
of actual damages. Nominal damages cannot co-exist
with actual or compensatory damages. 15 GRANTED.
Francisco vs. GSIS
7 SCRA 577 (March 30, 1963)
Facts: Trinidad Francisco, in consideration of a loan in the
amount of P400,000.00, mortgaged in favor of the GSIS
a parcel of land with twenty-one (21) bungalows, known
as Vic-Mari Compound, located at Baesa, Quezon City,
payable within ten (10) years in monthly installments
and with interest of 7%per annum compounded monthly.
Because of her failure to comply with the
mortgaged,
GSIS
extra-judicially
foreclosed
the
mortgage. GSIS itself was the buyer of the property in
theforeclosure sale.
On 20 February 1959, the Trinidads father, Atty.
Vicente J. Francisco, sent a letter to the general manager
of the GSIS offering a compromise that P30,000 which
GSIS owes him be credited to Trinidads unpaid monthly
installments and that GSIS would take over the
administration of the mortgaged property and collect all
monthly installments amounting to about P5,000 of
more than 31 lots and houses until the debt is fully
covered. This was approved by GSIS through Andal.
Remittances were made, totaling P698,726.10
sent by Trinidad to GSIS through Andal, all of which were
received and duly receipted for. However, GSIS sent 3
letters, all of which were signed by Andal, asking
Trinidad for a proposal for the payment of her
indebtedness, since according to GSIS the one-year
period for redemption had expired.

Atty. Francisco protested against the GSIS

request for proposal of payment because of the
existence of the agreed offer dated 20 February 1959.
However, GSIS countered stating that the telegram
should be disregarded in view of its failure to express
the contents of the board resolution due to the error of
its minor employees in couching the correct wording of
the telegram which provides that approval of the
compromise is subject to the condition that Mr. Vicente
J. Francisco shall pay all expenses incurred by the GSIS
in the foreclosure of the mortgage.
GSIS moved for the consolidated the title to the
compound in its name, and gave notice thereof to the
plaintiff and to each occupant of the compound. Hence,
the plaintiff instituted the present suit, for specific
performance and damages.
After trial, the court below found the following:
(a) Declaring null and void the
consolidation in the name of the defendant,
Government Service Insurance System, of the
title of the VIC-MARI Compound; said title shall
be restored to the plaintiff; and all payments
made by the plaintiff, after her offer had been
accepted by the defendant, must be credited as
amortizations on her loan; and (b) Ordering the
defendant to abide by the terms of the contract
created by plaintiff's offer and it's unconditional
acceptance, with costs against the defendant.
Both parties appealed. GSIS appealed the decision of
declaring null and void the consolidation of the lots,
while Trinidad appealed because the trial court did not
award the P535,000.00 damages and attorney's fees
she claimed.
Issue: Is the lower court correct in not awarding
damages to plaintiff?
Held: YES. The court a quo correctly refused to award
such actual or compensatory damages because it could
not determine with reasonable certainty the difference
between the offered price and the actual value of the
property, for lack of competent evidence. Without proof
we cannot assume, or take judicial notice, as suggested
by the plaintiff, that the practice of lending institutions
in the country is to give out as loan 60% of the actual
value of the collateral.
There was no error also denying moral damages,
not only on account of the plaintiff's failure to take the
witness stand and testify to her social humiliation,
wounded feelings, anxiety, etc., as the decision holds,
but primarily because a breach of contract like that of
defendant, not being malicious or fraudulent, does not
warrant the award of moral damages under Article 2220
of the Civil Code.

There is also no basis for awarding exemplary damages

either, because this species of damages is only allowed
in addition to moral, temperate, liquidated, or
compensatory damages, none of which have been
allowed in this case.
As to attorneys' fees, we agree with the trial court's
stand that, in view of the absence of gross and evident
bad faith in defendant's refusal to satisfy the plaintiff's
claim, and there being none of the other grounds
enumerated in Article 2208 of the Civil Code, such
absence precludes a recovery. The award of attorneys'
fees is essentially discretionary in the trial court, and no
abuse of discretion has been shown.

Adjusters and Valuers, Inc. which was engaged by the

Del Rosarios to determine the cause of the destruction.
MFC declined to concede liability for other damages
claimed by the Del Rosario Spouses to have been cause
to the interior of their home. This prompted the latter to
commence a civil action against MFC.

Issue: 1.) Whether or not there is a privity of contract

between the parties.
2.) Whether or not MFC is answerable to the Del
Rosarios for the damage caused to the latters residence
when its roof made of shingles purchased from and
installed by the former, was blown away by a typhoon

Held:
DECISION OF THE TRIAL COURT: The trial court held the
corporation liable for breach of its contract for the
supply and installation of the roofing materials in the Del
Rosarios residence because:
a.) There was actually serious damages cause on
the house on account of inferior installation
b.) MFC admitted to its liability by making partial
repairs
c.) There was an express warranty
DECISION OF THE CA: The CA reversed the judgment. It
ruled that there was no privity of contract between the
Del Rosarios and the MFC because:

Del Rosario vs CA

Facts: Del Rosarios complaint charged MFC with a

violation of Sec. 3 of Act No. 3740, An Act to Penalize
Fraudulent Advertising, Mislabeling or Misbranding of
Any Product, Stocks, Bonds, Etc.. After due
proceedings, the DTI rendered judgment declaring that
MFC had indeed misrepresented its product because
strong winds actually blew off part of a roof of the Del
Rosarios. MFC was accordingly sentenced to pay an
administrative fine of P10,000, otherwise their business
shall be deemed suspended. As already stated, the
decision of DTI was affirmed in toto by the Office of the
President and the latter judgment was in turn affirmed
by the CA with a modification of a fine to P5,000. MFC
replaced and repaired the roof free of charge, evidently
acknowledging that the damage was covered by its oneyear warranty on the materials and the installation. The
repair work was observed and analyzed by the Esteban

a.) The contracts for the supply of materials and

installation of the roof were signed by Engr.
Puno. On the face of the contracts, it does not
appear that the Del Rosarios were parties to it or
that it was entered into for their benefit. It does
not also appear that Engr. Puno acted as agent of
the Del Rosarios nor of the corporation.
b.) The holding of the trial court that Engr. Puno was
an agent of the corporation is not borne out by
the records. There is no evidence to show
agency exists.
c.) The nature of the relationship between the Del
Rosarios and Engr. Puno is also not clear from the
records of the case
d.) While it may be implicit in the complaint of the
Del Rosarios that there was a a contract between
them and the corporation, this is not supported
by the evidence presented.
DECISION OF THE SC: The facts on the record show
adequate basis for verdict against MFC because:
a.) Art. 1546 of the CC, as seller to the general
public had made an affirmation of fact and
promises relation to its advertised product, it
induced the Del Rosarios to rely thereon and
purchase the product

b.) Pursuant to the Del Rosarios instructions, Puno

placed orders with MFC and signed the pertinent
contracts for the purchase of the shingles,
accepted deliveries thereof and signed
corresponding invoices
c.) MFC acted in bad faith and/or with gross
negligence in failing to deliver the necessary
accessories for the proper installation of the
structure and actually installed inferior roofing
materials at the Del Rosarios residence in
villation of the proper installation procedure
expressly specified in the formers brochures and
advertisements for installation.
MORAL DAMAGES: P100,000
EXEMPLARY DAMAGES: P50,000

Maria Efigenia sued the LSC and the Petroparcel captain,

Edgardo Doruelo praying for an award of P692,680.00
representing the value of the fishing nets, boat
equipment and cargoes of M/V Maria Efigenia XV with
interest at the legal rate plus 25% as attorneys fees and
later on amended to add the lost value of the hull less
the P200K insurance and unrealized profits and lost
business opportunities.
During the pendency of the case, PNOC Shipping and
Transport Corporation sought to be substituted in place
of LSC as it acquired Petroparcel.
Lower Court: against PNOC ordering it to pay P6,438,048
value of the fishing boat with interest plus P50K
attorney's fees and cost of suit.
CA: affirmed in toto.
ISSUE: W/N the damage was adequately proven.
HELD: YES. Affirming with modification actual damages
of P6,438,048.00 for lack of evidentiary bases therefor.
P2M nominal damages instead.
In connection with evidence which may appear to be of
doubtful relevancy or incompetency or admissibility, it is
the safest policy to be liberal, not rejecting them on
doubtful or technical grounds, but admitting them unless
plainly irrelevant, immaterial or incompetent, for the
reason that their rejection places them beyond the
consideration of the court.
If they are thereafter found relevant or competent, can
easily be remedied by completely discarding or ignoring
them two kinds of actual or compensatory damages:
loss of what a person already possesses (dao
emergente) failure to receive as a benefit that which
would have pertained to him in the case of profit-earning
chattels, what has to be assessed is the value of the
chattel to its owner as a going concern at the time and
place of the loss, and this means, at least in the case of
ships, that regard must be had to existing and pending
engagements.

PNOC V. CA
G.R. No. 107518 October 8, 1998
FACTS:
In the early morning of September 21, 1977, M/V Maria
Efigenia XV, owned by Maria Efigenia Fishing
Corporation on its way to Navotas, Metro Manila collided
with the vessel Petroparcel owned by the Luzon
Stevedoring Corporation (LSC). Board of Marine Inquiry,
Philippine Coast Guard Commandant Simeon N.
Alejandro found Petroparcel to be at fault.

If the market value of the ship reflects the fact that it is

in any case virtually certain of profitable employment,
then nothing can be added to that value in respect of
charters actually lost, for to do so would be pro tanto to
compensate the plaintiff twice over.
If the ship is valued without reference to its actual future
engagements and only in the light of its profit-earning
potentiality, then it may be necessary to add to the
value thus assessed the anticipated profit on a charter
or other engagement which it was unable to fulfill.
Damages cannot be presumed and courts, in making an
award must point out specific facts that could afford a
basis for measuring whatever compensatory or actual

damages are borne proven through sole testimony of

general manager without objection from LSC.
Admissibility of evidence refers to the question of
whether or not the circumstance (or evidence) is to
considered at all. On the other hand, the probative value
of evidence refers to the question of whether or not it
proves an issue
Hearsay evidence whether objected to or not has no
probative value.
In the absence of competent proof on the actual damage
suffered, private respondent is `entitled to nominal
damages which, as the law says, is adjudicated in order
that a right of the plaintiff, which has been violated or
invaded by defendant, may be vindicated and
recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered awarded in every obligation
arising from law, contracts, quasi-contracts, acts or
omissions punished by law, and quasi-delicts, or in every
case where property right has been invaded.
Damages in name only and not in fact amount to be
awarded as nominal damages shall be equal or at least
commensurate to the injury sustained by private
respondent considering the concept and purpose of such
damages.

Gatchalian v. Delim
Facts:
On July 11, 1973, petitioner Reynalda Gatchalian
boarded as paying passenger a minibus owned by
respondents. While the bus was running along the
highway, a snapping sound was heard, and after a
short while, the bus bumped a cement flower pot,
turned turtle and fell into a ditch. The passengers were
confined in the hospital, and their bills were paid by
respondents spouse on July 14. Before Mrs. Delim left,
she had the injured passengers sign an already prepared
affidavit waiving their claims against respondents.
Petitioner was among those who signed.
Notwithstanding the said document, petitioner filed a
claim to recover actual and moral damages for loss of
employment opportunities, mental suffering and
inferiority complex caused by the scar on her forehead.
Respondents raised in defense force majeure and the
waiver signed by petitioner. The trial court upheld the
validity of the waiver and dismissed the complaint. The
appellate court ruled that the waiver was invalid, but
also that the petitioner is not entitled to damages.
Issues:

Ordinarily, the receipt of insurance payments should

diminish the total value of the vessel quoted by private
respondent in his complaint considering that such
payment is causally related to the loss for which it
claimed compensation.

(1) Whether there was a valid waiver

(2) Whether the respondent was negligent
(3) Whether the petitioner is entitled to actual and moral
damages

Its failure to pay the docket fee corresponding to its

increased claim for damages under the amended
complaint should not be considered as having curtailed
the lower courts jurisdiction since the unpaid docket fee
should be considered as a lien on the judgment.

Held:

WHEREFORE, the challenged decision of the Court of

Appeals dated October 14, 1992, affirming that of the
Regional Trial Court of Caloocan City, Branch 121, is
hereby MODIFIED insofar as it awarded actual damages
to private respondent Maria Efigenia Fishing Corporation
in the amount of P6,438,048.00 for lack of evidentiary
bases therefor. Considering the fact, however, that: (1)
technically petitioner sustained injury but which,
unfortunately, was not adequately and properly proved,
and (2) this case has dragged on for almost two
decades, we believe that an award of Two Million
(P2,000,000.00) in favor of private respondent as and
for nominal damages is in order

(1) We agree with the majority of the Court of Appeals

who held that no valid waiver of her cause of action had
been made by petitioner. A waiver, to be valid and
effective, must in the first place be couched in clear and
unequivocal terms which leave no doubt as to the
intention of a person to give up a right or benefit which
legally pertains to him. A waiver may not casually be
attributed to a person when the terms thereof do not
explicitly and clearly evidence an intent to abandon a
right vested in such person.
The circumstances under which the Joint Affidavit was
signed by petitioner Gatchalian need to be considered.
Petitioner testified that she was still reeling from the
effects of the vehicular accident when the purported
waiver in the form of the Joint Affidavit was presented to
her for signing; that while reading the same, she
experienced dizziness but that, seeing the other
passengers who had also suffered injuries sign the
document, she too signed without bothering to read the
Joint Affidavit in its entirety. Considering these
circumstances, there appears substantial doubt whether
petitioner understood fully the import of the Joint
Affidavit (prepared by or at the instance of private

respondent) she signed and whether she actually

intended thereby to waive any right of action against
private respondent.
Finally, because what is involved here is the liability of a
common carrier for injuries sustained by passengers in
respect of whose safety a common carrier must exercise
extraordinary diligence, we must construe any such
purported waiver most strictly against the common
carrier. To uphold a supposed waiver of any right to
claim damages by an injured passenger, under
circumstances like those exhibited in this case, would be
to dilute and weaken the standard of extraordinary
diligence exacted by the law from common carriers and
hence to render that standard unenforceable. We
believe such a purported waiver is offensive to public
policy.
(2) In case of death or injuries to passengers, a statutory
presumption arises that the common carrier was at fault
or had acted negligently "unless it proves that it [had]
observed extraordinary diligence as prescribed in
Articles 1733 and 1755." To overcome this presumption,
the common carrier must show to the court that it had
exercised extraordinary diligence to present the injuries.
The standard of extraordinary diligence imposed upon
common carriers is considerably more demanding than
the standard of ordinary diligence. A common carrier is
bound to carry its passengers safely "as far as human
care and foresight can provide, using the utmost
diligence of a very cautious person, with due regard to
all the circumstances".
The records before the Court are bereft of any evidence
showing that respondent had exercised the
extraordinary diligence required by law. The obvious
continued failure of respondent to look after the
roadworthiness and safety of the bus, coupled with the
driver's refusal or neglect to stop the mini-bus after he
had heard once again the "snapping sound" and the cry
of alarm from one of the passengers, constituted wanton
disregard of the physical safety of the passengers, and
hence gross negligence on the part of respondent and
his driver.
(3) At the time of the accident, she was no longer
employed in a public school. Her employment as a
substitute teacher was occasional and episodic,
contingent upon the availability of vacancies for
substitute teachers. She could not be said to have in
fact lost any employment after and by reason of the
accident. She may not be awarded damages on the
basis of speculation or conjecture.
Petitioner's claim for the cost of plastic surgery for
removal of the scar on her forehead, is another matter. A
person is entitled to the physical integrity of his or her
body; if that integrity is violated or diminished, actual
injury is suffered for which actual or compensatory
damages are due and assessable. Petitioner Gatchalian

is entitled to be placed as nearly as possible in the

condition that she was before the mishap. A scar,
especially one on the face of the woman, resulting from
the infliction of injury upon her, is a violation of bodily
integrity, giving raise to a legitimate claim for
restoration to her conditio ante.
Moral damages may be awarded where gross negligence
on the part of the common carrier is shown. Considering
the extent of pain and anxiety which petitioner must
have suffered as a result of her physical injuries
including the permanent scar on her forehead, we
believe that the amount of P30,000.00 would be a
reasonable award. Petitioner's claim for P1,000.00 as
attorney's fees is in fact even more modest.

SECOND DIVISION
[G.R. No. 108630. April 2, 1996]
PHILIPPINE NATIONAL BANK, petitioner, vs. COURT
OF APPEALS and LORETO TAN,respondents.
SYLLABUS
5. CIVIL LAW; DAMAGES; ATTORNEYS FEES;
AVAILABLE TO PARTY WHO WAS COMPELLED
TO LITIGATE. - Regarding the award of attorneys
fees, we hold that private respondent Tan is entitled
to the same. Art. 2208 of the Civil Code allows
attorneys fees to be awarded if the claimant is
compelled to litigate with third persons or to incur
expenses to protect his interest by reason of an
unjustified act or omission of the party from whom
it is sought.
6. ID.;
ID.;
EXEMPLARY
DAMAGES;
WHEN
RECOVERABLE. - Under Art. 2232 of the Civil
Code, exemplary damages may be awarded if a
party acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner. However, they
cannot be recovered as a matter of right; the court
has yet to decide whether or not they should be
adjudicated.
7. ID.; ID.; ID.; REQUIREMENTS FOR GRANT.
- Jurisprudence has set down the requirements for

exemplary damages to be awarded: 1. they may be

imposed by way of example in addition to
compensatory damages, and only after the
claimants right to them has been established; 2.
they cannot be recovered as a matter of right, their
determination depending upon the amount of
compensatory damages that may be awarded to
the claimant; 3. the act must be accompanied by
bad faith or done in a wanton, fraudulent,
oppressive or malevolent manner.
8. ID.; ID.; ID.; CANNOT BE RECOVERED WHERE
THERE IS NO CLEAR BREACH OF OBLIGATION
TO PAY OR THAT A PARTY ACTED IN
FRAUDULENT,
WANTON,
RECKLESS
OR
OPPRESSIVE MANNER. - As for the award of
exemplary damages, we agree with the appellate
court that the same should be deleted. In the case
at bench, while there is a clear breach of petitioners
obligation to pay private respondents, there is no
evidence that it acted in a fraudulent, wanton,
reckless or oppressive manner. Furthermore, there
is no award of compensatory damages which is a
prerequisite before exemplary damages may be
awarded. Therefore, the award by the trial court of
P5,000.00 as exemplary damages is baseless.
DECISION
ROMERO, J.:
Petitioner Philippine National Bank (PNB) questions
the decision1 of the Court of Appeals partially affirming
the judgment of the Regional Trial Court, Branch 44,
Bacolod City. The dispositive portion of the trial courts
decision states:
WHEREFORE, premises considered, the Court hereby
renders judgment in favor of the plaintiff and against the
defendants as follows:
1) Ordering defendants to pay plaintiff jointly and
severally the sum of P32,480.00, with legal rate of
interest to be computed from May 2, 1979, date of filing
of this complaint until fully paid;
2) Ordering defendants to pay plaintiff jointly and
severally the sum of P5,000.00 as exemplary damages;
3) Ordering defendants to pay plaintiff jointly and
severally the sum of P5,000.00 as attorneys fees;

Private respondent Loreto Tan (Tan) is the owner of

a parcel of land abutting the national highway in
Mandalagan, Bacolod City. Expropriation proceedings
were instituted by the government against private
respondent Tan and other property owners before the
then Court of First Instance of Negros Occidental, Branch
IV, docketed as Civil Case No. 12924.
Tan filed a motion dated May 10, 1978 requesting
issuance of an order for the release to him of the
expropriation price of P3 2,480.00.
On May 22, 1978, petitioner PNB (Bacolod Branch)
was required by the trial court to release to Tan the
amount of P32,480.00 deposited with it by the
government.
On May 24, 1978, petitioner, through its Assistant
Branch Manager Juan Tagamolila, issued a managers
check for P3 2,480.00 and delivered the same to one
Sonia Gonzaga without Tans knowledge, consent or
authority. Sonia Gonzaga deposited it in her account
with Far East Bank and Trust Co. (FEBTC) and later on
withdrew the said amount.
Private respondent Tan subsequently demanded
payment in the amount of P32,480.00 from petitioner,
but the same was refused on the ground that petitioner
had already paid and delivered the amount to Sonia
Gonzaga on the strength of a Special Power of Attorney
(SPA) allegedly executed in her favor by Tan.
On June 8, 1978, Tan executed an affidavit before
petitioners lawyer, Alejandro S. Somo, stating that:
1) he had never executed any Special Power of Attorney
in favor of Sonia S. Gonzaga;
2) he had never authorized Sonia Gonzaga to receive
the sum of P32,480.00 from petitioner;
3) he signed a motion for the court to issue an Order to
release the said sum of money to him and gave the
same to Mr. Nilo Gonzaga (husband of Sonia) to be filed
in court. However, after the Order was subsequently
issued by the court, a certain Engineer Decena of the
Highway Engineers Office issued the authority to release
the funds not to him but to Mr. Gonzaga.
When he failed to recover the amount from PNB,
private respondent filed a motion with the court to
require PNB to pay the same to him.

4) To pay the costs of this suit.

SO ORDERED.2
The facts are the following:

Petitioner filed an opposition contending that Sonia

Gonzaga presented to it a copy of the May 22, 1978
order and a special power of attorney by virtue of which
petitioner delivered the check to her.

The matter was set for hearing on July 21, 1978 and
petitioner was directed by the court to produce the said
special power of attorney thereat. However, petitioner
failed to do so.

Bank and Trust Company that it allowed Sonia Gonzaga

to encash Tans check on the basis of the SPA.

The court decided that there was need for the

matter to be ventilated in a separate civil action and
thus private respondent

There is no question that no payment had ever

been made to private respondent as the check was
never delivered to him. When the court ordered
petitioner to pay private respondent the amount of P3
2,480.00, it had the obligation to deliver the same to
him. Under Art. 1233 of the Civil Code, a debt shall not
be understood to have been paid unless the thing or
service in which the obligation consists has been
completely delivered or rendered, as the case may be.

filed a complaint with the Regional Trial Court in

Bacolod City (Branch 44) against petitioner and Juan
Tagamolila, PNBs Assistant Branch Manager, to recover
the said amount.
In its defense, petitioner contended that private
respondent had duly authorized Sonia Gonzaga to act as
his agent.
On September 28, 1979, petitioner filed a thirdparty complaint against the spouses Nilo and Sonia
Gonzaga praying that they be ordered to pay private
respondent the amount of P32,480.00. However, for
failure of petitioner to have the summons served on the
Gonzagas despite opportunities given to it, the thirdparty complaint was dismissed.
Tagamolila, in his answer, stated that Sonia
Gonzaga presented a Special Power of Attorney to him
but borrowed it later with the promise to return it,
claiming that she needed it to encash the check.
On June 7, 1989, the trial court rendered judgment
ordering petitioner and Tagamolila to pay private
respondent jointly and severally the amount of
P32,480.00 with legal interest, damages and attorneys
fees.

We find the petition unmeritorious.

The burden of proof of such payment lies with the

debtor.3 In the instant case, neither the SPA nor the
check issued by petitioner was ever presented in court.
The testimonies of petitioners own witnesses
regarding the check were conflicting. Tagamolila
testified that the check was issued to the order of Sonia
Gonzaga as attorney-in-fact of Loreto Tan,4 while Elvira
Tibon, assistant cashier of PNB (Bacolod Branch), stated
that the check was issued to the order of Loreto Tan.5
Furthermore, contrary to petitioners contention that
all that is needed to be proved is the existence of the
SPA, it is also necessary for evidence to be presented
regarding the nature and extent of the alleged powers
and authority granted to Sonia Gonzaga; more
specifically, to determine whether the document indeed
authorized her to receive payment intended for private
respondent. However, no such evidence was ever
presented.
Section 2, Rule 130 of the Rules of Court states that:

Both petitioner and Tagamolila appealed the case to

the Court of Appeals.

SEC. 2. Original writing must be produced; exceptions.

In a resolution dated April 8, 1991, the appellate

court dismissed Tagamolilas appeal for failure to pay the
docket fee within the reglementary period.

- There can be no evidence of a writing the contents of

which is the subject of inquiry, other than the original
writing itself, except in the following cases:

On August 31, 1992, the Court of Appeals affirmed

the decision of the trial court against petitioner, with the
modification that the award of P5,000.00 for exemplary
damages and P5,000.00 for attorneys fees by the trial
court was deleted.

(a) When the original has been lost, destroyed, or cannot be

produced in court;

Hence, this petition.

Petitioner PNB states that the issue in this case is
whether or not the SPA ever existed. It argues that the
existence of the SPA need not be proved by it under the
best evidence rule because it already proved the
existence of the SPA from the testimonies of its
witnesses and by the certification issued by the Far East

(b) When the original is in the possession of the party

against whom the evidence is offered, and the latter fails to
produce it after reasonable notice;
(c) When the original is a record or other document in the
custody of a public officer;
(d) When the original has been recorded in an existing
record a certified copy of which is made evidence by law;
(e) When the original consists of numerous accounts or
other documents which cannot be examined in court

without great loss of time and the fact sought to be

established from them is only the general result of the
whole.
Section 4, Rule 130 of the Rules of Court allows the
presentation of secondary evidence when the original is lost
or destroyed, thus:
SEC. 4. Secondary evidence when original is lost or
destroyed. - When the original writing has been lost or
destroyed, or cannot be produced in court, upon proof of its
execution and loss or destruction, or unavailability, its
contents may be proved by a copy, or by a recital of its
contents in some authentic document, or by the
recollection of witnesses.
Considering that the contents of the SPA are also in
issue here, the best evidence rule applies. Hence, only the
original document (which has not been presented at all) is
the best evidence of the fact as to whether or not private
respondent indeed authorized Sonia Gonzaga to receive the
check from petitioner. In the absence of such document,
petitioners arguments regarding due payment must fail.
Regarding the award of attorneys fees, we hold that
private respondent Tan is entitled to the same. Art. 2208 of
the Civil Code allows attorneys fees to be awarded if the
claimant is compelled to litigate with third persons or to
incur expenses to protect his interest by reason of an
unjustified act or omission of the party from whom it is
sought.6
In Rasonable v. NLRC, et al., we held that when a
party is forced to litigate to protect his rights, he is entitled
to an award of attorneys fees.
7

As for the award of exemplary damages, we agree with

the appellate court that the same should be deleted.
Under Art. 2232 of the Civil Code, exemplary damages
may be awarded if a party acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. However, they
cannot be recovered as a matter of right; the court has yet
to decide whether or not they should be adjudicated. 8
Jurisprudence has set down the requirements for
exemplary damages to be awarded:
1. they may be imposed by way of example in addition to
compensatory damages, and only after the claimants right
to them has been established;
2. they cannot be recovered as a matter of right, their
determination depending upon the amount of
compensatory damages that may be awarded to the
claimant;
3. the act must be accompanied by bad faith or done in a
wanton, fraudulent, oppressive or malevolent manner.9

In the case at bench, while there is a clear breach of

petitioners obligation to pay private respondents, there is
no evidence that it acted in a fraudulent, wanton, reckless
or oppressive manner. Furthermore, there is no award to
compensatory damages which is a prerequisite before
exemplary damages may be awarded. Therefore, the award
by the trial court of P5,000.00 as exemplary damages is
baseless.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the modification that the award by the
Regional Trial Court of P5,000.00 as attorneys fees is
REINSTATED.
SO ORDERED.
Regalado (Chairman), Puno, and Mendoza, JJ., concur.

SECOND DIVISION
[G.R. No. 129782. June 29, 2001]
PEOPLE
OF
THE
PHILIPPINES, plaintiff
and
appellee, vs. BALWINDER SINGH, GURMOK
SINGH,
DALVIR
SINGH,
DIAL
SINGH,
AMARJIT SINGH, MOHINDER SINGH, MALKIT
SINGH DHILLON, JOHINDER SINGH and
KULDIP SINGH, defendant,
BALWINDER SINGH, MALKIT, SINGH, MOHINDER
SINGH and DALVIR SINGH, defendants-appellants.
DECISION
BUENA, J.:
Appellants Balwinder, Malkit, Mohinder and Dalvir,
all surnamed Singh, were convicted of the crime of
Murder in Criminal Case No. 8683 for killing Surinder
Singh, and Frustrated Murder in Criminal Cases No. 8682
for stabbing Dilbag Singh. Each of them were sentenced
to suffer the penalty of reclusion perpetua for murder,
and the indeterminate penalty of 8 years and one (1)
day of prision mayor as minimum, to twelve (12) years
and one (1) day of reclusion temporal as maximum for
frustrated murder.
It appears that these four (4) appellants, who are
Indian nationals, were charged with murder and
frustrated murder along with their six (6) compatriots,
namely: Gurmok, Dalvir, Dial, Johinder, Kuldip and
Amarjit Singh. Only these four (4) appellants were
prosecuted because the rest of their co-accused are atlarge, except for Dial Singh, who died while under
detention.
Dilbag Singh, private complainant for frustrated
murder in Criminal Case No. 8682, recounts that on
November 26, 1993, at around 7:30 in the morning while
he was cleaning his motorbike in front of the Mendiola
Apartment in Barangay Canlalay, Bian, Laguna, Dalvir,
Balwinder, Gurmok, Jarnail, Amarjit, Mohinder, Dial,
Kuldip- all surnamed Singh-Johander Singh Dhillon, and
Malkit Singh Dhillon arrived, shouting foul remarks in
their native language and demanding Surinder Singh to
come out of the apartment. When Surinder Singh came
out of his apartment, Dalvir Singh tried to stab him but
Surinder Singh was able to move away. Dalvir Singh told
his companions to hold Surinder Singh as he will kill

him. Thereafter, Dial Singh and Johinder Singh each held

the right and left arms of Surinder Singh, with Kuldip
Singh pushing Surinder Singh on his back. Dalvir Singh
then stabbed Surinder Singh, hitting him on the right
side of his stomach, and causing him to fall on the
ground. Dial Singh remarked that Surinder Singh failed
to give money and if others will likewise refuse, the
same fate will befall them. As Surinder Singh tried to get
up, Malkit Singh Dhillon and Jarnail Singh started hitting
him with lead pipes all over his body, while Johinder
Singh and Dial Singh punched and kicked Surinder.
Amarjit Singh, who was holding a gun, warned everyone
not to help Surinder Singh or else he will shoot. Thereat,
when all these things were going on, private
complainant Dilbag Singh tried to stop them but
Balwinder Singh stabbed him on the left side of his back.
Gurmok Singh likewise stabbed him with a bolo, but he
was not hit as he was able to move to one side. After
that, the ten (10) accused Indians left.
Dilbag Singh and Surinder Singh, both injured, were
brought to the Perpetual Help Hospital, Bian, Laguna, by
Jaswinder Singh, Johinder Singh Gill, Balwinder Singh Gill
and Alwan Singh, for treatment. There, Surinder Singh
was pronounced dead on arrival.
From the hospital, private complainant Dilbag
Singh, Jaswinder Singh, Balwinder Singh Gill, a lady
named Vilma, and other companions went to the police
station in Bian, Laguna, and reported the incident. Both
Dilbag Singh and Jaswinder Singh executed a sworn
statement.
On the basis of the sworn statement, the Chief
Investigator of the Bian Police Station filed on November
28, 1993, a complaint for the crime of homicide with the
Municipal Trial Court (MTC) of Bian, Laguna for purposes
of preliminary investigation.
On January 7, 1994,[1] after finding probable cause,
the MTC recommended to upgrade the charges to
Murder and Frustrated Murder, and forwarded the
records of the case to the Provincial Prosecutor.[2]

superior strength, treachery and with evident

premeditation, the said accused, having inflicted the
wounds upon SURINDER SINGH while being held by the
other accused, and as a result thereof, the said wounds
being necessarily mortal/fatal, thereby causing the
direct and immediate death of said SURINDER SINGH, to
the damage and prejudice of his surviving heirs.
All contrary to law and with the qualifying/aggravating
circumstances of abuse of superior strength, evident
premeditation and alevosia, and the generic aggravating
circumstance of known conspiracy.
Criminal Case No. 8682[8] Frustrated Murder
That on or about November 26, 1993 in the Municipality
of Bian, Province of Laguna, Philippines and within the
jurisdiction of this Honorable Court, the above-named
accused conspiring, confederating and mutually helping
with one another, did then and there willfully, unlawfully
and feloniously, with abuse of superior strength,
treachery and evident premeditation, while armed with
bolos, lead pipes, fan knife and hand-gun, with the
intent of taking the life of DILBAG SINGH, attack, assault
thereby inflicting upon him mortal wound on the left side
of his body directly by overt acts thus, performing all the
acts of execution which would have nevertheless did not
produce it, by reason of causes independent of their will,
that is: the able and timely medical assistance given the
said DILBAG SINGH which prevented his death.
CONTRARY TO LAW.
Initially, the case was filed with the Regional Trial
Court of Bian, Laguna and was raffled to Branch 24. Both
cases were tried jointly.
Upon arraignment, on September 23, 1994, three
(3) appellants, Balwinder, Malkit and Mohinder Singh,
manifested that they are not entering any plea. Thus,
the court entered for them a plea of not guilty pursuant
to Section 1(c), Rule 116 of the Rules of Court. [9] The
arraignment of Dalvir and Dial Singh followed on
October 25, 1994.[10]

On February 17, 1994, 3rd Assistant Prosecutor of

Laguna, Fernando V. Balinado, rendered a resolution
recommending that only Dalvir Singh be charged with
homicide, and that frustrated homicide be filed against
Balwinder
and
Gurmok
Singh.[3] Thereafter,
the
Information for homicide was filed against Dalvir Singh,
and frustrated homicide against Balwinder and Gurmok
Singh[4] with the Regional Trial Court of Laguna. Before
arraignment, private complainants Dilbag Singh and
their heirs of Surinder Singh, thru their counsel, moved
for reinvestigation.[5]

On October 6, 1994, appellants filed a petition for

bail.[11] While hearing the petition for bail, appellants
filed a motion to inhibit and a petition for change of
venue.[12] Subsequently, on May 30, 1995, the hearing
on the petition for bail was continued before the
Regional Trial Court of San Pedro, Laguna. On December
13, 1995, RTC of San Pedro, Laguna denied the petition
for bail.[13]

On
June
30,
1994,
a
resolution
on
reinvestigation[6] resulted in the filing of two (2)
Informations for Murder and Frustrated Murder against
all ten (10) Indian nationals, to wit:

The events, according to appellants, happened in

this wise. Appellant Dalvir Singh testified that on
November 26, 1993, at around 7:30 in the morning, he
was conducting his buy and sell business along Brgy.
Canlalay, Bian, Laguna. While collecting from his
customers, he was accosted by Jaswinder, Dilbag and
Surinder Singh to stop at the corner of the street. When
he stopped, he alighted from his motorcycle. Jaswinder,
Dilbag and Surinder Singh accused him of squealing
their status to the immigration authorities. Then,
Jaswinder Singh punched him. Appellant Dalvir Singh
retaliated by slapping Jaswinder Singh afterwhich,
Jaswinder Singh, went inside his apartment to get a
pipe. When Surinder Singh was about to stab him, he
wrestled the knife from him and, in the process, private

CRIMINAL CASE No. 8683[7] For Murder

That on or about November 26, 1993, in the Municipality
of Bian, Province of Laguna, Philippines and within the
jurisdiction of this Honorable Court, the above-named
accused conspiring, confederating and mutually helping
with one another, and armed with a fan knife, hand gun
and lead pipes, did then and there willfully, unlawfully
and feloniously attack, assault, stab and wound and hit
with said knife and lead pipes one SURINDER SINGH
thereby inflicting upon him fatal wounds, with abuse of

The evidence presented during the bail hearings

were automatically reproduced at the trial.

complainant Dilbag Singh was stabbed on his back with

the same knife.[14] As Dalvir Singh grappled for the
possession of the knife from Surinder Singh, both of
them fell down, with him landing on top of Surinder
Singh and that was the time when Surinder Singh was
stabbed on the right portion of his stomach. Then,
Surinder Singh lost his grip and appellant Dalvir Singh
was able to get hold of the knife. Appellant Dalvir Singh
was so nervous that he left the place on his motorcycle
while holding the knife. He threw the knife along the
highway of Bian, Laguna.[15]
To bolster this version, appellants offered the
testimonies of Wilfredo Rivera and SPO4 Manuel
Francisco. Wilfredo Rivera corroborated the testimonies
of appellant Dalvir Singh. According to him, he testified
in court in exchange for the favor extended to him by an
Indian national who is a friend of appellant Dalvir
Singh. With respect to the testimonies of SPO4 Manuel
Francisco, then chief investigator of the PNP, Bian,
Laguna, the same were confined to the fact that private
complainants Dilbag Singh and Jaswinder Singh
executed their respective sworn statements of the
incident.
After trial, appellants were convicted of the crime
charged, thus
WHEREFORE, the guilt of accused Balwinder Singh,
Malkit Singh Dhillon, Mohinder Singh, Dalvir Singh and
Dial Singh having been established beyond reasonable
doubt of the crimes of frustrated murder in Criminal
Case No. 8282 and murder in Criminal Case 8683
defined and penalized in Articles 248 and 250 of the
Revised Penal Code, this Court hereby sentences them
(except Dial Singh who died during the presentation of
defense evidence on the main case) as follows:
Criminal Case No. 8682
1. each to suffer an indeterminate penalty of
imprisonment of from eight (8) years and
one (1) day of prision mayor as minimum, to
twelve (12) years and one (1) day
of reclusion temporal maximum;
2. jointly and severally, to pay private
complainant Dilbag Singh the amounts of
P16,000 representing his hospitalization and
medical expenses, and P30,000 for and as
attorneys fees; and
3. jointly and severally, to pay the costs of suit.
Criminal Case No. 8683
1. each to suffer
perpetua;

the

penalty

of reclusion

2. jointly and severally, to pay the heirs of

Surinder Singh the following sums:
a) P50,000.00 as civil indemnity;
b) P41,500.00 representing funeral, wake and
transportation expenses;
c) P5,760,000.00 for lost earnings/income;
d) P400.00 for hospitalization expenses;
e) P50,000.00 for moral damages; and
f) P500,000.00 for and as attorneys fees; and
3. jointly and severally, to pay the costs of suit.

Since accused Jarnail Singh, Gurmok Singh, Amarjit

Singh, Johinder Singh and Kuldip Singh have remained
at-large to date, in order not to clog the docket of this
court, let the records of these two cases be sent to the
files and warrant be issued for their immediate arrest.
SO ORDERED.[16]
Due to the penalty of reclusion perpetua imposed in
murder, the case is now before us on appeal.
Appellants challenge their conviction and interpose
the following errors allegedly committed by the trial
court-[17]
1. The court a quo erred in sanctioning errors and
irregularities of procedure which resulted in denial of
due process to accused-appellants.
2. The court a quo erred in accepting the prosecutions
version of the incident which gave rise to these cases,
overlooking the testimonies of the three (3) unbiased
witnesses thereto.
3. The court a quo erred in awarding excessive damages
against accused-appellants.
First error

According to appellants, an irregularity attended the

admission of the amended Informations. They claim that
the prosecution failed to conduct a preliminary
investigation for the upgraded crime of murder and
frustrated murder. This claim lacks basis.
Evidence on record reveals that when private
complainants filed a motion for re-investigation to
upgrade the charge to murder and frustrated murder, in
the course thereof, the prosecutor who handled the
reinvestigation[18] conducted
another
preliminary
investigation. Subpoenas were issued and sent to both
contending parties requiring them to appear and be
present on the scheduled date and time for the said reinvestigation, and to present, or submit, their evidence
in support of their complaints and defense,
respectively."[19] The prosecutor propounded clarificatory
questions to the prosecution witnesses revealing the
necessity to raise the category of the criminal charge to
murder and frustrated murder.
Appellants likewise alleged that the procedure
followed by the trial court in resolving their petitions for
bail departed from the usual course of judicial
proceedings, because the prosecution presented its
evidence ahead of appellants, and the presentation of
the prosecution took 10 months from January 27 to
October 30, 1995, while the accused were afforded only
two days to rebut the prosecution evidence. This
allegation is misplaced.
In hearing the petition for bail, the prosecution has
the burden of showing that the evidence of guilt is
strong. Section 8, Rule 114 of the Rules of Court
specifically provides that the burden of proof in bail
application lies in the prosecution, thusSection 8, Burden of proof in bail application.- At the
hearing of an application for admission to bail filed by
any person who is in custody for the commission of an
offense punishable by death, reclusion perpetua or life
imprisonment, the prosecution has the burden of
showing that evidence of guilt is strong. The evidence
presented during the bail hearings shall be considered

automatically reproduced at the trial, but upon motion of

either party, the court may recall any witness for
additional examination unless the witness is dead,
outside of the Philippines or otherwise unable to testify.
In bail proceedings, the prosecution must be given
ample opportunity to show that the evidence of guilt is
strong. While the proceeding is conducted as a regular
trial, it must be limited to the determination of the
bailability of the accused. It should be brief and speedy,
lest the purpose for which it is available is rendered
nugatory. Antecedents of this case show that the case
was initially raffled to Branch 24, RTC, Bian, Laguna, and
then transferred to RTC San Pedro, Laguna. From the
filing of the two (2) criminal Informations, several
motions and petitions were received by the trial court,
which include, among others, application for bail, motion
for re-investigation, motion to inhibit and change of
venue, motion to transfer appellants from the municipal
jail to Sta. Cruz provincial jail, petition for review filed
with the Department of Justice and motion for
postponements. In the course of hearing the petition for
bail, several petitions and motions cluttered the records
of the trial court. In fact, the records of the case were
not immediately forwarded to RTC San Pedro, Laguna
when the hearing was transferred. We have scoured the
records of this case and we found that the delay was
caused by these factors. These, however, did not justify
the length of time consumed by the prosecution in the
presentation of its evidence because the trial court,
exercising its discretion, ought to control the course of
bail proceedings, avoiding unnecessary thoroughness in
the examination and cross-examination of witnesses,
and reducing to a reasonable minimum the amount of
corroboration particularly on details that are not
essential to the purpose of the hearing.[20] While the
prosecution tarried too long, such fact did not amount to
a denial of due process because bail is granted only
where it is uncertain whether the accused is guilty or
innocent,[21] which is not attendant in this case.
Appellants also challenge their transfer from the
municipal jail in Bian, Laguna, to the provincial jail in
Sta. Cruz, Laguna. The transfer of appellants to the Sta.
Cruz provincial jail was sought for because during the
scheduled hearings, appellants were always late.
[22]
Considering that the jail guards in the municipal jail
at Bian reasoned that they are undermanned, thus, late
in going to court, the trial court deemed it best to
transfer appellants to the provincial jail. Besides, the
trial court took cognizance of the fact that appellants
complained of poor jail facilities in Bian, Laguna.
[23]
Circumstances
surrounding
this
case
justify
appellants transfer to the provincial jail for the purpose
of insuring the speedy disposition of the case.
Appellants claim that no evidence was presented by
the prosecution to prove the allegations in the amended
information, and that there is nothing in the records of
these cases which support the statement of the court a
quo that the documentary evidence, as well as the
testimonies of the xxx witnesses presented by the
prosecution in a petition for bail, was considered as
automatically reproduced at the trial on the main cases,
[24]
is misleading.
On May 30, 1995, the trial court declared that the
evidence presented during the bail hearings are
considered automatically reproduced at the trial of the
main case.[25] In fact, Section 8, Rule 114 of the Rules of

Court specifically provides that the evidence presented

during the bail hearings shall be considered
automatically reproduced at the trial. The mandate of
the Rules is clear and there is no need for the trial court
to issue an order so that the evidence presented in the
bail proceedings may be considered automatically
reproduced at the trial.
Appellants contend that they were deprived of their
rights to be heard and to present evidence with the
issuance of the trial court Order dated February 24,
1997. As culled from the records, appellants were
protracting the trial by filing motions for postponement
on scheduled hearings. On February 24,1997, the
scheduled date for appellants presentation of additional
evidence, appellants filed a motion for leave to file
demurrer to evidence and set the same for hearing on
that same day.[26] It bears stressing that judicial action
on a motion to dismiss, or demurrer to evidence, is left
to the exercise of sound judicial discretion. [27] The trial
court, mindful of the violation of the three-day notice
rule by appellants, declared that the trial court must be
given time to resolve the motion, and ordered the
parties to proceed with the hearing, without prejudice to
the outcome of the motion. The trial court emphasized
that there should be a limitation or an end to
unnecessary postponements. Thus, it disclosed that
when the Court of Appeals denied appellants Petition for
Certiorari with a prayer for temporary restraining order,
[28]
no legal hindrance existed to defer the scheduled
hearings. Appellants were given all the opportunity to be
heard and defend their cause but opted not to utilize the
same by its continued refusal to proceed with the
trial. Nevertheless, appellants were given time to file
their formal offer of exhibits to bolster their defense.
[29]
This negates the appellants claim of denial of due
process.
Second error
Appellants fault the trial court in accepting the
prosecutions version. This Court is convinced that
appellants are guilty of the crime charged. Appellants
Dalvir Singh admitted stabbing the deceased and
wounding Dilbag Singh, which was claimed to have been
caused while grappling for the possession of the
knife.This version invoking the justifying circumstance of
self-defense must be proven by clear and convincing
evidence.[30] After invoking self-defense, for exculpation,
appellants have the burden of proving their allegation to
substantiate such assertion, which they failed to do
so. In addition, their imputation of alleged discrepancy
between the sworn statement executed by private
complainants Dilbag and Jaswinder Singh on November
26, 1993, and their joint sworn statement executed on
December
13,
1993,[31] is
not
impressed
with
merit. Reviews of both sworn statements negate any
inconsistency. Immediately after the incident, private
complainants Dilbag and Jaswinder Singh, reported the
circumstances surrounding the death of Surinder Singh,
and the stab wound sustained by Dilbag Singh to police
authorities.[32] Both of them revealed the presence of all
the appellants and disclosed their participation in the
incident. On November 26, 1993, their narrations
collectively and individually demonstrate appellants
concerted action to inflict injury upon private
complainant Dilbag Singh and the deceased Surinder
Singh. In fine, we quote with approval, the trial courts

findings, holding all the appellants guilty of murder and

frustrated murder, thusx x x prosecution evidence has established that Surinder
Singh was stabbed in the stomach by accused Dalvir
Singh while the former was being held on his arms by
accused Dial Singh and Johinder Singh, and pushed on
his back by accused Kuldip Singh. At that juncture,
accused Malkit Singh Dhillon and Jarnail Singh held lead
pipes, accused Balwinder Singh, a big bolo-like knife,
accused Gurmok Singh, a small bolo-like knife, and
Amarjit Singh, a hand gun. Also, accused Mohinder
Singh shouted kill him, Im responsible, I will bring you
out of trouble in Punjabi and the rest of the accused
remarked come on, kill him, kill him also in
Punjabi. While all these acts were transpiring, accused
Amarjit Singh threatened to shoot anybody who will help
with the gun that he was holding. After he was stabbed,
Surinder Singh was still hit with lead pipes by accused
Malkit Singh Dhillon and Jarnail Singh and boxed and
kicked by Johinder Singh and Dial Singh and pushed at
his back by Kuldip Singh. When Dilbag pleaded with the
accused not to hit anymore (sic) Surinder Singh, he, too,
was stabbed on his back by Balwinder Singh followed by
an attempt to stab him also by Gurmok Singh. Evidently,
the foregoing concerted acts sufficiently demonstrated a
common purpose or design to kill Surinder Singh and
Dilbag Singh with treachery. As held in a number of
cases, there is treachery when offender commits any of
the crimes against person, employing means, methods
or forms in the execution thereof, without risk to himself
from the defense which the offended party might
make. xxx xxx xxx Thus, treachery which was alleged in
the informations, qualifies the killing of Surinder Singh to
murder and the inflicting of a mortal wound on Dilbag
Singh with intent to kill to frustrated murder. Where
criminal conspiracy is shown to exist, all the
conspirators are liable as co-principals regardless of the
extent and character of their participation, in
contemplation of law, the act of one conspirator is the
act of all xxx xxx xxx and the participation in all details
of execution of the crime is not necessary for such a
finding. xxx xxx xxx Although superior strength is found
to be attendant in the killing of Surinder Singh and
wounding of Dilbag Singh, it is deemed absorbed in
treachery and is not appreciated as a separate
aggravating circumstances. As regards the circumstance
of evident premeditation, prosecution evidence failed to
show when accused meditated and reflected upon their
decision to kill their victims. In short, it cannot also be
appreciated because there is wanting of any direct
evidence of the planning and the preparation to kill.[33]
The other errors allegedly committed by the trial
court call for the calibration of credibility of witnesses,
which we find no reason to disturb since it is best left to
the trial court to pass upon, having had the opportunity
to observe firsthand the demeanor and actuation of the
witnesses while on the witness stand.[34]
Third error

In Criminal Case No. 8682 for frustrated murder, the

trial court awarded private complainant Dilbag Singh the
amount of P16,000.00 representing his hospitalization
and medical expenses, and P 30,000.00 as attorneys
fees. For his hospitalization and medical expenses, the
receipts submitted to support said claim amounted only
to P370.50.[35] Hence, private complainant Dilbag Singh
is entitled only to the said amount. [36] The award of

attorneys fees is hereby deleted.[37]Nonetheless, private

complaint is entitled to moral damages [38] in the amount
of P50,000.00 for the suffering he endured from
appellants felonious acts.
In Criminal Case No. 8683 for murder, the following
amount of actual damages were duly proven P16,500.00
funeral expenses[39] and air ticket/freight of the cadaver
$600.27.[40] The amount of P400.00 for hospitalization
expenses should be deleted for not being supported by
evidence. The trial courts award of P50,000.00 as civil
indemnity, and P50,000.00 moral damages are
affirmed. The award of P500,000.00 as attorneys
fees[41] and P5,760,000 as compensation for loss of
earning capacity, are likewise deleted for lack of
basis. Awards for loss of earning capacity partake of
damages which must be proven not only by credible and
satisfactory evidence, but also by unbiased proof. [42] The
testimony of Balwinder Singh Gill, first cousin of the
deceased, on the alleged income of the deceased while
in the Philippines, is not enough. The best evidence to
substantiate income earned by foreigners while in the
Philippines is the payment of taxes with the Bureau of
Internal Revenue. Absent such proof, bare allegation is
insufficient. Nevertheless, considering that the definite
proof of pecuniary loss cannot be offered, and the fact of
loss has been established, appellants shall pay the heirs
of Surinder Singh temperate damages[43] in the amount
of P200,000.00.
WHEREFORE, in accordance with the foregoing
disquisition, the decision appealed from is hereby
affirmed subject to the following modifications1. In Criminal Case No. 8682 for frustrated murder,
appellants shall only be liable to pay
a. P370.50 for hospitalization expenses;
b. P50,000.00, as moral damages, plus costs; and,
2. In Criminal Case No. 8683 for murder, in addition
to the civil indemnity, moral damages and attorneys
fees awarded by the trial court, appellants shall paya. P16,500.00, as funeral expenses;
b. $600.27, as air ticket/freight of the cadaver,
to be computed at the prevailing rate of
exchange at the time of the promulgation of
this decision; and,
c. P200,000.00, as temperate damages, plus costs.
SO ORDERED.
Bellosillo,
(Chairman),
Quisumbing, and De Leon, Jr., JJ., concur.

Mendoza,

After the joinder of issues following the filing by the

parties of their respective pleadings, the trial court
conducted a pre-trial where CUBA and DBP agreed on
the following facts, which were embodied in the pre-trial
order:[2]
1. Plaintiff Lydia P. Cuba is a grantee of a
Fishpond Lease Agreement No. 2083 (new)
dated May 13, 1974 from the Government;
2. Plaintiff Lydia P. Cuba obtained loans from
the Development Bank of the Philippines in
the amounts of P109,000.00; P109,000.00;
and P98,700.00 under the terms stated in
the Promissory Notes dated September 6,
1974; August 11, 1975; and April 4, 1977;
3. As security for said loans, plaintiff Lydia P.
Cuba executed two Deeds of Assignment of
her Leasehold Rights;

FIRST DIVISION
[G.R. No. 118342. January 5, 1998]
DEVELOPMENT
BANK
OF
THE
PHILIPPINES, petitioner, vs. COURT OF
APPEALS and LYDIA CUBA, respondents.
[G.R. No. 118367. January 5, 1998]
LYDIA P. CUBA, petitioner, vs. COURT OF APPEALS,
DEVELOPMENT BANK OF THE PHILIPPINES
and AGRIPINA P. CAPERAL, respondents.
DECISION
DAVIDE, JR., J.:
These two consolidated cases stemmed from a
complaint[1] filed against the Development Bank of the
Philippines (hereafter DBP) and Agripina Caperal filed by
Lydia Cuba (hereafter CUBA) on 21 May 1985 with the
Regional Trial Court of Pangasinan, Branch 54. The said
complaint sought (1) the declaration of nullity of DBPs
appropriation of CUBAs rights, title, and interests over a
44-hectare fishpond located in Bolinao, Pangasinan, for
being violative of Article 2088 of the Civil Code; (2) the
annulment of the Deed of Conditional Sale executed in
her favor by DBP; (3) the annulment of DBPs sale of the
subject fishpond to Caperal; (4) the restoration of her
rights, title, and interests over the fishpond; and (5) the
recovery of damages, attorneys fees, and expenses of
litigation.

4. Plaintiff failed to pay her loan on the

scheduled dates thereof in accordance with
the terms of the Promissory Notes;
5. Without foreclosure proceedings, whether
judicial or extra-judicial, defendant DBP
appropriated the Leasehold Rights of
plaintiff Lydia Cuba over the fishpond in
question;
6. After defendant DBP has appropriated the
Leasehold Rights of plaintiff Lydia Cuba
over the fishpond in question, defendant
DBP, in turn, executed a Deed of
Conditional Sale of the Leasehold Rights in
favor of plaintiff Lydia Cuba over the same
fishpond in question;
7. In the negotiation for repurchase, plaintiff
Lydia Cuba addressed two letters to the
Manager DBP, Dagupan City dated
November 6, 1979 and December 20,
1979. DBP thereafter accepted the offer to
repurchase in a letter addressed to
plaintiff dated February 1, 1982;
8. After the Deed of Conditional Sale was
executed in favor of plaintiff Lydia Cuba, a
new Fishpond Lease Agreement No. 2083A dated March 24, 1980 was issued by the
Ministry of Agriculture and Food in favor of
plaintiff Lydia Cuba only, excluding her
husband;
9. Plaintiff Lydia Cuba failed to pay the
amortizations stipulated in the Deed of
Conditional Sale;

10. After plaintiff Lydia Cuba failed to pay the

amortization as stated in Deed of
Conditional Sale, she entered with the DBP
a temporary arrangement whereby in
consideration for the deferment of the
Notarial Rescission of Deed of Conditional
Sale, plaintiff Lydia Cuba promised to
make certain payments as stated in
temporary Arrangement dated February
23, 1982;
11. Defendant DBP thereafter sent a Notice of
Rescission thru Notarial Act dated March
13, 1984, and which was received by
plaintiff Lydia Cuba;
12. After the Notice of Rescission, defendant
DBP took possession of the Leasehold
Rights of the fishpond in question;
13. That after defendant DBP took possession
of the Leasehold Rights over the fishpond
in question, DBP advertised in the SUNDAY
PUNCH the public bidding dated June 24,
1984, to dispose of the property;
14. That the DBP thereafter executed a Deed of
Conditional Sale in favor of defendant
Agripina Caperal on August 16, 1984;
15. Thereafter, defendant Caperal was awarded
Fishpond Lease Agreement No. 2083-A on
December 28, 1984 by the Ministry of
Agriculture and Food.
Defendant Caperal admitted only the facts stated in
paragraphs 14 and 15 of the pre-trial order. [3]
Trial was thereafter had on other matters.
The principal issue presented was whether the act
of DBP in appropriating to itself CUBAs leasehold rights
over the fishpond in question without foreclosure
proceedings was contrary to Article 2088 of the Civil
Code and, therefore, invalid. CUBA insisted on an
affirmative resolution.DBP stressed that it merely
exercised its contractual right under the Assignments of
Leasehold Rights, which was not a contract of
mortgage.Defendant Caperal sided with DBP.
The trial court resolved the issue in favor of CUBA
by declaring that DBPs taking possession and ownership
of the property without foreclosure was plainly violative
of Article 2088 of the Civil Code which provides as
follows:

ART. 2088. The creditor cannot appropriate the things

given by way of pledge or mortgage, or dispose of
them. Any stipulation to the contrary is null and void.
It disagreed with DBPs stand that the Assignments of
Leasehold Rights were not contracts of mortgage
because (1) they were given as security for loans, (2)
although the fishpond land in question is still a public
land, CUBAs leasehold rights and interest thereon are
alienable rights which can be the proper subject of a
mortgage; and (3) the intention of the contracting
parties to treat the Assignment of Leasehold Rights as a
mortgage was obvious and unmistakable; hence, upon
CUBAs default, DBPs only right was to foreclose the
Assignment in accordance with law.
The trial court also declared invalid condition no. 12
of the Assignment of Leasehold Rights for being a clear
case of pactum commissoriumexpressly prohibited and
declared null and void by Article 2088 of the Civil
Code. It then concluded that since DBP never acquired
lawful ownership of CUBAs leasehold rights, all acts of
ownership and possession by the said bank were
void. Accordingly, the Deed of Conditional Sale in favor
of CUBA, the notarial rescission of such sale, and the
Deed of Conditional Sale in favor of defendant Caperal,
as well as the Assignment of Leasehold Rights executed
by Caperal in favor of DBP, were also void and
ineffective.
As to damages, the trial court found ample
evidence on record that in 1984 the representatives of
DBP ejected CUBA and her caretakers not only from the
fishpond area but also from the adjoining big house; and
that when CUBAs son and caretaker went there on 15
September 1985, they found the said house unoccupied
and destroyed and CUBAs personal belongings,
machineries, equipment, tools, and other articles used in
fishpond operation which were kept in the house were
missing. The
missing
items
were
valued
at
about P550,000. It further found that when CUBA and
her men were ejected by DBP for the first time in 1979,
CUBA had stocked the fishpond with 250,000 pieces of
bangus fish (milkfish), all of which died because the DBP
representatives prevented CUBAs men from feeding the
fish. At the conservative price of P3.00 per fish, the
gross value would have been P690,000, and after
deducting 25% of said value as reasonable allowance for
the cost of feeds, CUBA suffered a loss of P517,500. It
then set the aggregate of the actual damages sustained
by CUBA at P1,067,500.
The trial court further found that DBP was guilty of
gross bad faith in falsely representing to the Bureau of
Fisheries that it had foreclosed its mortgage on CUBAs
leasehold rights. Such representation induced the said
Bureau to terminate CUBAs leasehold rights and to
approve the Deed of Conditional Sale in favor of
CUBA. And considering that by reason of her unlawful

ejectment by DBP, CUBA suffered moral shock,

degradation, social humiliation, and serious anxieties for
which she became sick and had to be hospitalized the
trial court found her entitled to moral and exemplary
damages. The trial court also held that CUBA was
entitled to P100,000 attorneys fees in view of the
considerable expenses she incurred for lawyers fees and
in view of the finding that she was entitled to exemplary
damages.

a) The sum of ONE MILLION SIXTY-SEVEN

THOUSAND FIVE HUNDRED PESOS
(P1,067,500.00), as and for actual damages;

In its decision of 31 January 1990,

disposed as follows:

d) And the sum of ONE HUNDRED THOUSAND

(P100,000.00) PESOS, as and for attorneys
fees;

[4]

the trial court

WHEREFORE, judgment is hereby rendered in favor of

plaintiff:
1. DECLARING null and void and without any legal
effect the act of defendant Development Bank
of the Philippines in appropriating for its own
interest, without any judicial or extra-judicial
foreclosure, plaintiffs leasehold rights and
interest over the fishpond land in question
under her Fishpond Lease Agreement No. 2083
(new);
2. DECLARING the Deed of Conditional Sale dated
February 21, 1980 by and between the
defendant Development Bank of the Philippines
and plaintiff (Exh. E and Exh. 1) and the acts of
notarial rescission of the Development Bank of
the Philippines relative to said sale (Exhs. 16
and 26) as void and ineffective;
3. DECLARING the Deed of Conditional Sale dated
August 16, 1984 by and between
the Development Bank of the Philippines and
defendant Agripina Caperal (Exh. F and Exh.
21), the Fishpond Lease Agreement No. 2083-A
dated December 28, 1984 of defendant Agripina
Caperal (Exh. 23) and the Assignment of
Leasehold Rights dated February 12, 1985
executed by defendant Agripina Caperal in favor
of the defendant Development Bank of the
Philippines (Exh. 24) as void ab initio;
4. ORDERING defendant Development Bank of the
Philippines and defendant Agripina Caperal,
jointly and severally, to restore to plaintiff the
latters leasehold rights and interests and right
of possession over the fishpond land in
question, without prejudice to the right of
defendant Development Bank of the Philippines
to foreclose the securities given by plaintiff;
5. ORDERING defendant Development Bank of the
Philippines to pay to plaintiff the following
amounts:

b) The sum of ONE HUNDRED THOUSAND

(P100,000.00) PESOS as moral damages;
c) The sum of FIFTY THOUSAND (P50,000.00)
PESOS, as and for exemplary damages;

6. And ORDERING defendant Development Bank of

the Philippines to reimburse and pay to
defendant Agripina Caperal the sum of ONE
MILLION FIVE HUNDRED THIRTY-TWO
THOUSAND SIX HUNDRED TEN PESOS AND
SEVENTY-FIVE CENTAVOS (P1,532,610.75)
representing the amounts paid by defendant
Agripina Caperal to defendant Development
Bank of the Philippines under their Deed of
Conditional Sale.
CUBA and DBP interposed separate appeals from
the decision to the Court of Appeals. The former sought
an increase in the amount of damages, while the latter
questioned the findings of fact and law of the lower
court.
In its decision [5] of 25 May 1994, the Court of
Appeals ruled that (1) the trial court erred in declaring
that the deed of assignment was null and void and that
defendant Caperal could not validly acquire the
leasehold rights from DBP; (2) contrary to the claim of
DBP, the assignment was not a cession under Article
1255 of the Civil Code because DBP appeared to be the
sole creditor to CUBA - cession presupposes plurality of
debts and creditors; (3) the deeds of assignment
represented the voluntary act of CUBA in assigning her
property rights in payment of her debts, which
amounted to a novation of the promissory notes
executed by CUBA in favor of DBP; (4) CUBA was
estopped from questioning the assignment of the
leasehold rights, since she agreed to repurchase the
said rights under a deed of conditional sale; and (5)
condition no. 12 of the deed of assignment was an
express authority from CUBA for DBP to sell whatever
right she had over the fishpond. It also ruled that CUBA
was not entitled to loss of profits for lack of evidence,
but agreed with the trial court as to the actual damages
of P1,067,500. It, however, deleted the amount of
exemplary damages and reduced the award of moral
damages from P100,000 to P50,000 and attorneys fees,
from P100,000 to P50,000.

The Court of Appeals thus declared as valid the

following: (1) the act of DBP in appropriating Cubas
leasehold rights and interest under Fishpond Lease
Agreement No. 2083; (2) the deeds of assignment
executed by Cuba in favor of DBP; (3) the deed of
conditional sale between CUBA and DBP; and (4) the
deed of conditional sale between DBP and Caperal, the
Fishpond Lease Agreement in favor of Caperal, and the
assignment of leasehold rights executed by Caperal in
favor of DBP. It then ordered DBP to turn over possession
of the property to Caperal as lawful holder of the
leasehold rights and to pay CUBA the following amounts:
(a) P1,067,500 as actual damages; P50,000 as moral
damages; andP50,000 as attorneys fees.

[6]

Since their motions for reconsideration were denied,

DBP and CUBA filed separate petitions for review.

In its petition (G.R. No. 118342), DBP assails the

award of actual and moral damages and attorneys fees
in favor of CUBA.
Upon the other hand, in her petition (G.R. No.
118367), CUBA contends that the Court of Appeals erred
(1) in not holding that the questioned deed of
assignment was a pactum commissorium contrary to
Article 2088 of the Civil Code; (b) in holding that the
deed of assignment effected a novation of the
promissory notes; (c) in holding that CUBA was estopped
from questioning the validity of the deed of assignment
when she agreed to repurchase her leasehold rights
under a deed of conditional sale; and (d) in reducing the
amounts of moral damages and attorneys fees, in
deleting the award of exemplary damages, and in not
increasing the amount of damages.
We agree with CUBA that the assignment of
leasehold rights was a mortgage contract.
It is undisputed that CUBA obtained from DBP three
separate loans totalling P335,000, each of which was
covered by a promissory note. In all of these notes,
there was a provision that: In the event of foreclosure of
the mortgage securing this notes, I/We further bind
myself/ourselves, jointly and severally, to pay the
deficiency, if any. [7]
Simultaneous with the execution of the notes was
the
execution
of
Assignments
of
Leasehold
Rights [8] where CUBA assigned her leasehold rights and
interest on a 44-hectare fishpond, together with the
improvements thereon. As pointed out by CUBA, the
deeds of assignment constantly referred to the assignor
(CUBA) as borrower; the assigned rights, as mortgaged
properties; and the instrument itself, as mortgage
contract. Moreover, under condition no. 22 of the deed,
it was provided that failure to comply with the terms and
condition of any of the loans shall cause all other loans
to become due and demandable and all mortgages shall

be foreclosed. And, condition no. 33 provided that if

foreclosure is actually accomplished, the usual 10%
attorneys fees and 10% liquidated damages of the total
obligation shall be imposed. There is, therefore, no shred
of doubt that a mortgage was intended.
Besides, in their stipulation of facts the parties
admitted that the assignment was by way of security for
the payment of the loans; thus:
3. As security for said loans, plaintiff Lydia P. Cuba
executed two Deeds of Assignment of her
Leasehold Rights.
In Peoples Bank & Trust Co. vs. Odom,[9] this Court
had the occasion to rule that an assignment to
guarantee an obligation is in effect a mortgage.
We find no merit in DBPs contention that the
assignment novated the promissory notes in that the
obligation to pay a sum of money the loans (under the
promissory notes) was substituted by the assignment of
the rights over the fishpond (under the deed of
assignment). As correctly pointed out by CUBA, the said
assignment merely complemented or supplemented the
notes; both could stand together. The former was only
an accessory to the latter. Contrary to DBPs submission,
the obligation to pay a sum of money remained, and the
assignment merely served as security for the loans
covered by the promissory notes. Significantly, both the
deeds of assignment and the promissory notes were
executed on the same dates the loans were
granted. Also, the last paragraph of the assignment
stated: The assignor further reiterates and states all
terms, covenants, and conditions stipulated in the
promissory note or notes covering the proceeds of this
loan, making said promissory note or notes, to all intent
and purposes, an integral part hereof.
Neither did the assignment amount to payment
by cession under Article 1255 of the Civil Code for the
plain and simple reason that there was only one
creditor, the DBP. Article 1255 contemplates the
existence of two or more creditors and involves the
assignment of all the debtors property.
Nor did the assignment constitute dation in
payment under Article 1245 of the civil Code, which
reads: Dation in payment, whereby property is alienated
to the creditor in satisfaction of a debt in money, shall
be governed by the law on sales. It bears stressing that
the assignment, being in its essence a mortgage, was
but a security and not a satisfaction of indebtedness.[10]
We do not, however, buy CUBAs argument that
condition no. 12 of the deed of assignment
constituted pactum commissorium. Said condition reads:

12. That effective upon the breach of any condition of

this assignment, the Assignor hereby appoints the
Assignee his Attorney-in-fact with full power and
authority to take actual possession of the property
above-described, together with all improvements
thereon, subject to the approval of the Secretary of
Agriculture and Natural Resources, to lease the same or
any portion thereof and collect rentals, to make repairs
or improvements thereon and pay the same, to sell or
otherwise dispose of whatever rights the Assignor has or
might have over said property and/or its improvements
and perform any other act which the Assignee may
deem convenient to protect its interest. All expenses
advanced by the Assignee in connection with purpose
above indicated which shall bear the same rate of
interest aforementioned are also guaranteed by this
Assignment.Any amount received from rents,
administration, sale or disposal of said property may be
supplied by the Assignee to the payment of repairs,
improvements, taxes, assessments and other incidental
expenses and obligations and the balance, if any, to the
payment of interest and then on the capital of the
indebtedness secured hereby. If after disposal or sale of
said property and upon application of total amounts
received there shall remain a deficiency, said Assignor
hereby binds himself to pay the same to the Assignee
upon demand, together with all interest thereon until
fully paid. The power herein granted shall not be
revoked as long as the Assignor is indebted to
the Assignee and all acts that may be executed by the
Assignee by virtue of said power are hereby ratified.
The elements of pactum commissorium are as
follows: (1) there should be a property mortgaged by
way of security for the payment of the principal
obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal
obligation within the stipulated period.[11]
Condition no. 12 did not provide that the ownership
over the leasehold rights would automatically pass to
DBP upon CUBAs failure to pay the loan on time. It
merely provided for the appointment of DBP as attorneyin-fact with authority, among other things, to sell or
otherwise dispose of the said real rights, in case of
default by CUBA, and to apply the proceeds to the
payment of the loan. This provision is a standard
condition in mortgage contracts and is in conformity
with Article 2087 of the Civil Code, which authorizes the
mortgagee to foreclose the mortgage and alienate the
mortgaged property for the payment of the principal
obligation.
DBP, however, exceeded the authority vested by
condition no. 12 of the deed of assignment. As admitted
by it during the pre-trial, it had [w]ithout foreclosure
proceedings,
whether
judicial
or
extrajudicial,
appropriated the [l]easehold [r]ights of plaintiff Lydia

Cuba over the fishpond in question. Its contention that it

limited itself to mere administration by posting
caretakers is further belied by the deed of conditional
sale it executed in favor of CUBA. The deed stated:
WHEREAS, the Vendor [DBP] by virtue of a deed of
assignment executed in its favor by the herein vendees
[Cuba spouses] the former acquired all the rights and
interest of the latter over the above-described property;
The title to the real estate property [sic] and all
improvements thereon shall remain in the name of the
Vendor until after the purchase price, advances and
interest shall have been fully paid. (Emphasis supplied).
It is obvious from the above-quoted paragraphs that
DBP had appropriated and taken ownership of CUBAs
leasehold rights merely on the strength of the deed of
assignment.
DBP cannot take refuge in condition no. 12 of the
deed of assignment to justify its act of appropriating the
leasehold rights. As stated earlier, condition no. 12 did
not provide that CUBAs default would operate to vest in
DBP ownership of the said rights. Besides, an
assignment to guarantee an obligation, as in the present
case, is virtually a mortgage and not an absolute
conveyance of title which confers ownership on the
assignee.[12]
At any rate, DBPs act of appropriating CUBAs
leasehold rights was violative of Article 2088 of the Civil
Code, which forbids a creditor from appropriating, or
disposing of, the thing given as security for the payment
of a debt.
The fact that CUBA offered and agreed to
repurchase her leasehold rights from DBP did not estop
her from questioning DBPs act of appropriation. Estoppel
is unavailing in this case. As held by this Court in some
cases,[13] estoppel cannot give validity to an act that is
prohibited by law or against public policy. Hence, the
appropriation of the leasehold rights, being contrary to
Article 2088 of the Civil Code and to public policy,
cannot be deemed validated by estoppel.
Instead of taking ownership of the questioned real
rights upon default by CUBA, DBP should have
foreclosed the mortgage, as has been stipulated in
condition no. 22 of the deed of assignment. But, as
admitted by DBP, there was no such foreclosure. Yet, in
its letter dated 26 October 1979, addressed to the
Minister of Agriculture and Natural Resources and
coursed through the Director of the Bureau of Fisheries
and Aquatic Resources, DBP declared that it had
foreclosed the mortgage and enforced the assignment of
leasehold rights on March 21, 1979 for failure of said
spouses [Cuba spouces] to pay their loan amortizations.

This only goes to show that DBP was aware of the

necessity of foreclosure proceedings.
[14]

In view of the false representation of DBP that it had

already foreclosed the mortgage, the Bureau of Fisheries
cancelled CUBAs original lease permit, approved the
deed of conditional sale, and issued a new permit in
favor of CUBA. Said acts which were predicated on such
false representation, as well as the subsequent acts
emanating from DBPs appropriation of the leasehold
rights, should therefore be set aside. To validate these
acts would open the floodgates to circumvention of
Article 2088 of the Civil Code.
Even in cases where foreclosure proceedings were
had, this Court had not hesitated to nullify the
consequent auction sale for failure to comply with the
requirements laid down by law, such as Act No. 3135, as
amended.[15] With more reason that the sale of property
given as security for the payment of a debt be set aside
if there was no prior foreclosure proceeding.
Hence, DBP should render an accounting of the
income derived from the operation of the fishpond in
question and apply the said income in accordance with
condition no. 12 of the deed of assignment which
provided:
Any
amount
received
from
rents,
administration, may be applied to the payment of
repairs, improvements, taxes, assessment, and other
incidental expenses and obligations and the balance, if
any, to the payment of interest and then on the capital
of the indebtedness.
We shall now take up the issue of damages.
Article 2199 provides:
Except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly
proved. Such compensation is referred to as actual or
compensatory damages.
Actual or compensatory damages cannot be
presumed, but must be proved with reasonable degree
of certainty.[16] A court cannot rely on speculations,
conjectures, or guesswork as to the fact and amount of
damages, but must depend upon competent proof that
they have been suffered by the injured party and on the
best obtainable evidence of the actual amount thereof.
[17]
It must point out specific facts which could afford a
basis for measuring whatever compensatory or actual
damages are borne.[18]
In the present case, the trial court awarded in favor
of CUBA P1,067,500 as actual damages consisting
of P550,000 which represented the value of the alleged
lost articles of CUBA and P517,500 which represented

the value of the 230,000 pieces of bangus allegedly

stocked in 1979 when DBP first ejected CUBA from the
fishpond and the adjoining house. This award was
affirmed by the Court of Appeals.
We find that the alleged loss of personal belongings
and equipment was not proved by clear evidence. Other
than the testimony of CUBA and her caretaker, there
was no proof as to the existence of those items before
DBP took over the fishpond in question. As pointed out
by DBP, there was not inventory of the alleged lost items
before the loss which is normal in a project which
sometimes, if not most often, is left to the care of other
persons. Neither was a single receipt or record of
acquisition presented.
Curiously, in her complaint dated 17 May 1985,
CUBA included losses of property as among the
damages resulting from DBPs take-over of the
fishpond. Yet, it was only in September 1985 when her
son and a caretaker went to the fishpond and the
adjoining house that she came to know of the alleged
loss of several articles. Such claim for losses of property,
having been made before knowledge of the alleged
actual loss, was therefore speculative. The alleged loss
could have been a mere afterthought or subterfuge to
justify her claim for actual damages.
With regard to the award of P517,000 representing
the value of the alleged 230,000 pieces of bangus which
died when DBP took possession of the fishpond in March
1979, the same was not called for. Such loss was not
duly proved; besides, the claim therefor was delayed
unreasonably.From 1979 until after the filing of her
complaint in court in May 1985, CUBA did not bring to
the attention of DBP the alleged loss. In fact, in her
letter dated 24 October 1979,[19] she declared:
1. That from February to May 1978, I was then seriously
ill in Manila and within the same period I neglected the
management and supervision of the cultivation and
harvest of the produce of the aforesaid fishpond thereby
resulting to the irreparable loss in the produce of the
same in the amount of about P500,000.00 to my great
damage and prejudice due to fraudulent acts of some of
my fishpond workers.
Nowhere in the said letter, which was written seven
months after DBP took possession of the fishpond, did
CUBA intimate that upon DBPs take-over there was a
total of 230,000 pieces of bangus, but all of which died
because of DBPs representatives prevented her men
from feeding the fish.
The award of actual damages should, therefore, be
struck down for lack of sufficient basis.

In view, however, of DBPs act of appropriating

CUBAs leasehold rights which was contrary to law and
public policy, as well as its false representation to the
then Ministry of Agriculture and Natural Resources that it
had foreclosed the mortgage, an award of moral
damages in the amount of P50,000 is in order
conformably with Article 2219(10), in relation to Article
21, of the Civil Code. Exemplary or corrective damages
in the amount of P25,000 should likewise be awarded by
way of example or correction for the public good.
[20]
There being an award of exemplary damages,
attorneys fees are also recoverable.[21]
WHEREFORE, the 25 May 1994 Decision of the
Court of Appeals in CA-G.R. CV No. 26535 is hereby
REVERSED, except as to the award ofP50,000 as moral
damages, which is hereby sustained. The 31 January
1990 Decision of the Regional Trial Court of Pangasinan,
Branch 54, in Civil Case No. A-1574 is MODIFIED setting
aside the finding that condition no. 12 of the deed of
assignment constituted pactum commissoriumand the
award of actual damages; and by reducing the amounts
of moral damages from P100,000 to P50,000; the
exemplary damages, fromP50,000 to P25,000; and the
attorneys
fees,
from P100,000
to P20,000. The
Development Bank of the Philippines is hereby ordered

to render an accounting of the income derived from the

operation of the fishpond in question.
Let this case be REMANDED to the trial court for the
reception of the income statement of DBP, as well as the
statement of the account of Lydia P. Cuba, and for the
determination of each partys financial obligation to one
another.
SO ORDERED.
Bellosillo, Vitug, and Kapunan, JJ., concur.