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G.R. No. L-25414 July 30, 1971
LEOPOLDO ARANETA, petitioner,
vs.
BANK of AMERICA, respondent.
FACTS:
Leopoldo Araneta, the petitioner herein, was a local merchant engaged in the
import and export business. On June 30, 1961 he issued a check for $500
payable to cash and drawn against the San Francisco main office of the Bank
of America, where he had been maintaining a dollar current account since
1948. At that time he had a credit balance of $523.81 in his account, con-
firmed by the bank's assistant cashier in a letter to Araneta dated September 7,
1961. However, when the check was received by the bank on September
8, 1961, a day after the date of the letter, it was dishonored and stamped
with the notation "Account Closed."
Upon inquiry by Araneta as to why his check had been dishonored, the Bank
of America acknowledged that it was an error, explaining that for some
reason the check had been encoded with wrong account number, and
promising that "we shall make every effort to see that this does not reoccur."
The bank sent a letter of apology to the payee of the check, a Mr. Harry Gre-
gory of Hongkong, stating that "the check was returned through an error on
our part and should not reflect adversely upon Mr. Araneta." In all probability
the matter would have been considered closed, but another incident of a simi-
lar nature occurred later.
On May 25, and 31, 1962 Araneta issued Check No. 110 for $500 and Check
No. 111 for $150, respectively, both payable to cash and drawn against the
Bank of America. These two checks were received by the bank on June 3,
1962. The first check appeared to have come into the hands of Rufina Sal-
dana, who deposited it to her account the First National City Bank of New
York, which in turn cleared it through the Federal Reserve Bank. The second
check appeared to have been cleared through the Wells Fargo Bank. Despite
the sufficiency of Araneta's deposit balance to cover both checks, they
were again stamped with the notation "Account Closed" and returned to
the respective clearing banks.
In the particular case of Check No. 110, it was actually paid by the Bank of
America to the First National City Bank. Subsequently, however, the Bank of
America, claiming that the payment had been inadvertently made, returned
the check to the First National City Bank with the request that the amount
thereof be credited back to the Bank of America. In turn, the First National
City Bank wrote to the depositor of the check, Rufina Saldana, informing her
about its return with the notation "Account Closed" and asking her consent to
the deduction of its amount from her deposit. However, before Mrs. Saldana's
reply could be received, the Bank of America recalled the check from the
First National City Bank and honored it.
In view of the foregoing incidents, Araneta, through counsel, sent a letter
to the Bank of America demanding damages in the sum of $20,000. While
admitting responsibility for the inconvenience caused to Araneta, the bank
claimed that the amount demanded was excessive, and offered to pay the sum
of P2,000.00. The offer was rejected.
On December 11, 1962 Araneta filed the complaint in this case against the
Bank of America for the recovery of the following:
1. Actual or compensatory damages P30,000.00
2. Moral damages 20,000.00
3. Temperate damages 50,000.00
4. Exemplary damages 10,000.00
5. Attorney's fees 10,000.00
TOTAL P120,000.00
RTC: Awarded all the item prayed for.
CA: Eliminated the award of compensatory and temperate damages and
reduced the moral damages to P8,000.00, the exemplary damages to
P1,000.00 and the attorney's fees to P1,000.00.
PETITIONER: The Court of Appeals erred in holding that temperate
damages cannot be awarded without proof of actual pecuniary loss. There
is absolutely no legal basis for this ruling; worse yet, it runs counter to the
very provisions of ART. 2216 of the New Civil Code and to the established
jurisprudence on the matter;
CA RULING (RE: TEMPERATE DAMAGES): In view of the fact that he
has not proven the existence of the supposed contract for himself to buy jew-
els at a profit there is not even an occasion for an award of temperate dam-
ages on this score.
PETITIONER’S CONTENTION: The petitioner maintains that in an action
by a depositor against a bank for damages resulting from the wrongful dis-
honor of the depositor's checks, temperate damages for injury to business
standing or commercial credit may be recovered even in the absence of
definite proof of direct pecuniary loss to the plaintiff, a finding — as it
was found by the Court of Appeals — that the wrongful acts of the respon-
dent had adversely affected his credit being sufficient for the purpose. The
following provisions of the Civil Code are invoked:
ART. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or per-
manent personal injury;
(2) For injury to the plaintiff's business standing or commercial credit.
ART. 2216. No proof of pecuniary loss is necessary in order that moral, nom-
inal, temperate, liquidated or exemplary damages may be adjudicated. The
assessment of such damages, except liquidated ones, is left to the discretion
of the court, according to the circumstances of each case.
Also invoked by the petitioner is the case of Atlanta National Bank vs.
Davis, and the following citations in American Jurisprudence:
In some states what are called "temperate damages" are allowed in cer-
tain classes of cases, without proof of actual or special damages, where
the wrong done must in fact have caused actual damage to the plaintiff,
though from the nature of the case, he cannot furnish independent, dis-
tinct proof thereof. Temperate damages are more than nominal damages,
and, rather, are such as would be a reasonable compensation for the
injury sustained. (15 Am. Jur. 400)
It has been generally, although not universally, held, in an action based upon
the wrongful act of a bank dishonoring checks of a merchant or trader having
sufficient funds on deposit with the bank, that substantial damages will be
presumed to follow such act as a necessary and natural consequence, and
accordingly, that special damages need not be shown. One of the reasons
given for this rule is that the dishonor of a merchant's or trader's check is
tantamount or analogous, to a slander of his trade or business, imputing to
him insolvency or bad faith. (10 Am. Jur. 2d. 545)
RESPONDENT’S ARGUMENT: Since the petitioner invokes Article 2205
of the Civil Code, which speaks of actual or compensatory damages for
injury to business standing or commercial credit, he may not claim them as
temperate damages and thereby dispense with proof of pecuniary loss under
Article 2216. The respondent cites Article 2224, which provides that "tem-
perate or moderate damages, which are more than nominal but less than
compensatory damages may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature
of the case, proved with certainty," and contends that the petitioner failed to
show any such loss in this case.
ISSUE: WON on the basis of the findings of the Court of Appeals, there is
reason to conclude that the petitioner did sustain some pecuniary loss al-
though no sufficient proof of the amount thereof has been adduced? - YES.
HELD:
In rejecting the claim for temperate damages the said Court referred specifi-
cally to the petitioner's failure to prove "the existence of a supposed contract
for him to buy jewels at a profit," in connection with which he issued the two
checks which were dishonored by the respondent. This may be true as far as it
goes, that is, with particular reference to the alleged loss in that particular
transaction. But it does not detract from the finding of the same Court that
actual damages had been suffered, thus:
... Obviously, the check passed the hands of other banks since it was cleared
in the United States. The adverse reflection against the credit of Araneta with
said banks was not cured nor explained by the letter of apology to Mr. Grego-
ry.
xxx xxx xxx
... This incident obviously affected the credit of Araneta with Miss Saldana.
xxx xxx xxx
However, in so far as the credit of Araneta with the First National City Bank,
with Miss Rufina Saldana and with any other persons who may have come to
know about the refusal of the defendant to honor said checks, the harm was
done ...
The financial credit of a businessman is a prized and valuable asset, it being a
significant part of the foundation of his business. Any adverse reflection
thereon constitutes some material loss to him. As stated in the case Atlanta
National Bank vs. Davis, supra, citing 2 Morse Banks, Sec. 458, "it can
hardly be possible that a customer's check can be wrongfully refused
payment without some impeachment of his credit, which must in fact be
an actual injury, though he cannot, from the nature of the case, furnish
independent, distinct proof thereof."
The Code Commission, in explaining the concept of temperate damages
under Article 2224, makes the following comment:
In some States of the American Union, temperate damages are allowed. There
are cases where from the nature of the case, definite proof of pecuniary loss
cannot be offered, although the court is convinced that there has been such
loss. For instance, injury to one's commercial credit or to the goodwill of a
business firm is often hard to show with certainty in terms of money. Should
damages be denied for that reason? The judge should be empowered to calcu-
late moderate damages in such cases, rather than that the plaintiff should
suffer, without redress from the defendant's wrongful act.
The petitioner, as found by the Court of Appeals, is a merchant of long stand-
ing and good reputation in the Philippines. Some of his record is cited in the
decision appealed from. We are of the opinion that his claim for temperate
damages is legally justified. Considering all the circumstances, including
the rather small size of the petitioner's account with the respondent, the
amounts of the checks which were wrongfully dishonored, and the fact
that the respondent tried to rectify the error soon after it was discovered,
although the rectification came after the damage had been caused, we
believe that an award of P5,000 by way of temperate damages is suffi-
cient.
DP: WHEREFORE, the judgment of the Court of Appeals is modified by
awarding temperate damages to the petitioner in the sum of P5,000 and in-
creasing the attorney's fees to P4,000; and is affirmed in all other respects.
Costs against the respondent.

G.R. No. 188072 October 19, 2011
EMERITA M. DE GUZMAN, Petitioner,
vs.
ANTONIO M. TUMOLVA, Respondent.
FACTS: On September 6, 2004, petitioner Emerita M. De Guzman (De
Guzman), represented by her attorneys-in-fact, Lourdes Rivera and Dhonna
Chan, and respondent Antonio Tumolva, doing business under the name and
style A.M. Tumolva Engineering Works (the Contractor), entered into a
Construction Agreement3 (Agreement) for the construction of an orphanage.
Incorporated in the Agreement was the plan and specifications of the perime-
ter fence. The Contractor, however, made deviations from the agreed
plan4 with respect to the perimeter fence of the orphanage.
On September 6, 2005, after the completion of the project, De Guzman
issued a Certificate of Acceptance. For his part, the Contractor issued a
quitclaim acknowledging the termination of the contract and the full com-
pliance therewith by De Guzman.
In November 2006, during typhoon "Milenyo," a portion of the perimeter
fence collapsed and other portions tilted.
In her Letter dated December 5, 2006, De Guzman, through counsel, de-
manded the repair of the fence in accordance with the plan. In response, the
Contractor claimed that the destruction of the fence was an act of God and
expressed willingness to discuss the matter to avoid unnecessary litigation.
De Guzman, however, reiterated her demand for the restoration of the wall
without additional cost on her part, or in the alternative, for the Contractor to
make an offer of a certain amount by way of compensation for the damages
she sustained. Her demand was not heeded.
On February 14, 2008, De Guzman filed a Request for Arbitration5 of the
dispute before the Construction Industry Arbitration
Commission (CIAC). She alleged that the Contractor deliberately de-
frauded her in the construction of the perimeter fence by "under sizing the
required column rebars from 12mm. based on the plan to only 10mm., the
required concrete hollow blocks from #6 to #5, and the distance between
columns from 3.0m to 4.3m."6 Further, the Contractor neither anchored the
lenten beams to the columns nor placed drains or weepholes along the lower
walls. She prayed for an award of actual, moral and exemplary damages,
as well as attorney’s fees and expenses of litigation, and for the inspection
and technical assessment of the construction project and the rectification
of any defect.
In his Answer with Counterclaim, the Contractor denied liability for the
damaged fence claiming, among others, that its destruction was an act of
God. He admitted making deviations from the plan, but pointed out that
the same were made with the knowledge and consent of De Guzman
through her representatives, Architect Quin Baterna and Project Engineer
Rodello Santos (Engineer Santos), who were present during the construction
of the fence. He further argued that pursuant to the Agreement, the claim
for damages was already barred by the 12-month period from the is-
suance of the Certificate of Acceptance of the project within which to file
the claim. He, thus, prayed for the dismissal of the action and interposed a
counterclaim for actual and compensatory damages for the additional work/
change orders made on the project in the amount of ₱ 2,046,500.00, attor-
ney’s fees and litigation expenses.
CIAC: issued the Award dated July 17, 2008 in favor of De Guzman.
CA: The assailed Award dated July 17, 2008 rendered by the CIAC in CIAC
Case No. 03-2008 is hereby MODIFIED, deleting the award of actual, moral
and exemplary damages, but awarding temperate damages in the amount
of ₱ 100,000.00 for reconstructing the collapsed and damaged perimeter
fence.
- held that although the Contractor deviated from the plan, CIAC’s
award of actual damages was not proper inasmuch as De Guzman
failed to establish its extent with reasonable certainty. The CA,
however, found it appropriate to award temperate damages
considering that De Guzman suffered pecuniary loss as a re-
sult of the collapse of the perimeter fence due to the Contrac-
tor’s negligence and violation of his undertakings in the
Agreement. It further ruled that there was no basis for awarding
moral damages reasoning out that De Guzman’s worry for the
safety of the children in the orphanage was insufficient to justify
the award. Likewise, it could not sustain the award of exemplary
damages as there was no showing that the Contractor acted in
wanton, reckless, fraudulent, oppressive, or malevolent manner.
DE GUZMAN ARGUMENTS: Contractor is liable for the actual damages
that she suffered from the collapse of the perimeter fence. He failed to put
weep holes on the collapsed portion of the said fence, which could have re-
lieved the pressure from the wet soil of the adjoining higher ground.
- questions the CA’s deletion of the award for moral and exemplary
damages. She insists that her anxiety and suffering over the safety
of the children in the orphanage entitled her to an award of moral
damages. It is likewise her position that the Contractor’s wanton
acts of deliberately cheating the benefactors of the orphanage by
making deviations on the approved plan through the use of con-
struction materials of inferior quality warranted the imposition of
exemplary damages against the Contractor.
ISSUE: WON De Guzman is entitled to temperate damages? YES!
COURT: There is no doubt that De Guzman incurred damages as a result of
the collapse of the perimeter fence. The Contractor is clearly guilty of negli-
gence and, therefore, liable for the damages caused.
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RE: ACTUAL DAMAGES
COURT: CIAC’s award of actual damages, however, is indeed not proper
under the circumstances as there is no concrete evidence to support the plea.
In determining actual damages, one cannot rely on mere assertions, specula-
tions, conjectures or guesswork, but must depend on competent proof and on
the best evidence obtainable regarding specific facts that could afford some
basis for measuring compensatory or actual damages.
RE: TEMPERATE DAMAGES
COURT: Nevertheless, De Guzman is indeed entitled to temperate dam-
ages as provided under Article 2224 of the Civil Code for the loss she
suffered. When pecuniary loss has been suffered but the amount cannot,
from the nature of the case, be proven with certainty, temperate damages
may be recovered. Temperate damages may be allowed in cases where
from the nature of the case, definite proof of pecuniary loss cannot be
adduced, although the court is convinced that the aggrieved party suf-
fered some pecuniary loss.15 Undoubtedly, De Guzman suffered pecu-
niary loss brought about by the collapse of the perimeter fence by reason
of the Contractor’s negligence and failure to comply with the specifica-
tions. As she failed to prove the exact amount of damage with certainty as
required by law, the CA was correct in awarding temperate damages, in
lieu of actual damages. However, after weighing carefully the attendant
circumstances and taking into account the cost of rebuilding the dam-
aged portions of the perimeter fence, the amount of ₱ 100,000.00 award-
ed to De Guzman should be increased. This Court, in recognition of the
pecuniary loss suffered, finds the award of ₱ 150,000.00 by way of tem-
perate damages as reasonable and just under the premises.
RE: MORAL DAMAGES
COURT: As to the CIAC’s award of ₱ 100,000.00 as moral damages, this
Court is one with the CA that De Guzman is not entitled to such an award.
The record is bereft of any proof that she actually suffered moral damages as
contemplated in Article 2217 of the Code
Certainly, the award of moral damages must be anchored on a clear showing
that she actually experienced mental anguish, besmirched reputation, sleep-
less nights, wounded feelings, or similar injury. There could not have been a
better witness to this experience than De Guzman herself.16 Her testimony,
however, did not provide specific details of the suffering she allegedly went
through after the fence collapsed while she was miles away in the United
States. As the CA aptly observed, "the testimony of the OWNER as to her
worry for the safety of the children in the orphanage is insufficient to estab-
lish entitlement thereto."17 Since an award of moral damages is predicated on
a categorical showing by the claimant that she actually experienced emotional
and mental sufferings, it must be disallowed absent any evidence thereon.
RE: EXEMPLARY DAMAGES
COURT: De Guzman cannot be awarded exemplary damages either, in the
absence of any evidence showing that the Contractor acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner as provided in Article
2232 of the Civil Code. The ruling in the case of Nakpil and Sons v. Court of
Appeals,21 relied upon by De Guzman, where it was emphasized that the
wanton negligence in effecting the plans, designs, specifications, and con-
struction of a building is equivalent to bad faith in the performance of the
assigned task, finds no application in the case at bench. As already pointed
out, there is negligence on the part of Contractor, but it is neither wanton,
fraudulent, reckless, oppressive, nor malevolent.
The award of exemplary damages cannot be made merely on the allegation of
De Guzman that the Contractor’s deviations from the plans and specifications
without her written consent was deplorable and condemnable. The Court
regards the deviations as excusable due to the unavailability of the approved
construction materials. Besides, these were made known to De Guzman’s
project manager who was present all the time during the construction. Indeed,
no deliberate intent on the part of the Contractor to defraud the orphanage’s
benefactors was ever shown, much less proved.
WHEREFORE, the petition is DENIED. The Decision of the Court of Ap-
peals dated February 24, 2009 and its Resolution dated May 26, 2009
are AFFIRMED with the MODIFICATION that the award of ₱ 100,000.00
as temperate damages is increased to ₱ 150,000.00. The award shall earn
interest at the rate of 12% per annum reckoned from the finality of this judg-
ment until fully paid.
 3 of 10

FONTANA RESORT AND COUNTRY CLUB, INC. AND RN DEVEL- SEC- in favor of respondents.
OPMENT CORP., Petitioners, It is undisputed that many of the facilities promised were not completed with-
vs. in the specified date. Ms. Lacuna even testified that less than 50% of what
SPOUSES ROY S. TAN AND SUSAN C. TAN, Respondents. was promised were actually delivered.

Facts:
Respondent spouses Roy S. Tan and Susana C. Tan bought from petitioner
RN Development Corporation (RNDC) two class "D" shares of stock in peti-
tioner Fontana Resort and Country Club, Inc. (FRCCI), worth ₱387,300.00,
enticed by the promises of petitioners’ sales agents that petitioner FRCCI
would construct a park with first-class leisure facilities in Clark Field, Pam-
panga, to be called Fontana Leisure Park (FLP); that FLP would be fully
developed and operational by the first quarter of 1998; and that FRCCI class
"D" shareholders would be admitted to one membership in the country
club, which entitled them to use park facilities and stay at a two-bedroom
villa for "five (5) ordinary weekdays and two (2) weekends every year for
free."5
CA- brushed aside the finding of the SEC that petitioners were guilty of
fraudulent misrepresentation. Nonetheless, the sale of the two FRCCI class
"D" shares of stock by petitioners to respondents should be rescinded. Peti-
tioners defaulted on their promises to respondents that FLP would be fully
developed and operational by the first quarter of 1998 and that as sharehold-
ers of said shares, respondents were entitled to the free use of first-class
leisure facilities at FLP and free accommodations at a two-bedroom villa for
"five (5) ordinary weekdays and two (2) weekends every year.”
ISSUE:
WON respondents are entitled to nominal damages?
COURT: YES.

Two years later, in March 1999, respondents filed before the SEC a
Complaint6 for refund of the ₱387,300.00 they spent to purchase FRCCI
shares of stock from petitioners. Respondents alleged that they had been
deceived into buying FRCCI shares because of petitioners’ fraudulent
misrepresentations. Construction of FLP turned out to be still unfinished
and the policies, rules, and regulations of the country club were obscure.
Respondents narrated that they were able to book and avail themselves of free
accommodations at an FLP villa on September 5, 1998, a Saturday. They
requested that an FLP villa again be reserved for their free use on October 17,
1998, another Saturday, for the celebration of their daughter’s 18th birthday,
but were refused by petitioners. Petitioners clarified that respondents were
only entitled to free accommodations at FLP for "one week annually
consisting of five (5) ordinary days, one (1) Saturday and one (1)
Sunday[,]" and that respondents had already exhausted their free Satur-
day pass for the year.
According to respondents, they were not informed of said rule regarding their
free accommodations at FLP, and had they known about it, they would not
have availed themselves of the free accommodations on September 5, 1998.
In January 1999, respondents attempted once more to book and reserve an
FLP villa for their free use on April 1, 1999, a Thursday. Their reservation
was confirmed by a certain Murphy Magtoto. However, on March 3, 1999,
another country club employee named Shaye called respondents to say that
their reservation for April 1, 1999 was cancelled because the FLP was already
fully booked.
Petitioners asserted that respondents had been duly informed of the privileges
given to them as shareholders of FRCCI class "D" shares of stock since these
were all explicitly provided in the promotional materials for the country club,
the AOI and the By-Laws of FRCCI. Petitioners called attention to the fol-
lowing paragraph in their ads:
GUEST ROOMS
Nominal damages:
Respondents alleged the unreasonable cancellation of their confirmed reser-
vation for the free use of an FLP villa on April 1, 1999. According to respon-
dents, their reservation was confirmed by a Mr. Murphy Magtoto, only to be
cancelled later on by a certain Shaye. Petitioners countered that April 1, 1999
was a Holy Thursday and FLP was already fully-booked. Petitioners, howev-
er, do not deny that Murphy Magtoto and Shaye are FLP employees who
dealt with respondents.
The absence of any confirmation number issued to respondents does not
also discount the possibility that the latter’s reservation was mistakenly
confirmed by Murphy Magtoto despite FLP being fully-booked. At most,
we perceive a mix-up in the reservation process of petitioners. This
demonstrates a mere negligence on the part of petitioners, but not willful
intention to deprive respondents of their membership benefits. It does
not constitute default that would call for rescission of the sale of FRCCI
shares by petitioners to respondents. For the negligence of petitioners as
regards respondents’ reservation for April 1, 1999, respondents are at
least entitled to nominal damages in accordance with Articles 2221 and
2222 of the Civil Code.35
In Almeda v. Cariño,36 we have expounded on the propriety of granting nomi-
nal damages as follows:
[N]ominal damages may be awarded to a plaintiff whose right has been vio-
lated or invaded by the defendant, for the purpose of vindicating or recogniz-
ing that right, and not for indemnifying the plaintiff for any loss suffered by
him. Its award is thus not for the purpose of indemnification for a loss
but for the recognition and vindication of a right. Indeed, nominal dam-
ages are damages in name only and not in fact. When granted by the
courts, they are not treated as an equivalent of a wrong inflicted but simply a
recognition of the existence of a technical injury. A violation of the plain-
tiff's right, even if only technical, is sufficient to support an award of
nominal damages. Conversely, so long as there is a showing of a violation
of the right of the plaintiff, an award of nominal damages is proper.37

As a member of the Fontana Resort and Country Club, you are entitled to
7 days stay consisting of 5 weekdays, one Saturday and one Sunday. A
total of 544 elegantly furnished villas available in two and three bedroom
units.8
Petitioners also cited provisions of the FRCCI Articles of Incorporation
and the By-Laws on class "D" shares of stock, to wit:
It is also settled that "the amount of such damages is addressed to the sound
discretion of the court, taking into account the relevant circumstances.
In this case, we deem that the respondents are entitled to an award of
₱5,000.00 as nominal damages in recognition of their confirmed reservation
for the free use of an FLP villa on April 1, 1999 which was inexcusably can-
celled by petitioner on March 3, 1999.

Class D shares may be sold to any person, irrespective of nationality or

Citizenship. Every registered owner of a class D share may be admitted
to one (1) Membership in the Club and subject to the Club’s rules and
regulations, shall be entitled to use a Two (2) Bedroom Multiplex Model
Unit in the residential villas provided by the Club for one week annually
consisting of five (5) ordinary days, one (1) Saturday and one (1) Sunday.
(Article Seventh, Articles of Incorporation)

Class D shares – which may be sold to any person, irrespective of nation-

ality or Citizenship. Every registered owner of a class D share may be
admitted to one (1) Membership in the Club and subject to the Club’s
rules and regulations, shall be entitled to use a Two (2) Bedroom Multi-
plex Model Unit in the residential villas provided by the Club for one
week annually consisting of five (5) ordinary days, one (1) Saturday and
one (1) Sunday. [Section 2(a), Article II of the By-Laws.]

Petitioners further denied that they unjustly cancelled respondents’ reserva-

tion for an FLP villa on April 1, 1999

Lastly, petitioners averred that when respondents were first accommodated at

FLP, only minor or finishing construction works were left to be done and that
facilities of the country club were already operational.
 4 of 10

G.R. No. 152143 January 13, 2003 acted in an unfair, reckless or malevolent manner so as to justify such an
ROMEL P. ALMEDA, in substitution of the late PONCIANO L. ALME- award.
DA and/or ALMEDA, INC., petitioners,
Petitioners’ argument is based on a misreading of the decision in FNCB Fi-
vs.
nance v. Estavillo. Contrary to petitioners’ claim, this Court did not award
LEONOR A. CARIÑO, the surviving spouse, and his children, namely:
nominal damages to the respondent in that case because of petitioner’s
ROSARIO C. SANTOS, REMEDIOS C. GALSIM, RAMON A. CAR-
reckless action, malevolent manner and lack of regard to the feelings and
IÑO, REGINALDO A. CARIÑO, RANIEELA C. DIONELA and
reputation of the other party. Such factors were cited in that case to justify
RACHELLE C. SAMANIEGO, in substitution of the late AVELINO G.
the award of exemplary, not nominal, damages.
CARIÑO, respondents.
Indeed, nominal damages may be awarded to a plaintiff whose right has
FACTS:
been violated or invaded by the defendant, for the purpose of vindicating
This is a petition for review on certiorari of the decision CA affirming the or recognizing that right, and not for indemnifying the plaintiff for any
decision of the RTC ordering the petitioners to pay the respondents jointly loss suffered by him. Its award is thus not for the purpose of indemnifica-
and severally the amount of P150,000.00 as nominal damages. (for RTC’s tion for a loss but for the recognition and vindication of a right. Indeed,
complete ruling, refer to the full text) nominal damages are damages in name only and not in fact. When
granted by the courts, they are not treated as an equivalent of a wrong
——— inflicted but simply a recognition of the existence of a technical injury. A
On April 30, 1980, Ponciano L. Almeda and Avelino G. Cariño, predeces- violation of the plaintiff’s right, even if only technical, is sufficient to
sors-in-interest of petitioners and respondents, entered into two agreements to support an award of nominal damages. Conversely, so long as there is a
sell, one covering eight titled properties and another three untitled proper- showing of a violation of the right of the plaintiff, an award of nominal
ties, all of which are located in Biñan, Laguna. The agreed price of the eight damages is proper.
titled properties was P1,743,800.00, 20% of which was to be paid upon the Applying such principles to the instant case, we have on record the fact that
signing and execution of the agreement and the balance to be paid in four petitioners have an unpaid balance on the purchase price of lots sold to them
equal semi-annual installments, beginning six months from the signing there- by respondents. Their refusal to pay the remaining balance of the pur-
of, with the balance earning 12% interest per annum. On the other hand, the chase price despite repeated demands, even after they had sold the prop-
purchase price of the three untitled properties was P1,208,580.00, 15% of erties to third parties, undoubtedly constitutes a violation of respondents’
which was to be paid upon the signing and execution of the agreement, and right to the said amount under their agreements. The facts show that the
the balance, bearing a 12% annual interest from the signing thereof, to be right of the vendor to receive the unpaid balance to the lots sold was
paid as follows: 15% of the purchase price plus interest to be paid upon the violated by petitioners, and this entitles respondents at the very least to
issuance of titles to the lots, and the balance plus interests to be paid in semi- nominal damages.
annual installments starting from the date of issuance of the respective certifi-
cates of title to the lots involved, which must be not later than March 30, DP: WHEREFORE, the petition for review on certiorari is DENIED and the
1982. decision of the Court of Appeals is AFFIRMED. Interest at the rate of twelve
percent (12%) shall be imposed on the amount due upon finality of this deci-
On April 3, 1982, Cariño and Almeda executed an amendment to their agree- sion until payment thereof.
ments to sell (a) extending the deadline for the production of the titles to the
untitled properties from March 31, 1982 to June 30, 1982, (b) providing for a SO ORDERED.
partial payment of P300,000.00 for the titled properties, (c) requiring Cariño
to render an accounting of the proceeds of the sugar cane crop on the proper-
ties subject of the sale up to the 1982 harvest season and (d) obliging the
vendor (Cariño) to pay the vendee (Almeda) the sum of P10,000.00 a month
in case of the failure of the former to produce the certificates of title to the
untitled properties by June 30, 1982.
Before the end of April 1982, Almeda asked Cariño for the execution of a
Deed of Absolute Sale over the eight titled properties although they had not
been fully paid. Cariño granted the request and executed on May 3, 1982 the
deed of sale over the eight titled lots in favor of Almeda, Inc. On April 30,
1982, Almeda executed an undertaking to pay Cariño the balance of the pur-
chase price. Deeds of sale for two of the three untitled lots were also executed
on July 2, 1982 and October 9, 1982.
Subsequently, Cariño made demands for the full and final payment of
the balance due him in the amount of P477,589.47 and the interests
thereon. Despite demand letters sent to Almeda on March 9, 1983 and on
July 20, 1983, however, the balance was not paid. Hence, Cariño filed
before the RTC of Biñan a complaint against Almeda and Almeda, Inc., in
whose name the titles to the properties had been transferred. Cariño prayed
that Almeda and/or Almeda, Inc. be ordered to pay to him the balance of
P477,589.47, the legal interests thereon from demand until full payment, 15%
of all the amounts due, including interests as attorney’s fees, P10,000.00 as
litigation expenses, P100,000.00 as moral, exemplary and nominal damages
and the costs of suit.
Almeda and Almeda, Inc. contended that the purchase price, including
interest charges, of the eight titled properties had been fully paid as of April 3,
1982. With respect to the three untitled lots, they contended that the purchase
price of Lot Nos. 2272 and 2268-B had likewise been fully paid, while that of
Lot No. 3109 had only a remaining balance of P167,522.70.
RTC: Found the claim of Cariño to be well founded and gave judgment in his
favor as quoted at the beginning of this opinion.
Ponciano Almeda and Almeda, Inc. appealed to the Court of Appeals for a
modification of judgment, contending that the lower court erred in award-
ing nominal damages and attorney’s fees in favor of Cariño and imposing a
12% annual interest on the judgment debt from the time of demand on March
9, 1983 until it was fully paid. They maintained that they were not guilty of
any unfair treatment or reckless and malevolent actions so as to justify an
award of nominal damages. They claimed that they refused to pay the remain-
ing balance because the proceeds of certain harvests from the lands in ques-
tion and liquidated damages were also due them.
During the pendency of the case, Almeda died. He was substituted by his
heirs.
CA: The Court of Appeals affirmed the decision of the lower court. It held
that the award of nominal damages was justified by the unjust refusal of
Almeda and Almeda, Inc. to settle and pay the balance of the purchase
price in violation of the rights of Cariño.
ISSUE: WON the RTC and the CA erred in awarding nominal damages in
the amount of P150,000.00? - NO.
HELD:
PETITIONER’S CONTENTION: The trial court erred in awarding nomi-
nal damages in favor of respondents since there was no showing that they
 5 of 10

G.R. No. 158693 November 17, 2004 Court, after considering the circumstances therein, fixed the indemnity at
P2,590.50, which was equivalent to the employee's one month salary. This
JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, indemnity is intended not to penalize the employer but to vindicate or recog-
vs. nize the employee's right to statutory due process which was violated by the
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA employer.39
HOME IMPROVEMENTS, INC. and VICENTE ANGELES, respon-
dents. The violation of the petitioners' right to statutory due process by the
private respondent warrants the payment of indemnity in the form of
FACTS: Private respondent Riviera Home Improvements, Inc. is engaged nominal damages. The amount of such damages is addressed to the sound
in the business of selling and installing ornamental and construction materi- discretion of the court, taking into account the relevant circumstances.40 Con-
als. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum sidering the prevailing circumstances in the case at bar, we deem it prop-
board and cornice installers on January 2, 19922 until February 23, 1999 when er to fix it at P30,000.00. We believe this form of damages would serve to
they were dismissed for abandonment of work. deter employers from future violations of the statutory due process rights of
Petitioners then filed a complaint for illegal dismissal and payment of employees. At the very least, it provides a vindication or recognition of this
money claims. fundamental right granted to the latter under the Labor Code and its Imple-
menting Rules.
LA: the dismissals illegal and ordered private respondent to pay the monetary
claims. WHEREFORE, in view of the foregoing, the petition is DENIED. The
decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No.
NLRC: reversed the Labor Arbiter because it found that the petitioners had 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their
abandoned their work, and were not entitled to backwages and separation pay. work, and ordering private respondent to pay each of the petitioners holiday
CA: the dismissal of the petitioners was not illegal because they had aban- pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00,
doned their employment but ordered the payment of money claims. service incentive leave pay for the same period in the amount of P3,255.00
and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the
PETITIONERS ASSERTION: they were dismissed because the private amount of P2,150.00 is AFFIRMED with the MODIFICATION that private
respondent refused to give them assignments unless they agreed to work on respondent Riviera Home Improvements, Inc. is further ORDERED to pay
a "pakyaw" basis when they reported for duty on February 23, 1999. They did each of the petitioners the amount of P30,000.00 as nominal damages for
not agree on this arrangement because it would mean losing benefits as Social non-compliance with statutory due process.
Security System (SSS) members. Petitioners also claim that private respon-
dent did not comply with the twin requirements of notice and hearing.
PRIVATE RESPONDENT: petitioners were not dismissed but had aban-
doned their work.9 In fact, private respondent sent two letters to the last
known addresses of the petitioners advising them to report for work. Private
respondent's manager even talked to petitioner Virgilio Agabon by telephone
sometime in June 1999 to tell him about the new assignment at Pacific Plaza
Towers involving 40,000 square meters of cornice installation work. Howev-
er, petitioners did not report for work because they had subcontracted to per-
form installation work for another company. Petitioners also demanded for an
increase in their wage to P280.00 per day. When this was not granted, peti-
tioners stopped reporting for work and filed the illegal dismissal case.
ISSUE: WON the petitioners was validly dismissed? There’s a valid
cause but without due process.
Entitled to nominal damages? YES
HELD: Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine
Services, Inc. v. National Labor Relations Commission,30 which opinion he
reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not
been properly observed by an employer, it would not be right to
order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with
the procedure prescribed by law in terminating the services of the
employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It
might be pointed out that the notice to be given and the hearing to
be conducted generally constitute the two-part due process re-
quirement of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain situa-
tions where to undertake the above steps would be no more than a
useless formality and where, accordingly, it would not be impru-
dent to apply the res ipsa loquitur rule and award, in lieu of sepa-
ration pay, nominal damages to the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the
law on employment termination, we believe that in cases involving dismissals
for cause but without observance of the twin requirements of notice and hear-
ing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing
sanctions on the employer. Such sanctions, however, must be stiffer than that
imposed in Wenphil. By doing so, this Court would be able to achieve a fair
result by dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or autho-
rized causes but not complying with statutory due process may have far-
reaching consequences.
This would encourage frivolous suits, where even the most notorious viola-
tors of company policy are rewarded by invoking due process. This also
creates absurd situations where there is a just or authorized cause for dis-
missal but a procedural infirmity invalidates the termination. Let us take for
example a case where the employee is caught stealing or threatens the lives of
his co-employees or has become a criminal, who has fled and cannot be
found, or where serious business losses demand that operations be ceased in
less than a month. Invalidating the dismissal would not serve public interest.
It could also discourage investments that can generate employment in the
local economy.
Under the Civil Code, nominal damages is adjudicated in order that a right
of the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plain-
tiff for any loss suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations Commis-
sions,38 an employer is liable to pay indemnity in the form of nominal dam-
ages to an employee who has been dismissed if, in effecting such dismissal,
the employer fails to comply with the requirements of due process. The
 6 of 10

RADIOWEALTH FINANCE COMPANY, petitioner, (2) YES

vs.
Spouses VICENTE and MA. SUMILANG DEL ROSARIO, respondents.
Facts:
Spouses Vicente and Maria Sumilang del Rosario (herein respondents), joint-
ly and severally executed, signed and delivered in favor of Radiowealth Fi-
nance Company (herein petitioner), a Promissory Note5 for ₱138,948.
In addition, the Note also provided that the debtors would be liable for attor-
ney’s fees equivalent to 25 percent of the amount due in case a legal action
was instituted and 10 percent of the same amount as liquidated damages.
Liquidated damages, however, should no longer be imposed for being
unconscionable.24 Such damages should also be deemed included in the
2.5 percent monthly penalty. Furthermore, we hold that petitioner is entitled
to attorney’s fees, but only in a sum equal to 10 percent of the amount due
which we deem reasonable under the proven facts.

Pertinent provisions of the Promissory Note read:

"FOR VALUE RECEIVED, on or before the date listed below, I/We promise
to pay jointly and severally Radiowealth Finance Co. or order the sum
of ONE HUNDRED THIRTY EIGHT THOUSAND NINE HUNDRED
FORTY EIGHTPesos (₱138,948.00) without need of notice or demand, in
installments as follows:

₱11,579.00 payable for 12 consecutive months starting on ________ 19__

until the amount of ₱11,579.00 is fully paid. Each installment shall be due
every ____ day of each month. A late payment penalty charge of two and a
half (2.5%) percent per month shall be added to each unpaid installment from
due date thereof until fully paid.

xxx xxx xxx

It is hereby agreed that if default be made in the payment of any of the in-
stallments or late payment charges thereon as and when the same becomes
due and payable as specified above, the total principal sum then remaining
unpaid, together with the agreed late payment charges thereon, shall at once
become due and payable without need of notice or demand.

xxx xxx xxx

If any amount due on this Note is not paid at its maturity and this Note is
placed in the hands of an attorney or collection agency for collection, I/We
jointly and severally agree to pay, in addition to the aggregate of the principal
amount and interest due, a sum equivalent to ten (10%) per cent thereof as
attorney’s and/or collection fees, in case no legal action is filed, otherwise,
the sum will be equivalent to twenty-five (25%) percent of the amount due
which shall not in any case be less than FIVE HUNDRED PESOS (P500.00)
plus the cost of suit and other litigation expenses and, in addition, a further
sum of ten per cent (10%) of said amount which in no case shall be less than
FIVE HUNDRED PESOS (P500.00), as and for liquidated damages.”

Thereafter, respondents defaulted on the monthly installments. Despite re-

peated demands, they failed to pay their obligations under their Promissory
Note.

Respondent’s contention:
Respondents, on the other hand, counter that the installments were not yet due
and demandable. Petitioner had allegedly allowed them to apply their promo-
tion services for its financing business as payment of the Promissory Note.
This was supposedly evidenced by the blank space left for the date on which
the installments should have commenced.

Issue:
WON the obligation is due and demandable?
WON petitioner is entitled to liquidated damages?

COURT:

(1) YES.
The act of leaving blank the due date of the first installment did not necessari-
ly mean that the debtors were allowed to pay as and when they could. If this
was the intention of the parties, they should have so indicated in the Prom-
issory Note. However, it did not reflect any such intention.

On the contrary, the Note expressly stipulated that the debt should be amor-
tized monthly in installments of ₱11,579 for twelve consecutive months.
While the specific date on which each installment would be due was left
blank, the Note clearly provided that each installment should be payable each
month.

Furthermore, it also provided for an acceleration clause and a late payment

penalty, both of which showed the intention of the parties that the installments
should be paid at a definite date.

Convincingly, petitioner has established not only a cause of action against the
respondents, but also a due and demandable obligation. The obligation of the
respondents had matured and they clearly defaulted when their checks
bounced. Per the acceleration clause, the whole debt became due one month
(April 2, 1991) after the date of the Note because the check representing their
first installment bounced.
 7 of 10

G.R. No. 171660 October 17, 2011 b) Delivery Date: August 29, 1990 or six (6) weeks from receipt of order and
CONTINENTAL CEMENT CORPORATION Petitioner, down payment
vs.
c) Penalty: One half of one percent of the total cost or Nine Hundred Eighty
ASEA BROWN BOVERI, INC., BBC BROWN BOVERI, CORP., AND
Seven Pesos and Twenty five centavos (₱987.25) per day of delay.
TORD B. ERIKSON,** Respondents.
Respondent ABB, however, not only incurred delay in performing its obliga-
FACTS:
tion but likewise failed to repair the Kiln Drive Motor; thus, prompting peti-
Sometime in July 1990, petitioner Continental Cement Corporation tioner to sue for damages.
(CCC), a corporation engaged in the business of producing cement, obtained
Clause 7 of the General Conditions is not binding on petitioner.
the services of respondents Asea Brown Boveri, Inc. (ABB) and BBC
Brown Boveri, Corp. to repair its 160 KW Kiln DC Drive Motor (Kiln Drive Respondents contend that under Clause 7 of the General Conditions their
Motor). liability "does not extend to consequential damages either direct or indi-
rect." This contention, however, is unavailing because respondents failed
On October 23, 1991, due to the repeated failure of respondents to repair the
to show that petitioner was duly furnished with a copy of said General
Kiln Drive Motor, petitioner filed with Branch 101 of the Regional Trial
Conditions. Hence, it is not binding on petitioner.
Court (RTC) of Quezon City a Complaint for sum of money and damages,
docketed as Civil Case No. Q-91-10419, against respondent corporations and Having breached the contract it entered with petitioner, respondent ABB
respondent Tord B. Eriksson (Eriksson), Vice-President of the Service Divi- is liable for damages pursuant to Articles 1167, 1170, and 2201 of the
sion of the respondent ABB. Civil Code, which state:
Petitioner alleged that: Art. 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.
4. On July 11, 1990, the plaintiff delivered the 160 KW Kiln DC Drive Motor
to the defendants to be repaired under PO No. 17136-17137, x x x This same rule shall be observed if he does it in contravention of the tenor of
the obligation. Furthermore, it may be decreed that what has been poorly
The defendant, Tord B. Eriksson, was personally directing the repair of the
done be undone.
said Kiln Drive Motor. He has direction and control of the business of the
defendant corporations. Apparently, the defendant Asea Brown Boveri, Inc. Art. 1170. Those who in the performance of their obligations are guilty of
has no separate personality because of the 4,000 shares of stock, 3996 shares fraud, negligence, or delay, and those who in any manner contravene the tenor
were subscribed by Honorio Poblador, Jr. The four other stockholders sub- thereof, are liable for damages.
scribed for one share of stock each only.
Art. 2201. In contracts and quasi-contracts, the damages for which the oblig-
5. After the first repair by the defendants, the 160 KW Kiln Drive Motor was or who acted in good faith is liable shall be those that are the natural and
installed for testing on October 3, 1990. On October 4, 1990 the test failed. probable consequences of the breach of the obligation, and which the parties
The plaintiff removed the DC Drive Motor and replaced it with its old motor. have foreseen or could have reasonably foreseen at the time the obligation
It was only on October 9, 1990 that the plaintiff resumed operation. The was constituted.
plaintiff lost 1,040 MTD per day from October 5 to October 9, 1990.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
6. On November 14, 1990, after the defendants had undertaken the second responsible for all damages which may be reasonably attributed to the non-
repair of the motor in question, it was installed in the kiln. The test failed performance of the obligation.
again. The plaintiff resumed operation with its old motor on November 19,
1990. The plaintiff suffered production losses for five days at the rate of Based on the foregoing, a repairman who fails to perform his obligation is
1,040 MTD daily. liable to pay for the cost of the execution of the obligation plus damages.
Though entitled, petitioner in this case is not claiming reimbursement for the
7. The defendants were given a third chance to repair the 160 KW Kiln DC repair allegedly done by Newton Contractor, but is instead asking for dam-
Drive Motor. On March 13, 1991, the motor was installed and tested. Again, ages for the delay caused by respondent ABB.
the test failed. The plaintiff resumed operation on March 15, 1991. The
plaintiff sustained production losses at the rate of 1,040 MTD for two Petitioner is entitled to penalties under Purchase Order Nos. 17136-37.
days. As per Purchase Order Nos. 17136-37, petitioner is entitled to penalties in the
8. As a consequence of the failure of the defendants to comply with their amount of ₱987.25 per day from the time of delay, August 30, 1990, up to the
contractual obligation to repair the 160 KW Kiln DC Drive Motor, the plain- time the Kiln Drive Motor was finally returned to petitioner. Records show
tiff sustained Total Damages of 10,983,017.42 that although the testing of Kiln Drive Motor was done on March 13, 1991,
the said motor was actually delivered to petitioner as early as January 7,
9. The plaintiff has made several demands on the defendants for the payment 1991. The installation and testing was done only on March 13, 1991 upon the
of the above-enumerated damages, but the latter refused to do so without request of petitioner because the Kiln was under repair at the time the motor
valid justification. was delivered; hence, the load testing had to be postponed.
10. The plaintiff was constrained to file this action and has undertaken to pay Under Article 1226 of the Civil Code, the penalty clause takes the place of
its counsel Twenty Percentum (20%) of the amount sought to be recovered as indemnity for damages and the payment of interests in case of non-compli-
attorney’s fees. ance with the obligation, unless there is a stipulation to the contrary. In this
case, since there is no stipulation to the contrary, the penalty in the
Respondents, however, claimed that under Clause 7 of the General Condi-
amount of ₱987.25 per day of delay covers all other damages (i.e. produc-
tions, attached to the letter of offer dated July 4, 1990 issued by respondent
tion loss, labor cost, and rental of the crane) claimed by petitioner.
ABB to petitioner, the liability of respondent ABB "does not extend to
consequential damages either direct or indirect.” Moreover, as to respon- DP: WHEREFORE, the petition is hereby GRANTED. The assailed Decision
dent Eriksson, there is no lawful and tenable reason for petitioner to sue him dated August 25, 2005 and the Resolution dated February 16, 2006 of the
in his personal capacity because he did not personally direct the repair of the Court of Appeals in CA-G.R. CV No. 58551 are hereby REVERSED and
Kiln Drive Motor. SET ASIDE. Respondent ABB is ORDERED to pay petitioner the amount of
₱129,329.75, with interest at 6% per annum to be computed from the date of
RTC: Rendered a Decision in favor of petitioner. The RTC rejected the de-
the filing of the complaint until finality of this Decision and 12% per annum
fense of limited liability interposed by respondents since they failed to prove
thereafter until full payment.
that petitioner received a copy of the General Conditions. Consequently, the
RTC granted petitioner’s claims for production loss, labor cost and rental of SO ORDERED.
crane, and attorney’s fees.
CA: Reversed the ruling of the RTC. The CA applied the exculpatory clause
in the General Conditions and ruled that there is no implied warranty on
repair work; thus, the repairman cannot be made to pay for loss of production
as a result of the unsuccessful repair.
ISSUE: WON the Purchase Order Nos. 17136-37 will bind the petitioner and
hence will exculpate the respondent from payment for damages? - NO.
PETITIONER’ S ARGUMENTS: Petitioner reiterates that the General
Conditions cannot exculpate respondents because petitioner never agreed to
be bound by it nor did petitioner receive a copy of it.
RESPONDENT’S ARGUMENTS: Conversely, respondents insist that
petitioner is bound by the General Conditions. By issuing Purchase Order
Nos. 17136-37, petitioner in effect accepted the General Conditions appended
to respondent ABB’s letter of offer.
HELD:
The petition has merit.
Petitioner and respondent ABB entered into a contract for the repair of peti-
tioner’s Kiln Drive Motor, evidenced by Purchase Order Nos. 17136-37, with
the following terms and conditions:
a) Total Price: ₱197,450.00
 8 of 10

G.R. No. 150843 March 14, 2003 TRIAL COURT: rendered in favor of plaintiffs Vazquez spouses and against
defendant Cathay Pacific Airways, Ltd., ordering the latter to pay each plain-
CATHAY PACIFIC AIRWAYS, LTD., petitioner, tiff….Exemplary damages in the amount of P5,000,000.00 for each plain-
vs. tiff;
SPOUSES DANIEL VAZQUEZ and MARIA LUISA MADRIGAL
VAZQUEZ, respondents. CA: deleted the award for exemplary damages;
FACTS: Cathay is a common carrier engaged in the business of transporting - that by upgrading the Vazquezes to First Class, Cathay novated the
passengers and goods by air. Among the many routes it services is the Mani- contract of carriage without the former’s consent. There was a
la-Hongkong-Manila course. As part of its marketing strategy, Cathay accords breach of contract not because Cathay overbooked the Business
its frequent flyers membership in its Marco Polo Club. The members enjoy Class Section of Flight CX-905 but because the latter pushed
several privileges, such as priority for upgrading of booking without any through with the upgrading despite the objections of the
extra charge whenever an opportunity arises. Thus, a frequent flyer booked in Vazquezes.
the Business Class has priority for upgrading to First Class if the Business
ISSUES: whether (1) by upgrading the seat accommodation of the Vazquezes
Class Section is fully booked.
from Business Class to First Class Cathay breached its contract of carriage
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa with the Vazquezes; YES (2) the upgrading was tainted with fraud or bad
Madrigal Vazquez are frequent flyers of Cathay and are Gold Card members faith; NO and (3) the Vazquezes are entitled to damages. YES (NOMINAL
of its Marco Polo Club. On 24 September 1996, the Vazquezes, together with BUT NOT EXEMPLARY)
their maid and two friends Pacita Cruz and Josefina Vergel de Dios, went to
HELD: Moral damages predicated upon a breach of contract of carriage may
Hongkong for pleasure and business.
only be recoverable in instances where the carrier is guilty of fraud or bad
For their return flight to Manila on 28 September 1996, they were booked on faith or where the mishap resulted in the death of a passenger.13 Where in
Cathay’s Flight CX-905, with departure time at 9:20 p.m. Two hours before breaching the contract of carriage the airline is not shown to have acted
their time of departure, the Vazquezes and their companions checked in fraudulently or in bad faith, liability for damages is limited to the natural and
their luggage at Cathay’s check-in counter at Kai Tak Airport and were probable consequences of the breach of the obligation which the parties had
given their respective boarding passes, to wit, Business Class boarding foreseen or could have reasonably foreseen. In such a case the liability does
passes for the Vazquezes and their two friends, and Economy Class for their not include moral and exemplary damages.14
maid. They then proceeded to the Business Class passenger lounge.
In this case, we have ruled that the breach of contract of carriage, which
When boarding time was announced, the Vazquezes and their two friends consisted in the involuntary upgrading of the Vazquezes’ seat accommoda-
went to Departure Gate No. 28, which was designated for Business Class tion, was not attended by fraud or bad faith. The Court of Appeals’ award of
passengers. Dr. Vazquez presented his boarding pass to the ground stew- moral damages has, therefore, no leg to stand on.
ardess, who in turn inserted it into an electronic machine reader or computer
The deletion of the award for exemplary damages by the Court of Ap-
at the gate. The ground stewardess was assisted by a ground attendant by the
peals is correct. It is a requisite in the grant of exemplary damages that the
name of Clara Lai Han Chiu. When Ms. Chiu glanced at the computer
act of the offender must be accompanied by bad faith or done in wanton,
monitor, she saw a message that there was a "seat change" from Business
fraudulent or malevolent manner.15 Such requisite is absent in this case.
Class to First Class for the Vazquezes.
Moreover, to be entitled thereto the claimant must first establish his right to
Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes’ ac- moral, temperate, or compensatory damages.16 Since the Vazquezes are not
commodations were upgraded to First Class. Dr. Vazquez refused the entitled to any of these damages, the award for exemplary damages has
upgrade, reasoning that it would not look nice for them as hosts to travel no legal basis. And where the awards for moral and exemplary damages are
in First Class and their guests, in the Business Class; and moreover, they eliminated, so must the award for attorney’s fees.17
were going to discuss business matters during the flight. He also told Ms.
RE: NOMINAL DAMAGES
Chiu that she could have other passengers instead transferred to the First
Class Section. Taken aback by the refusal for upgrading, Ms. Chiu consulted COURT: The most that can be adjudged in favor of the Vazquezes for
her supervisor, who told her to handle the situation and convince the Cathay’s breach of contract is an award for nominal damages under
Vazquezes to accept the upgrading. Ms. Chiu informed the latter that the Article 2221 of the Civil Code. Nonetheless, considering that the breach was
Business Class was fully booked, and that since they were Marco Polo Club intended to give more benefit and advantage to the Vazquezes by upgrading
members they had the priority to be upgraded to the First Class. Dr. Vazquez their Business Class accommodation to First Class because of their valued
continued to refuse, so Ms. Chiu told them that if they would not avail them- status as Marco Polo members, we reduce the award for nominal damages to
selves of the privilege, they would not be allowed to take the flight. Eventual- P5,000.
ly, after talking to his two friends, Dr. Vazquez gave in. He and Mrs. Vazquez
then proceeded to the First Class Cabin. WHEREFORE, the instant petition is hereby partly GRANTED. The Deci-
sion of the Court of Appeals of 24 July 2001 in CA-G.R. CV No. 63339 is
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 hereby MODIFIED, and as modified, the awards for moral damages and
addressed to Cathay’s Country Manager, demanded that they be indemni- attorney’s fees are set aside and deleted, and the award for nominal damages
fied in the amount of P1million for the "humiliation and embarrass- is reduced to P5,000.
ment" caused by its employees. They also demanded "a written apology
from the management of Cathay, preferably a responsible person with a rank
of no less than the Country Manager, as well as the apology from Ms. Chiu"
within fifteen days from receipt of the letter.
In his reply of 14 October 1996, Mr. Larry Yuen, the assistant to Cathay’s
Country Manager Argus Guy Robson, informed the Vazquezes that Cathay
would investigate the incident and get back to them within a week’s time.
On 8 November 1996, after Cathay’s failure to give them any feedback within
its self-imposed deadline, the Vazquezes instituted before the Regional
Trial Court of Makati City an action for damages against Cathay, pray-
ing for the payment to each of them the amounts of P250,000 as temperate
damages; P500,000 as moral damages; P500,000 as exemplary or corrective
damages; and P250,000 as attorney’s fees.
In their complaint, the Vazquezes alleged that when they informed Ms. Chiu
that they preferred to stay in Business Class, Ms. Chiu "obstinately, uncom-
promisingly and in a loud, discourteous and harsh voice threatened" that they
could not board and leave with the flight unless they go to First Class, since
the Business Class was overbooked. Ms. Chiu’s loud and stringent shouting
annoyed, embarrassed, and humiliated them because the incident was wit-
nessed by all the other passengers waiting for boarding.
In its answer, Cathay alleged that it is a practice among commercial airlines to
upgrade passengers to the next better class of accommodation, whenever an
opportunity arises, such as when a certain section is fully booked. Priority in
upgrading is given to its frequent flyers, who are considered favored passen-
gers like the Vazquezes. Thus, when the Business Class Section of Flight CX-
905 was fully booked, Cathay’s computer sorted out the names of favored
passengers for involuntary upgrading to First Class.
Cathay also asserted that its employees at the Hong Kong airport acted in
good faith in dealing with the Vazquezes; none of them shouted, humiliated,
embarrassed, or committed any act of disrespect against them (the
Vazquezes). Assuming that there was indeed a breach of contractual obliga-
tion, Cathay acted in good faith, which negates any basis for their claim for
temperate, moral, and exemplary damages and attorney’s fees. Hence, it
prayed for the dismissal of the complaint and for payment of P100,000 for
exemplary damages and P300,000 as attorney’s fees and litigation expenses.
 9 of 10

BRIGHT MARITIME CORPORATION (BMC)/DESIREE P. TENO- RE: illegal dismissal

RIO, Petitioners,
vs.
RICARDO B. FANTONIAL, Respondent.
Facts:
A Contract of Employment2 was executed by petitioner Bright Maritime
Corporation (BMC), a manning agent, and its president, petitioner Desiree P.
Tenorio, for and in behalf of their principal, Ranger Marine S.A., and respon-
dent Ricardo B. Fantonial, which contract was verified and approved by the
Philippine Overseas Employment Administration (POEA) on January 17,
2000. The employment contract provided that respondent shall be employed
as boatswain of the foreign vessel M/V AUK for one year, with a basic
monthly salary of US$450, plus an allowance of US$220. The contract also
provided for a 90 hours per month of overtime with pay and a vacation leave
with pay of US$45 per month.
The Court has carefully reviewed the records of the case, and agrees with the
Court of Appeals that respondent’s Medical Certificate17 dated January 17,
2000, stamped with the words "FIT TO WORK," proves that respondent was
medically fit to leave Manila on January 17, 2000 to join the vessel M/V
AUK in Germany. The Affidavit of Dr. Lyn dela Cruz-De Leon that respon-
dent was declared fit to work only on January 21, 2000 cannot overcome the
evidence in the Medical Certificate dated January 17, 2000, which already
stated that respondent had "Class-B Non-Infectious Hepatitis-B," and that he
was fit to work. The explanation given by Dr. Lyn dela Cruz-De Leon in her
affidavit that the Medical Certificate was dated January 17, 2000, since it
carries the date when they started to examine the patient per standard operat-
ing procedure, does not persuade as it goes against logic and the chronologi-
cal recording of medical procedures. The Medical Certificate submitted as
documentary evidence18 is proof of its contents, including the date thereof
which states that respondent was already declared fit to work on January 17,
2000, the date of his scheduled deployment.

Respondent was made to undergo a medical examination at the Christian

Medical Clinic, which was petitioner’s accredited medical clinic. Re-
spondent was issued a Medical Certificate3 dated January 17, 2000,
which certificate had the phrase "FIT TO WORK" stamped on its lower
and upper portion.

Respondent, after having undergone the pre-departure orientation seminar and

being equipped with the necessary requirements and documents for travel,
went to the Ninoy Aquino International Airport upon instruction of petition-
ers. Petitioners told respondent that he would be departing on that day, and
that a liaison officer would be delivering his plane ticket to him. At about
4:00 p.m., petitioners’ liaison officer met respondent at the airport and told
him that he could not leave on that day due to some defects in his medical
certificate. The liaison officer instructed respondent to return to the Christian
Medical Clinic.

Respondent went back to the Christian Medical Clinic the next day, and he
was told by the examining physician, Dr. Lyn dela Cruz-De Leon, that there
was nothing wrong or irregular with his medical certificate.

Respondent went to petitioners’ office for an explanation, but he was merely

told to wait for their call, as he was being lined-up for a flight to the ship's
next port of call. However, respondent never got a call from petitioners.

On May 16, 2000, respondent filed a complaint against petitioners for illegal
dismissal, payment of salaries for the unexpired portion of the employment
contract and for the award of moral, exemplary, and actual damages as well as
attorney’s fees before the Regional Arbitration Branch No. 7 of the NLRC in
Cebu City.4

Petitioner’s contention:
That physical and laboratory results were all within normal limits except for
the finding, after chest x-ray, of Borderline Heart Size, and that respondent
was positive to Hepatitis B on screening; that respondent underwent ECG to
check if he had any heart problem, and the result showed left axis deviation.
Dr. De Leon stated that she requested for a Hepatitis profile, which was done
on January 18, 2000; that on January 20, 2000, the result of the Hepatitis
profile showed non-infectious Hepatitis B. Further, Dr. De Leon stated that
respondent was declared fit to work only on January 21, 2000; however, the
date of the Medical Certificate was January 17, 2000, which was the date
when she started to examine the patient per standard operating procedure.

Petitioners argued that since respondent was declared fit to work only on
January 21, 2000, he could not join the vessel anymore as it had left the port
in Germany. Respondent was advised to wait for the next vacancy for
boatswain, but he failed to report to petitioners’ office, and he gave them an
incorrect telephone number. During the mandatory conference/conciliation
stage of this case, petitioners offered respondent to join one of their vessels,
but he refused.

ISSUE:
WON respondent is entitle to exemplary damages?

COURT: YES

The Court agrees with the Court of Appeals that petitioner BMC is liable to
respondent for exemplary damages,27 which are imposed by way of example
or correction for the public good in view of petitioner’s act of preventing
respondent from being deployed on the ground that he was not yet declared
fit to work on the date of his departure, despite evidence to the contrary. Such
act, if tolerated, would prejudice the employment opportunities of our seafar-
ers who are qualified to be deployed, but prevented to do so by a manning
agency for unjustified reasons. Exemplary damages are imposed not to enrich
one party or impoverish another, but to serve as a deterrent against or as a
negative incentive to curb socially deleterious actions.28 In this case, petition-
er should be held liable to respondent for exemplary damages in the amount
of ₱50,000.00,29 following the recent case of Claudio S. Yap v. Thenamaris
Ship’s Management, et al.,30 instead of ₱10,000.00
 10 of 10

G.R. No. 174179 November 16, 2011 VERSED and SET ASIDE. The Labor Arbiter’s award of attorney’s fees
KAISAHAN AT KAPATIRAN NG MGA MANGGAGAWA AT KAWANI equivalent to ten percent (10%) of the total judgment award is hereby REIN-
SA MWC-EAST ZONE UNION and EDUARDO BORELA, representing STATED.
its members, Petitioners,
No pronouncement as to costs.
vs.
MANILA WATER COMPANY, INC., Respondent. SO ORDERED.
FACTS:
Petitioner union is the duly-recognized bargaining agent of the rank-and-file
employees of the respondent Manila Water Company, Inc. (Company) while
Borela is the Union President.
Metropolitan Waterworks and Sewerage System (MWSS) entered into a
Concession Agreement (Agreement) with the Company to privatize the oper-
ations of the MWSS. Article 6.1.3 of the Agreement provides that the Con-
cessionaire shall grant its employees benefits no less favorable than those
granted to MWSS employees at the time of their separation from MWSS such
as amelioration allowance (AA) and the cost-of-living allowance (COLA).
The payment of the AA and the COLA was discontinued pursuant to Republic
Act No. 6758, otherwise known as the Salary Standardization Law, which
integrated the allowances into the standardized salary. Nonetheless, the Union
demanded from the Company the payment of the AA and the COL.
The Company subsequently agreed for the payment of AA & COLA. Howev-
er, did not pay said benefits since Commission on Audit disapproved its pay-
ment because the Company had no funds to cover this benefit.
A complaint against the Company for payment of the AA, COLA, moral and
exemplary damages, legal interest, and attorneys fees before the National
Labor Relations Commission (NLRC).
LA: Ruled in favor of the petitioners and ordered the payment of their AA
and COLA, six percent (6%) interest of the total amount awarded, and ten
percent (10%) attorneys fees.
NLRC: Affirmed.
ARGUMENT OF THE COMPANY: The award of 10% attorneys fees to
the petitioners is already provided for in Memorandum of Agreement (MOA)
which mandated that attorneys fees shall be deducted from the AA and CBA
receivables.
ARGUMENT OF THE PETITIONER: The MOA only covered the pay-
ment of their share in the contracted attorneys fees, but did not include the
attorneys fees awarded by the NLRC.
ISSUE: WON NLRC gravely abused its discretion in awarding ten percent
(10%) attorneys fees to the petitioners? - NO.
HELD:
Two commonly accepted concepts of attorneys fees:
1) ordinary concept - attorneys fees are the reasonable compensation
paid to a lawyer by his client for legal services rendered.
2) extraordinary concept - attorneys fees represent an indemnity for
damages ordered by the court to be paid by the losing party in a liti-
gation based on what the law provides; it is payable to the client not
to the lawyer, unless there is an agreement to the contrary.
The court order was in the nature of an extraordinary concept.
In actions for recovery of wages, or where an employee was forced to litigate
and, thus, incur expenses to protect his rights and interests, a monetary award
by way of attorneys fees is justifiable under Article 111 of the Labor Code;
the award of attorneys fees is proper, and there need not be any showing that
the employer acted maliciously or in bad faith when it withheld the wages.
There need only be a showing that the lawful wages were not paid according-
ly.
A plain showing that the lawful wages were not paid without justification is
sufficient.
In the case at bar, it is undisputed that the union members are entitled to their
AA benefits and that these benefits were not paid by the Company.
That the Company had no funds is not a defense as this was not an insupera-
ble cause that was cited and properly invoked. As a consequence, the union
members represented by the Union were compelled to litigate and incur legal
expenses. On these bases, we find no difficulty in upholding the NLRCs
award of ten percent (10%) attorneys fees.
The attorneys fees contracted under the MOA do not refer to the amount
of attorneys fees awarded by the NLRC; the MOA provision on attorneys
fees does not have any bearing at all to the attorneys fees awarded by the
NLRC under Article 111 of the Labor Code.
The Company’s argument that the attorneys fees are unconscionable as they
represent 20% of the amount due or about P21.4 million is flawed.
Since the attorneys fees awarded by the LA pertained to the Unions
members as indemnity for damages, it was totally within their right to
waive the amount and give it to their counsel as part of their contingent
fee agreement.
Beyond the limit fixed by Article 111 of the Labor Code, such as between
the lawyer and the client, the attorneys fees may exceed ten percent
(10%) on the basis of quantum meruit, as in the present case.
DP: WHEREFORE, premises considered, the petition is hereby GRANT-
ED. The assailed decision dated March 6, 2006 and the resolution dated Au-
gust 15, 2006 of the Court of Appeals in CA-G.R. SP No. 83654 are RE-