WEEK 11 CASE DIGESTS

ARTICLE 2208

A.1. In-N-Out Burger, Inc. v. Sehwani, Inc., G.R. No. 179127, 24 December 2008.

FACTS:

○ Petitioner In-N-Out Burger, Inc. is a business entity incorporated under the laws
of California, United States, which is a signatory to the Convention of Paris on
Protection of Industrial Property and the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS).

○ Petitioner is engaged mainly in the restaurant business, but it has never engaged
in business in the Philippines.

○ Respondents Sehwani, Inc. and Benita Frites, Inc. are corporations organized in
the Philippines.

○ In-N-Out Burger, Inc. alleged that it is the owner of the trade name “In-N-Out” and
trademarks (1) “In-N-Out”; (2) “In-N-Out Burger & Arrow Design”; and (3)
“In-N-Out Burger Logo,” which are used in its business since 1948 up to the
present. These trade names and trademarks were internationally well-known and
were registered with the Trademark Office of the United States and in other parts
of the world.

○ Petitioner filed trademark and service mark applications with the Bureau of
Trademarks (BOT) of the Intellectual Property Office (IPO) for “In-N-Out” and
“In-N-Out Burger & Arrow Design.”

○ December 1993: In-N-Out Burger found out through the Official Action Papers
issued by the IPO, that Sehwani, Incorporated had already obtained Trademark
Registration for the mark “In N Out” (the inside of the letter “O” formed like a star)
without its authority.

○ June 2001: INOB eventually filed before the Bureau of Legal Affairs (BLA) of the
IPO an administrative complaint against respondents for unfair competition and
cancellation of trademark registration. INOB pointed out that its internationally
well-known trademarks and the mark of the Respondents are all registered for
the restaurant business and are clearly identical and confusingly similar.
Petitioner claimed that respondents are making it appear that their goods and

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 services are those of the petitioner, thus misleading ordinary and unsuspecting
consumers that they are purchasing petitioner's products.

○ In-N-Out Burger, Inc. thus demanded that Sehwani, Inc. stop from claiming
ownership of the mark “In-N-Out” and to voluntarily cancel its trademark
registration.

○ Sehwani, Inc. refused to agree to the demand. Sehwani, Inc. asserted therein
that they had been using the mark “In-N-Out'” in the Philippines since October
1982. It also alleged that In-N-Out Burger, Inc. lacks the legal capacity to sue
because it was not doing business in the Philippines and that it has no cause of
action because its mark is not registered or used in the Philippines.

○ The IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a

Decision in favor of petitioner In-N-Out Burger, Inc. It held that INOB had the
legal capacity to sue in the Philippines, since its country of origin was a member
of and a signatory to the Convention of Paris on Protection of Industrial Property.

○ Although INOB had never done business in the Philippines, it was widely known
in this country through the use of products bearing its corporate and trade name.

○ Both parties filed their respective Motions for Reconsideration. Both were denied
by the IPO Director for Legal Affairs.

○ The events gave rise to two cases, G.R. No. 171053 and G.R. No. 179127, the
case at bar. G.R. No. 171053: The CA confirmed that respondents’ appeal
before the IPO Director General was filed out of time and that it was only proper
to cancel the registration of the disputed trademark in the name of respondent
Sehwani, Inc. and to permanently prohibit respondents from using the same.
Respondents appealed to the CA via petition which the CA eventually denied.
Respondents moved for motion to reconsideration and the CA denied the same.
Respondents raised the matter to the Supreme Court in a Petition for Review
under Rule 45 of the Rules of Court. SC: The Court affirmed the Decision of the
IPO Director of Legal Affairs holding that petitioner had the legal capacity to sue
for the protection of its trademarks, even though it was not doing business in the
Philippines, and ordering the cancellation of the registration obtained by herein
respondent Sehwani, Inc. of the internationally well-known marks of petitioner,
and directing respondents to stop using the said marks. Respondents filed a
Motion for Reconsideration of the Decision but it was denied with finality.

○ G.R. No. 179127: IPO Director General Francisco declared that Sehwani, Inc.
was guilty of unfair competition. The sole distinction of the mark registered in the
name of respondent Sehwani, Incorporated, from those of the petitioner was the

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 star inside the letter “O,” a minor difference which still deceived purchasers.
Respondents were not even actually using the star in their mark because it was
allegedly difficult to print.

○ The IPO Director General also considered respondents' use of petitioner's

registered mark "Double-Double" as a sign of bad faith and an intent to mislead
the public. The IPO Director General ruled that INOB was entitled to an award for
the actual damages it suffered because of respondents’ acts of unfair
competition, exemplary damages, and attorney’s fees.

○ CA: The CA reversed the decision of the IPO Director General. The CA declared
that Section 163 of the Intellectual Property Code specifically confers upon the
regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases
involving provisions of the Intellectual Property Code, particularly trademarks.
The IPO Director General had no jurisdiction to rule on supposed violations of the
provisions of the Intellectual Property Code.

○ The CA denied petitioner's Motion for Reconsideration. Hence, the present

Petition where petitioner raised WHETHER OR NOT THE COURT OF
APPEALS ERRED DECLARING THAT THE IPO HAS NO JURISDICTION
OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY
RIGHTS VIOLATIONS.

ISSUE:

Whether the IPO Director General was correct in ordering petitioners to pay damages
and attorney's fees to respondents. (YES)

HELD:

○ The Supreme Court granted the petition. The CA’s decision was reversed and the
decision of the IPO Director General was reinstated in part with the modification.

○ Exemplary Damages: Taking into account the deliberate intent of respondents

to engage in unfair competition, it was proper that INOB be awarded exemplary
damages. Article 2229 of the Civil Code provides that such damages may be
imposed by way of example or correction for the public good, such as the
enhancement of the protection accorded to intellectual property and the
prevention of similar acts of unfair competition. However, exemplary damages
are not meant to enrich one party or to impoverish another, but to serve as a
deterrent against or as a negative incentive to curb socially deleterious action.

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 ○ Attorney’s Fees: In accordance with Article 2208(1) of the Civil Code, attorney’s
fees may likewise be awarded to petitioner since exemplary damages are
awarded to it. INOB was compelled to protect its rights over the disputed mark.
The amount of Php500,000.00 is more than reasonable, given the fact that the
case has dragged on for more than seven years, despite the respondent’s failure
to present countervailing evidence. Considering moreover the reputation of
petitioner’s counsel, the actual attorney’s fees paid by petitioner would far exceed
the amount that was awarded to it.

ADDITIONAL NOTES:

The Jurisdiction of the IPO

The SC ruled that petitioner's complaint, which seeks the cancellation of the disputed
mark in the name of respondent Sehwani, Incorporated, and damages for violation of
petitioner's intellectual property rights, falls within the jurisdiction of the IPO Director
of Legal Affairs.

Forum Shopping

The SC ruled that respondents were not guilty of forum shopping. The Court took
notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can
be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair
competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785,
seeking the reversal of the finding of the IPO Director General that they are guilty of
unfair competition, and the nullification of the award of damages in favor of the
petitioner resulting from said finding.

A.2. Dacquel v. Spouses Sotelo, G.R. No. 203946, August 4, 2021.

FACTS:

○ A parcel of land located in Malabon City, NCR was formerly registered to

Respondent spouses Ernesto and Flora Sotelo, which then was later registered
to Petitioner Arturo Dacquel.

○ 1994: The Sotelos began the construction of a 7-door apartment on the subject
land. However, because of budget constraints they had to borrow Php140,000.00
from Dacquel (Flora’s brother).

○ 1997: Construction of the apartment was completed. Sps. Sotelo claimed that the
debt of Php140,000 was agreed to be payable in double (Php280k), which is to

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 be collected from the rental income of four of the seven apartment units. There
was no agreed period to pay the loan and interests.

○ Dacquel required the Sotelos to transfer to him the land as security for the loan.
In September 1994, the parties executed a Deed of Sale with a consideration of
Php140,000. A Transfer Certificate of Title (TCT) was issued, making Dacquel
the new registered owner of the subject land.

○ March 2000: Sps. Sotelo asked for the return of the subject lot when Dacquel
collected the full amount of Php280,000 from the rental income of the four units.
However, Dacquel held on to the title and refused to return the lot to the Sotelos.

○ May 2000: Sps. Sotelo filed a complaint for annulment of title and reconveyance
against Dacquel at the RTC.

■ In which they alleged:

1. Dacquel only held the title as security for the loan and in trust for the
Sotelos, who remained the beneficial owners of the subject lot;

2. Dacquel was legally obligated to reconvey the property to the Sotelos

when he received more than the amount he had loaned; and

3. Building permits and the original registration for the electric and water
were issued in Ernesto Sotelo’s name. Construction expenses were paid
for by Ernesto’s checks.

○ Furthermore, Ernesto claimed:

■ 1. That he could not remember signing the Deed of Sale because he was
sick, and Flora’s signature was forged;

■ 2. The market value of the property was Php1.75 million and not just
Php140,000;

■ 3. Ernesto mortgaged the property to a bank for Php500,000 and the

mortgage had been annotated to the title;

■ 4. Title to subject property cannot be transferred to Dacquel’s name

because he was a foreigner despite misrepresenting his nationality as
Filipino in the DoS.

○ Dacquel asserted:

■ 1. That the Sotelos’s debts to him totaled 1M pesos, which he recorded in

a black diary;

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 ■ 2. As payment for their debts, Sps. Sotelo offered to sell to him the land
and he accepted their offer;

■ 3. September 1994: They put the agreement into writing (DoS) for the true
consideration of 1M pesos, and the Php140,000 was indicated on the DoS
only for reducing tax liabilities for the transaction;

■ 4. Sotelos were allegedly barred from questioning the validity of the DoS
because of their acquiescence to the subject property’s transfer unto
Dacquel’s name;

■ 5. Dacquel caused the construction of the apartment from his inheritance

from Richmond Lloyd Wilcox;

■ 6. He did not authorize the Sotelos to lease and collect rental payments

○ RTC: Ruled in favor of Dacquel. It held that there was no evidence that Dacquel
was of foreign citizenship. It also discounted the checks issued and presented by
Ernesto because nothing on the checks shows that it was intended for the
construction of the apartment. The RTC also ruled that registration of property in
one’s name for billing purposes, when in reality the same property is owned by
another, is common practice in the country.

○ CA: Ruled in favor of Sps. Sotelos, and reversed RTC’s decision. It declared that
the Deed of Sale was an equitable mortgage. It found two badges of fraud: gross
inadequacy of the price and the continued possession by the Sotelos of the
subject property. The CA granted attorney's fees (P100,000) to the Sotelos and
denied their prayer for moral damages.

○ Petitioner Dacquel’s Arguments (SC):

■ 1. Dacquel insisted that the validity of the DoS;

■ 2. He asserted his lawful ownership of the property;

■ 3. He argued that the price of Php140,000 was not a grossly inadequate

price for the sale of the property as there were no improvements at the
time of the transaction;

■ 4. All the requisites of dacion en pago (dation in payment) are present in

their contract;

■ 5. Dacquel remained in constructive possession of the property as he

collected in his name the rental for 4 units and even claimed the other 3 in
the same manner.

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 ■ 6. He disputed the award of attorney’s fees because he was not guilty of
bad faith in litigating his case against the Sotelos.

○ Respondent Sps. Sotelo’s Position: They maintained that the transaction was
an equitable mortgage and rested their claims with the findings of the CA.

ISSUES:

1) Whether or not the Deed of Sale between petitioner and respondents-spouses

constituted an equitable mortgage; (YES)
2) Whether Dacquel's title to the subject property should be nullified and
reconveyed to Sps. Sotelo; (YES) and
3) Whether or not Spouses Sotelo are entitled to attorney's fees. (NO)

HELD:

○ While the CA declared that petitioner's acts forced respondent spouses to

litigate, records show insufficient reason to consider the case within the
said exception cited under Article 2208. Even when a claimant is compelled to
bring his cause to court or incur expenses to protect his rights, attorney's fees still
may not be awarded as part of damages where no sufficient showing of bad faith
could be reflected in a party's persistence in a case other than an erroneous
conviction of the righteousness of his cause.

○ No such bad faith was proven against the petitioner. On the contrary, both
parties were impelled by the honest belief that their respective actions were
justified. The dispute was sparked by a series of undocumented transactions
over the subject property, driving both parties into deeper misunderstandings that
ended up too complicated and far too late to be clarified. Respondent spouses'
victory should not earn petitioner an automatic label of bad faith and a correlative
award of attorney's fees.

○ The general rule is that attorney's fees cannot be recovered as part of damages
because of the policy that no premium should be placed on the right to litigate.
They are not to be awarded every time a party wins a suit. Being the exception
rather than the rule, an award of attorney's fees requires compelling reason
before it may be granted. Parties still are allowed to stipulate on it beforehand.
In the absence of any agreement, however, factual, legal, and equitable
justification must be established to avoid speculation and conjecture surrounding
the grant of attorney's fees by the courts.

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 TWO CONCEPTS OF ATTORNEY’S FEES

B.1. Philippine National Construction Corporation v. APAC Marketing Corporation,

G.R. No. 190957, June 5, 2013

FACTS:

○ Philippine National Construction Corporation (PNCC), represented by Rogelio

Espiritu and Rolando Macasaet, made a simple purchase transaction with APAC
Marketing Corporation, represented by Cesar M. Ong Jr., involving crushed
basalt rock delivered by APAC.

○ APAC filed, with the RTC, Quezon City, a complaint against PNCC for collection
of sum of money in the amount of ₱782,296.80 with damages, alleging that it had
sold, delivered and supplied good quality crushed basalt rock to PNCC.

○ While the parties had initially agreed that PNCC would issue the check
corresponding to the value of the materials prior to the implementation of the said
payment agreement (“Check before Delivery”), PNCC requested from APAC a
30-day term from the delivery date within which to pay, which APAC accepted.

○ After making deliveries and despite demands by APAC, PNCC failed and refused
to pay and settle their overdue accounts. PNCC filed a motion to dismiss,
alleging that the complaint was premature considering that it had been faithfully
paying its obligations to APAC, but it was denied by the RTC.

○ PNCC alleged that their obligation was only with respect to the balance of the
principal obligation that had not been fully paid amounted to only Php474,095.92

○ Due to the PNCC’s repeated failure to attend the hearings, they were deemed to
have waived the presentation of their evidence.

○ RTC: Ruled in favor of APAC ordering PNCC jointly and solidarily to pay actual
damages and attorney's fees (P50,000; 3,000 per court appearance). PNCC
filed a motion for reconsideration alleging that the principal obligation was paid.
The trial court considered their claim of full payment of the principal obligation,
but still ordered them to pay legal interest of 12% per annum.

○ CA: CA ordered PNCC to pay legal interest at 6% on the principal obligation and
absolved Rogelio Espiritu and Rolando Macasaet from liability. PNCC filed a
motion for Reconsideration, which raised the line issue of the priority of the
award of attorney’s fees in favor of the respondent.

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ISSUE:

Whether or not the CA gravely erred in awarding attorney’s fees to respondent. (YES)

HELD:

○ The SC agreed with PNCC’s contention that the RTC’s Decision has no finding
that would fall under any of the exceptions enumerated in Article 2208 of the new
Civil Code, where an attorney’s fee may be awarded. An award of attorney’s
fees under Article 2208 demands factual, legal, and equitable justification
to avoid speculation and conjecture surrounding the grant thereof. Article
2208 of the New Civil Code of the Philippines states the policy that should guide
the courts when awarding attorney’s fees to a litigant. The Court was not able to
find any factual, legal, or equitable justification for the award of attorney’s fees in
favor of the respondent.

○ The CA simply quoted the portion of the RTC Decision that granted the award as
basis for the affirmation thereof. There was no elaboration on the basis. There is
an absence of an independent CA finding of the factual circumstances and
legal or equitable basis to justify the grant of attorney’s fees. The CA
merely adopted the RTC’s rationale for the award, which in this case the
court found to be sorely inadequate.

Two Concepts of Attorney’s Fees: In the ordinary sense, attorney's fees represent
the reasonable compensation paid to a lawyer by his client for the legal services
he has rendered to the latter; while in its extraordinary concept, they may be
awarded by the court as indemnity for damages to be paid by the losing party to
the prevailing party. Attorney's fees as part of damages are awarded only in the
instances specified in Article 2208 of the Civil Code. As such, it is necessary for the
court to make findings of fact and law that would bring the case within the enumerated
instances to justify the grant of such award, and in all cases it must be reasonable.

Attorney’s Fees: The law is clear that in the absence of stipulation, attorney’s fees
may be recovered as actual or compensatory damages under any of the
circumstances provided for in Article 2208 of the Civil Code. The general rule is
that attorney’s fees cannot be recovered as part of damages because of the policy that
no premium should be placed on the right to litigate. They are not to be awarded every
time a party wins a suit. The power of the court to award attorney’s fees under Article
2208 demands factual, legal, and equitable justification. Even when a claimant is
compelled to litigate with third persons or to incur expenses to protect his rights, still
attorney’s fees may not be awarded where no sufficient showing of bad faith could be

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reflected in a party’s persistence in a case other than an erroneous conviction of the
righteousness of his cause.

QUANTUM MERUIT

C.1. Rilloraza v. Eastern Telecommunications Phils., Inc., G.R. No. 104600, July 2,
1999

FACTS:

○ Eastern Telecommunications, Phils., Inc. (ETPI) represented by the law firm

SAGA, filed with the RTC, Makati, a complaint for the recovery of revenue shares
against PLDT. Atty. Rilloraza, a partner of the firm, appeared for ETPI.

○ September 1987: The RTC granted ETPI's application for preliminary restrictive
and mandatory injunctions. SAGA was dissolved and four of the junior partners
formed the law firm Rilloraza, Africa, De Ocampo & Africa (RADA), which took
over as counsel in the case for ETPI.

○ ETPI filed with the RTC two urgent motions for restraining order. As the
applications were not acted upon, ETPI brought the case up to the CA by petition
for certiorari.

○ June 1988: RADA received a letter from ETPI terminating the retainer contract.
RADA then filed with the RTC a notice of attorney's lien, furnishing copies to the
plaintiff ETPI, to the signatory of the termination letter and PLDT.

○ Petitioner additionally sent a letter to ETPI attaching its partial billing statement.

○ April 1990: Petitioner confirmed that indeed the parties arrived at an amicable
settlement and that the same was entered as a judgment. Thereafter, Petitioner
filed a motion for the enforcement of attorney's lien with the RTC.

○ May 1990: PLDT filed with the trial court a manifestation that it is not a party to
nor in any manner involved in the attorney's lien being asserted by Atty. Rilloraza
for and on behalf of the law firm, 3 while ETPI filed its opposition thereto on June
11, 1990.

○ RTC: Denied the motion for enforcement of attorney’s lien for no basis in fact and
in law. In October 1990, RADA filed with the RTC a notice of appeal from the
above-mentioned order to the Supreme Court.

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 ○ November 1990: ETPI filed a Motion to Dismiss Appeal contending that the case
could be brought to the Supreme Court only via a petition for review on certiorari,
not by a mere notice of appeal. The trial court dismissed RADA’s appeal.

○ Petitioner RADA filed a petition for certiorari with the Supreme Court. The petition
was remanded to the Court of Appeals.

○ CA: Dismissed the petition in a decision and ruled that the judge committed no
abuse of discretion in denying petitioner's motion for enforcement of attorney's
lien.||

ISSUE:

Whether or not RADA is entitled to recover attorney's fees for handling the case for its
client Eastern Telecommunications Philippines despite the termination of the firm’s
services. (YES)

HELD:

○ Petitioners are entitled to attorney’s fees but the Supreme Court remanded
the case to the court of origin for the determination of the amount of
attorney’s fees to which RADA is entitled. Petitioner's claim for attorney's fees
hinged on two grounds: (1) the fact that Atty. Rilloraza personally handled the
case when he was working for SAGA; and (2), the retainer agreement dated
October 1, 1987.

○ First, RADA contended that Atty. Rilloraza initiated the filing of the complaint.
When a client employs the services of a law firm, he does not employ the
services of the lawyer who is assigned to personally handle the case. Rather, he
employs the entire law firm. RADA could not claim to have initiated the filing
of the complaint considering that ETPI hired SAGA. SAGA assigned one of
its associates, Atty. Francisco Rilloraza, to handle the case for the firm. Although
Atty. Rilloraza handled the case personally, he did so for and on behalf of SAGA.

○ Second, petitioner claimed that under the retainer agreement, the firm is entitled
to the fees agreed upon (15% of the amounts collected or the value of the
property acquired or liability saved as attorney’s fees). However, the retainer
agreement has been terminated.

○ An attorney-client relationship between petitioner and respondent no longer

existed during its culmination by amicable agreement. To award the attorneys'

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 fees amounting to 15% of Php125,671,886.04 plus 50M pesos paid by PLDT to
ETPI would be too unreasonable.

○ A lawyer would be entitled to receive what he merits for his services. Otherwise
stated, the amount must be determined on a quantum meruit basis. In fixing a
reasonable compensation for the services rendered by a lawyer on the basis of
quantum meruit, the elements to be considered are generally (1) the
importance of the subject matter in controversy, (2) the extent of services
rendered, and (3) the professional standing of the lawyer. A determination of
these factors would necessarily require nothing less than a full-blown trial
where private respondents can adduce evidence to establish the right to lawful
attorney's fees and for petitioner to oppose or refute the same.

○ Whether there is an agreement or not, the courts shall fix a reasonable

compensation which lawyers may receive for their professional services. “A
lawyer has the right to be paid for the legal services he has extended to his
client, which compensation must be reasonable.” A lawyer would be entitled
to receive what he merits for his services. Otherwise stated, the amount must be
determined on a quantum meruit basis.

○ The trial court has the principal task of fixing the amount of attorney's fees.
The Supreme Court granted the petition and reversed the decision of the Court of
Appeals and remanded the case to the Regional Trial Court for the determination
of the amount of attorney's fees to which petitioner is entitled.

○ QUANTUM MERUIT — Quantum meruit, meaning “as much as he deserved”

is used as a basis for determining the lawyer's professional fees in the
absence of a contract but recoverable by him from his client. Recovery of
attorney's fees on the basis of quantum meruit is authorized when (1) there is no
express contract for payment of attorney's fees agreed upon between the lawyer
and the client; (2) when although there is a formal contract for attorney's fees, the
fees stipulated are found unconscionable or unreasonable by the court; and (3)
when the contract for attorney's fees is void due to purely formal defects of
execution; (4) when the counsel, for justifiable cause, was not able to finish the
case to its conclusion; (5) when lawyer and client disregard the contract for
attorney's fees.

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 ARTICLE 2209

D.1. Nacar v. Gallery Frames, G.R. No. 189871, 13 August 2013.

FACTS:

○ Petitioner Dario Nacar filed a complaint for constructive dismissal before the
Arbitration Branch of the NLRC against respondents Gallery Frames (GF) and/or
Felipe Bordey, Jr.

○ LA: rendered a Decision in favor of Nacar and found that he was dismissed from
employment without a valid or just cause. He was awarded backwages and
separation pay in lieu of reinstatement in the amount of Php158,919.92.

○ Gallery Frames and Bordey appealed to the NLRC, but it was dismissed for lack
of merit. They filed a motion for reconsideration, but it was denied.

○ CA: Gallery Frames and Bordey then filed a Petition for Review on Certiorari
before the CA but the CA dismissed both the petition and motion for
reconsideration.

○ SC: The Supreme Court found no reversible error on the part of the CA and
denied the petition. An Entry of Judgment was later issued certifying that the
resolution became final and executory and the case was referred back to the
Labor Arbiter.

○ In November 2002, Nacar filed a Motion for Correct Computation, praying that his
backwages be computed from the date of his dismissal on January 24, 1997 up
to the finality of the Resolution of the Supreme Court on May 27, 2002.

○ Upon recomputation, the Computation and Examination Unit of the NLRC arrived
at an updated amount of ₱471,320.31.

○ A Writ of Execution was issued by the Labor Arbiter ordering the Sheriff to collect
from respondents the total amount of ₱471,320.31.

○ Respondents filed a Motion to Quash Writ of Execution, arguing, among other

things, that since the Labor Arbiter awarded separation pay of ₱62,986.56 and
limited backwages of ₱95,933.36, no more recomputation is required to be made
of the said awards. They claimed that after the decision becomes final and
executory, the same cannot be altered or amended anymore.

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○ In August 2003, an Entry of Judgment was issued declaring the Resolution of the
NLRC to be final and executory. Consequently, another pre-execution conference
was held, but respondents failed to appear on time. Meanwhile, petitioner moved
that an Alias Writ of Execution be issued to enforce the earlier recomputed
judgment award in the sum of ₱471,320.31.

○ The records of the case were again forwarded to the Computation and
Examination Unit for recomputation, where the judgment award of petitioner was
reassessed to be in the total amount of only ₱147,560.19. Petitioner then moved
that a writ of execution be issued ordering respondents to pay him the original
amount as determined by the Labor Arbiter, pending the final computation of his
backwages and separation pay.

○ In January 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy
the judgment award that was due to Nacar in the amount of ₱147,560.19, which
he eventually received.

○ Petitioner then filed a Manifestation and Motion praying for the re-computation of
the monetary award to include the appropriate interests.

○ In May 2005, the Labor Arbiter issued an Order granting the motion, but only up
to the amount of ₱11,459.73. The Labor Arbiter reasoned that it is the October
15, 1998 Decision that should be enforced considering that it was the one that
became final and executory. However, since the decision stated that the
separation pay and backwages are computed only up to the promulgation of the
said decision, it is the amount of ₱158,919.92 that should be executed.

○ Since Nacar has already received ₱147,560.19, he is only entitled to the balance
of ₱11,459.73. Nacar then appealed before the NLRC, which both appeal and
reconsideration was denied by the NLRC.

○ Nacar sought recourse before the CA. The CA denied the petition. It stated that
since petitioner no longer appealed the October 15, 1998 Decision of the Labor
Arbiter, which already became final and executory, a belated correction thereof is
no longer allowed.

○ The CA stated that there is nothing left to be done except to enforce the said
judgment. Consequently, it can no longer be modified in any respect, except to
correct clerical errors or mistakes.

○ Petitioner argued that notwithstanding the fact that there was a computation of
backwages in the Labor Arbiter’s decision, the same is not final until

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 reinstatement is made or until finality of the decision, in case of an award of
separation pay.

○ Rspondents asserted that since only separation pay and limited backwages were
awarded to petitioner by the October 15, 1998 decision of the Labor Arbiter, no
more recomputation is required to be made of said awards.

ISSUE:

Whether or not Petitioner Dario Nacar is entitled to payment of interest from finality of
decision until full payment by the respondents. (YES)

HELD:

○ The Supreme Court reversed and set aside the decision of the Court of Appeals.
Respondents are ordered to pay petitioner: (1) backwages computed from the
time petitioner was illegally dismissed on January 24, 1997 up to May 27, 2002,
when the Resolution of this Court in G.R. No. 151332 became final and
executory; (2) separation pay computed from August 1990 up to May 27, 2002 at
the rate of one month pay per year of service; and (3) interest of twelve
percent (12%) per annum of the total monetary awards, computed from May
27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013
until their full satisfaction the Supreme Court’s decision.

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

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

■ When the obligation is breached, and it consists in the payment of a sum

of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.

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 ■ When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages,
except when or until the demand can be established with reasonable
certainty.

■ Accordingly, where the demand is established with reasonable certainty,

the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be
so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.

■ When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.

Distinguish between monetary interest and compensatory interest.

E.1. Odiamar v. Valencia, G.R. No. 213582, 12 September 2018.

FACTS:

○ Nympha Odiamar had a debt to Linda Valencia in the amount of Php2.1 Million.
On appeal, the CA ordered Odiamar to pay Valencia Php1M, which was the
remaining balance of her debt. Hence, the petition. Respondent Valencia prayed
for the imposition of legal interest on the monetary award due to her. She insisted
that the petitioner's loan obligation to her is not just Php1.3M but Php2.1M and,
as such, Odiamar should be made to pay the Php2.1M.

○ There are two (2) types of interest, namely, monetary interest and compensatory
interest. Monetary interest is the compensation fixed by the parties for the
use or forbearance of money. On the other hand, compensatory interest is
that imposed by law or by the courts as penalty or indemnity for damages.

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 ○ In other words, the right to recover interest arises only either by virtue of a
contract (monetary interest) or as damages for the delay or failure to pay the
principal loan on which the interest is demanded (compensatory interest).

○ Anent monetary interest, it is an elementary rule that no interest shall be due

unless it has been expressly stipulated in writing. In this case, no monetary
interest may be imposed on the loan obligation, considering that there was
no written agreement expressly providing for such.

ISSUE:

Whether or not additional interest shall be paid. (YES)

HELD:

○ Odiamar’s loan obligation to Valencia shall be subjected to compensatory

interest at the legal rate of 12% per annum from the date of judicial demand
(August of 2003), until June 30, 2013, and then 6% per annum from July 1,
2013 until finality of the ruling.

○ Additionally, all monetary rewards due to respondent shall earn legal interest
of 6% per annum from finality of this ruling until fully paid.

○ Jurisprudence: (Nacar vs Gallery Frames) “In the absence of an express

stipulation as to the rate of interest that would govern the parties, the rate of legal
interest for loans or forbearance of any money, goods, or credits and the rate
allowed in judgments shall longer be 12% per annum - but will now be 6% per
annum effective July 1, 2013. It should be noted that the new rate could only be
applied prospectively and not retroactively. Consequently, the 12% per annum
legal interest shall apply only until the 30th of June, 2013. Come July 1, 2013, the
new rate of 6% per annum shall be the prevailing rate of interest.

NATURE OF MORAL DAMAGES

L1. Ganancial v. Cabugao, G.R. No. 203348, 06 July 2020.

FACTS:

○ Pastora Ganancial owed Betty Cabugao an amount of Php130,000.00, agreed to

be payable within three years. To guarantee her indebtedness, Ganancial

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 entrusted to Cabugao the Transfer Certificate of Title (TCT) No. 168803 and Tax
Declaration No. 641, both covering a 397-square-meter parcel of land located in
Balangobong, Binalonan, Pangasinan, which Ganancial owns in her name.

○ The transaction ended in the parties' respective lawsuits against each other
before the Regional Trial Court (RTC), Branches 45 and 48 of Urdaneta City,
Pangasinan.

○ In October 2001, Cabugao filed a case for foreclosure of real estate mortgage
against Ganancial. Ganancial, in turn, filed against Cabugao a complaint for
declaration of the deed of mortgage as null and void, with damages.

○ The cases were eventually ordered consolidated before Branch 45. Cabugao
alleged that in March 1998, Ganancial executed a Deed of Mortgage over the
subject property as collateral for her loan.

○ Despite the lapse of three years from the date of the mortgage and repeated
demands, Ganancial failed and refused to pay the amount she owed Cabugao.

○ Cabugao sought the judicial foreclosure of the real estate mortgage, plus
interest, and the award of attorney's fees and litigation expenses.

○ Ganancial assailed the authenticity of the Deed of Mortgage. Ganancial averred

that she never executed the supposed Deed of Mortgage nor appeared for its
notarization.

○ Cabugao allegedly required Ganancial and her children to affix their signatures
on a blank bond paper, which Cabugao filled out only later.

○ Ganancial learned of the existence of the Deed of Mortgage for the first time
during her confrontation with Cabugao before the barangay captain regarding her
unpaid debt and where Cabugao threatened to foreclose the subject property.

○ Ganancial thus prayed for the declaration of the Deed of Mortgage as null and
void and claimed moral damages, exemplary damages, litigation expenses, and
costs of suit.

○ RTC: The RTC ruled in favor of Cabugao. It declared that Ganancial's

contentions against the authenticity of the notarized Deed of Mortgage were not
proven by clear and convincing evidence.

○ CA: The CA denied Ganancial's appeal. It concurred with the disposition of the
RTC that forgery or falsification cannot be presumed and must be proved with
clear, positive, and convincing evidence by the party who alleges the same. The
CA found that Ganancial failed in discharging such burden of proof, especially

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 that the deed in issue was a notarized document. The CA denied her Motion for
Reconsideration. Ganancial proceeded to the Supreme Court.

ISSUE:

Whether the CA erred in affirming the decision of the RTC favoring Betty Cabugao
despite the glaring irregularity of the questioned deed of mortgage.

HELD:

Mere formal infirmities in the notarization of the instrument will not invalidate the
mortgage.

○ The appeal is meritorious in part. Errors in, or even absence of, notarization
on a deed of mortgage will not invalidate an already perfected mortgage
agreement. These would only depreciate the evidentiary value of the said written
deed, as the same would be demoted from a public document to a private one.
○ Even if the present case is one for annulment of contract, the fraud alleged to
have vitiated Ganancial's consent to the mortgage must still be proven by clear
and convincing evidence.

○ Clear and convincing evidence is less than proof beyond reasonable doubt but
greater than preponderance of evidence. The degree of believability upon an
imputation of fraud in a civil case is higher than that of an ordinary civil case, the
latter generally requiring only a preponderance of evidence to meet the required
burden of proof. The burden of proof rests on the party alleging fraud.

Basis for the award of damages must be clearly and distinctly set out in the
judgment.

○ Immediately after its outright conclusion of Ganancial's bad faith and without
further disquisitions, the RTC jumped to its final verdict favoring Cabugao and
awarding the latter moral damages, exemplary damages, attorney's fees, and
reimbursement of litigation expenses.

○ There was no clear and distinct citation of the RTC's factual and legal
bases as regards its positive grant of damages in favor of Cabugao, or any
discussion as to how Ganancial was liable. The issue of whether Ganancial
was in bad faith or whether Cabugao is entitled to reimbursement of attorney's
fees and litigation costs is essentially a question of fact.

○ A question of fact requires this Court to review the truth or falsity of the
allegations of the parties, which includes assessment of the probative value of

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 the evidence presented, or when the issue presented before this Court is the
correctness of the lower courts' appreciation of the evidence presented by the
parties. Statements were the only tangible proof in the records in support of
Cabugao's claim for damages. The RTC readily acceded to her monetary pleas
and granted her a total of P100,000.00 as moral damages, P20,000.00 as
exemplary damages, and a full P30,000.00 as attorney's fees and litigation
expenses, all attributed to and payable by Ganancial. The SC found the judicial
awards legally unsound.

○ A robotic allegation that one “suffered anxiety and sleepless nights,” or a

seemingly haphazard conversion of these disturbed feelings into some
pecuniary equivalent, without more, will not automatically entitle a party to
moral damages.

○ Ganancial's refusal to pay her indebtedness was grounded on her firm

belief that the subject Deed of Mortgage was fake. She was unwavering in
her claim that she had a sound cause against Cabugao, and the honesty in her
legal pursuit is reflected in the consistency of her allegations throughout the
proceedings.

○ Ganancial's actuations as testified to by Cabugao cannot be seen as being

motivated by a corrupt purpose, some moral obliquity and conscious doing
of a wrong, or a breach of known duty through some other motive or
interest or ill will that partakes of the nature of fraud to merit an award of
moral damages.

RECOVERY OF MORAL DAMAGES

M.1. Bad Faith. Cathay Pacific Airways v. Sps. Fuentebella, G.R. No. 188283, July
20, 2016.

FACTS:

○ Congressmen Arnulfo Fuentebella Alberto Lopez, and Leonardo Fugoso were

authorized by the Speaker of the House to travel on official business to Sydney,
Australia, to confer with their counterparts in the Australian Parliament from 25
October to 6 November 1993.

○ Respondent Spouses originally bought Business Class tickets for Manila to

Sydney via Hong Kong and back. However, they changed their minds and
decided to upgrade to First Class.

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○ According to Respondent Spouses, their travel arrangements, including the
request for the upgrade of their seats from Business Class to First Class, were
made through Cong. Lopez.

○ On the other hand, petitioner claimed that a certain Carol Dalag had transacted
on behalf of the congressmen and their spouses for the purchase of the airline
tickets.

○ Petitioner admitted that First Class tickets were issued to respondents but
clarified that the tickets were open dated (waitlisted).

○ There was no showing whether the First-Class tickets issued to Sps. Lopez and
Sps. Fugoso were open-dated or otherwise, but it appears that they were able to
fly First Class on all the segments of the trip, while respondents were not.

○ In October 1993, respondents queued in front of the First-Class counter in the

airport. They only discovered that they had not been given First-Class seats
when they were denied entry into the First-Class lounge.

○ Respondent Fuentebella went back to the check-in counter to demand that they
be given First Class seats or at the very least, access to the First-Class Lounge.
However, he was allegedly told that the plane would leave with or without them.

○ During the trial, senior reservation supervisor Nenita Montillana admitted that
First-Class tickets had been issued to respondents, but qualified that those
tickets were open dated.

○ Petitioner explained that while respondents expressed their desire to travel First
Class, they could not be a ccommodated because they had failed to confirm and
the sections were full on the date and time of their scheduled and booked flights.

■ Petitioner also denied that its personnel exhibited arrogance in dealing

with respondents; on the contrary, it was allegedly respondent Fuentebella
who was hostile in dealing with the ground staff.

■ Respondents alleged that during transit through the Hong Kong airport,
they were treated with far less respect and courtesy by the ground staff.

■ The first employee they approached completely ignored them and turned
her back on them.

■ The second one did not even give them any opportunity to explain why
they should be given First-Class seats, but instead brushed aside their
complaints and told them to just fall in line in Economy Class.

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 ■ The third employee they approached shoved them to the line for Economy
Class passengers in front of many people.

○ Petitioner used the deposition of Manuel Benipayo, airport service officer, and
Raquel GalvezLeonio, airport services supervisor, to contradict the claims of
respondents.

■ Benipayo testified that around five o'clock on 25 October 1993,

respondent Fuentebella loudly insisted that he be accommodated on First
Class.

■ Benipayo also insisted he exerted his best effort to secure First Class
seats for them, but the plane was already full.

■ He claimed that he was intimidated by respondent Fuentebella into

making the notations “Involuntary Downgrading” and “fare difference to be
refunded” on the tickets.

■ Galvez-Leonio testified that it was company policy not to engage

passengers in debates or drawn-out discussions, but to address their
concerns in the best and proper way.

■ Respondents were able to travel First-Class for their trip from Sydney to
Hong Kong on 30 October 1993. However, on the last segment of the
itinerary from Hong Kong to Manila on 2 November 1993, they were
issued boarding passes for Business Class.

■ Respondents narrated that for their trip from Hong Kong to Sydney, they
were squeezed into very narrow seats for eight and a half hours and, as a
result, they felt groggy and miserable upon landing.

○ RTC: The Trial Court in San Jose, Camarines Sur, Bicol ruled in favor of
respondents. The RTC gave full faith and credence to the testimonies of
respondents and Cong. Fugoso, who testified in open court.

■ In setting the award for moral damages, the RTC considered the
prestigious position held by respondent Fuentebella, as well as the bad
faith exhibited by petitioner.

■ According to the trial court, the contract was violated in four instances:
first, when respondents were denied entry to the First Class lounge;
second, at the check-in counter when the airport services officer failed to
adequately address their concern; third, at the Hong Kong airport when

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 they were ignored; and fourth, when respondents became the butt of jokes
upon their arrival in Sydney.

○ CA: The CA affirmed the RTC’s Decision with modification. It found that there
was a breach of contract when the petitioner assigned Business Class and
Economy Class seats to First Class ticket holders.

■ The CA proceeded to determine whether respondents were entitled to

moral damages.

■ Finding that there was a breach of contract when petitioner assigned

Business It said that bad faith can be inferred from the inattentiveness and
lack of concern shown by petitioner's personnel to the predicament of
respondents.

■ The court also considered as a badge of bad faith the fact that
respondents had been downgraded due to overbooking.

ISSUE:

Whether there was bad faith on the part of petitioner Cathay Pacific Airways. (YES)

HELD:

○ The Supreme Court partially granted the petition. The decision of the Court of
Appeals was affirmed with modification that moral and exemplary damages are
hereby reduced to P500,000 and P50,000.00, respectively. It held that there was
a basis for the award of moral damages, however, it was excessive.

○ It agreed with the RTC and CA that there is bad faith on the part of Cathay
Pacific Airways.

○ The Supreme Court has held that damages may be awarded only when the
breach is wanton and deliberately injurious, or the one responsible had
acted fraudulently or with malice or bad faith.

○ Bad faith is a question of fact that must be proven by clear and convincing
evidence.

○ The Court found no reason to disturb the finding of the trial court that the
inattentiveness and rudeness of the ground staff were gross enough to
amount to bad faith.

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 ○ The bad faith in the present case is even more pronounced because
petitioner's ground staff physically manhandled the passengers by shoving
them to the line, after another staff had insulted them by turning her back
on them.

○ The Rules of Court do not require that the testimony of the injured party be
corroborated by independent evidence. In criminal cases in which the standard of
proof is higher, this Court has ruled that the testimony of even one witness may
suffice to support a conviction. What more in the present case, in which petitioner
has had adequate opportunity to controvert the testimonies of respondents.

○ Air France v. Gillego: “the mere fact that respondent was a Congressman
should not result in an automatic increase in the moral and exemplary
damages.”

M.2. Factors in assessing moral damages. Zulueta v. Pan American World

Airways, Inc., G.R. No. L-28589, 29 February 1972.

FACTS:

○ In October 1964, the spouses Rafael Zulueta and Telly Albert Zulueta, as well as
their daughter, Carolinda Zulueta, were passengers aboard a PANAM plane from
Honolulu to Manila, the first layover of which was Wake Island.

○ As the plane landed on said Island, the passengers were advised that they could
disembark for a stopover of about 30 minutes. Shortly before reaching that place,
the flight was, according to the plaintiffs, “very rough.” Testifying for PANAM its
purser, Miss Schmitz, asserted, however, that it was “very calm.”

■ However, her notes stated that there was “unusually small amount of
roughness,” which His Honor, the Trial Judge, considered properly as “an
admission that there was roughness, only the degree thereof is in
dispute.”

○ Plaintiff testified that, having found the need to relieve himself, he went to the
men's comfort room at the terminal building, but found it full of soldiers, in view of
which he walked down the beach some 100 yards away.

○ Meanwhile, the flight was called and when the passengers had boarded the
plane, Rafael Zulueta’s absence was noticed.

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○ The take-off was, accordingly, delayed and a search for him was conducted by
Mrs. Zulueta, Ms. Zulueta, and other people.

○ Minutes later, Rafael Zulueta was seen walking back from the beach towards the
terminal. Heading towards the ramp of the plane, plaintiff said, “You people
almost made me miss your flight. You have a defective announcing system and I
was not paged.”

○ Mr. Sitton, according to plaintiffs; Mr. Pendleton according to defendants —

asked plaintiffs to turn over their baggage claim checks.

○ Plaintiffs did so, handing him four (4) claim checks. However, only three (3) bags
were located and segregated from the rest of the passenger's luggage.

○ Once three bags had been identified, and while the search was going on for the
fourth bag, the PANAM's airport manager demanded the plaintiffs to open the
bags and allow them to inspect it.

○ However, Mr. Zulueta refused and warned that the defendant could open the
bags only by force and at the peril of a lawsuit.

○ Mr. Sitton, defendant's manager, told plaintiff that he would not be allowed to
proceed to Manila on board the plane and handed Zulueta a letter saying that
they are forced to off-load him from the flight due to the fact that he refused to
open his checked baggage for inspection as requested.

○ Though originally all three plaintiffs had been offloaded, Rafael requested that his
wife and daughter be permitted to continue with the flight. This was allowed but
they were required to leave the three bags behind.

○ Upon arrival at Manila, Mrs. Zulueta demanded of the defendant's Manila office
that it reroute plaintiff Rafael Zulueta to Manila at the earliest possible time, by
the fastest route, and at its expense. However, defendants refused.

○ In December 1964, plaintiffs demanded that the defendant reimburse them in the
sum of P1,505,502.85 for damages but defendants refused to do so.

○ CFI: The Court of First Instance of Rizal ordered PANAM to pay plaintiffs the sum
of P5,502.85, as actual damages; plus, the further sum of P1,000,000.00 as
moral damages; the further sum of P400,000.00 as exemplary damages; and
attorney's fees in the sum of P100,000.00.

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ISSUES:

1) Whether or not moral damages are recoverable; (YES) and

2) Whether the award of P1,000,000 as moral damages was proper and justified by
the circumstances. (NO)

HELD:

○ The Supreme Court ruled that the moral and exemplary damages collectible
by the plaintiffs should be reduced to one-half of the amounts awarded by
the lower court, that is, to P500,000 for moral damages, and P200,000 for
exemplary damages, aside from the attorney's fees which should, likewise,
be reduced to P75,000.

○ The Court ordered Pan American World Airways, Inc., to pay plaintiffs the sums
of P500,000 as moral damages, P200,000 as exemplary damages, and P75,000
as attorney's fees, apart from P5,502.85 as actual damages, and without
prejudice to deducting the aforementioned sum of P50,000 already paid Mrs.
Zulueta, the decision appealed from.

○ Article 2217. Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of defendant's
wrongful act or omission.

○ The Court held that the records established plaintiffs' right to recover both moral
and exemplary damages.

■ The rude and rough reception plaintiff received at the hands of Sitton or
Captain Zentner when the latter met him at the ramp (“what in the hell do
you think you are? Get on that plane”);

■ The menacing attitude of Zentner or Sitton and the manner in which he

had asked plaintiff to open his bags (“open your bag,” and when told that a
fourth bag was missing, “I don't give a damn”);

■ The abusive language and highly scornful reference to plaintiffs as

monkeys by one of PANAM's employees (who turning to Mrs. Zulueta and
Miss Zulueta remarked, “will you pull these three monkeys out of here?”);

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 ■ The unfriendly attitude, the ugly stares and unkind remarks to which
plaintiffs were subjected, and their being cordoned by men in uniform as if
they were criminals, while plaintiff was arguing with Sitton;

■ The airline officials' refusal to allow plaintiff to board the plane on the
pretext that he was hiding a bomb in his luggage and their arbitrary and
high-handed decision to leave him in Wake;

■ Mrs. Zulueta's having suffered a nervous breakdown for which she was
hospitalized as a result of the embarrassment, insults and humiliations to
which plaintiffs were exposed by the conduct of PANAM's employees;

■ Miss Zulueta had suffered shame, humiliation and embarrassment for the
treatment received by her parents at the airport.

○ All these justify an award for moral damages resulting from mental
anguish, serious anxiety, wounded feelings, moral shock, and social
humiliation thereby suffered by plaintiffs.

○ Among the factors courts take into account in assessing moral damages
are the professional, social, political and financial standing of the offended
parties on one hand, and the business and financial position of the
offender on the other.

○ PANAM agents should have first inquired, with an open mind, about the cause of
his delay instead of assuming that he was at fault and of taking an arrogant and
overbearing attitude, as if they were dealing with an inferior. Just the same, there
is every reason to believe that, in all probability, things would not have turned out
as bad as they became had he not allowed himself, in a way, to be dragged to
the level or plane on which PANAM's personnel had placed themselves.

ARTICLE 2219

O.1. Coca-Cola Bottlers Philippines v. Meñez, G.R. No. 209906, 22 November 2017.

FACTS:

○ In March 1995, research scientist Ernani Meñez went to Rosante and ordered
two (2) bottles of beer. Thereafter, he ordered pizza and a bottle of Sprite. His
additional order arrived consisting of one whole pizza and a bottled soft drink
Sprite with a drinking straw.

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○ After Meñez drank from the straw the contents of the Sprite bottle, he noticed
that the taste of the soft drink was not one of Sprite but of a different substance
which was disgusting to taste. The substance smelled of kerosene.

○ He felt a burning sensation in his throat and stomach and could not control the
urge to vomit. He left his table for the toilet to vomit but was unable to reach the
toilet room. Instead, he vomited on the lavatory found immediately outside the
said toilet.

○ Meñez brought the bottle to the place where the waitresses were and angrily told
them that he was served kerosene. Upon passing the bottle and smelling it, all of
the waitresses confirmed that the bottle smelled of kerosene and not of Sprite.

○ Meñez found Gerardo Ovas Jr. of the traffic assistant unit and reported the
incident and requested the latter to accompany him to the Silliman University
Medical Center (SUMC).

○ While at the Emergency Room, he again vomited before the hospital staff could
examine him. Meñez had to be confined in the hospital for three (3) days. A
representative from Rosante came to the hospital and informed the hospital staff
that Rosante would take care of the hospital and medical bills of Meñez.

○ The bottle of Sprite was examined by Prof. Chester Dumancas, a licensed

chemist of Silliman University and the analysis identified the contents of the liquid
inside the bottle as pure kerosene.

○ Meñez then filed a complaint against CCBPI and Rosante. Rosante further
denied that the waitresses confirmed the content of the bottle to be kerosene. In
fact, Meñez refused to have the waitresses smell it.

○ CCBPI filed a motion to dismiss the complaint since the complaint revealed that
there is no allegation therein which stated that CCBPI used noxious or harmful
substances in the manufacture of its products. What the complaint repeatedly
stated is that the bottle with the name SPRITE on it contained pure kerosene.

○ Meñez introduced several exhibits to substantiate the damages he prayed for.

Among others were Explanation of Benefits and Statements of Account from
healthcare providers to show that he had to undergo a series of examinations in
the United States as a consequence of the incident.

○ Meñez also included in his exhibits his profile as a scientist in an attempt to prove
that damages were also incurred with the delay of his work; still as a
consequence of the kerosene poisoning.

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 ○ RTC: The RTC dismissed the complaint for insufficiency of evidence. It declared
that there was failure of Meñez to categorically establish the chain of custody of
the Sprite bottle which was the very core of the evidence in his complaint for
damages.

○ The Court noted that from the time of the incident, thirty-six (36) hours have
lapsed before the Sprite bottle was submitted for laboratory examination. During
such time, the Sprite bottle changed hands several times. The RTC further noted
that since kerosene had a characteristic smell and considering that the Sprite
bottle allegedly contained pure kerosene, it was quite surprising why the
employees of Rosante did not notice its distinct smell.

○ CA: The CA reversed the decision of the RTC. It ruled that the RTC erred in
dismissing the case for failing to comply with an administrative remedy because it
is not a condition precedent in pursuing a case for damages under Article 2187 of
the Civil Code which is the basis of Meñez's complaint for damages. It also
awarded moral and exemplary damages in favor of Meñez.

ISSUE:

Whether Meñez is entitled to moral damages under Article 2219. (NO)

HELD:

○ The Supreme Court held that the CA erred in ruling that Meñez is entitled to
moral damages, exemplary damages and attorney's fees. The cases when
moral damages may be awarded are specific. Unless the case falls under the
enumeration as provided in Article 2219, which is exclusive, and Article
2220 of the Civil Code, moral damages may not be awarded.

○ The only ground which could sustain an award of moral damages in favor of
Meñez and against CCBPI is Article 2219 (2) — quasi-delict under Article 2187
causing physical injuries.

○ Meñez has not presented competent, credible and preponderant evidence

to prove that he suffered physical injuries when he allegedly ingested
kerosene from the Sprite bottle in question. Nowhere in the CA Decision is
the physical injury of Meñez discussed.

○ The statements of the doctors who tended to the medical needs of Meñez were
equivocal. “Physical effects on the body” and “adverse effect on his body” are not
very clear and definite as to whether or not Meñez suffered physical injuries and

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 if these statements indicate that he did, what their nature was or how extensive
they were. Consequently, in the absence of sufficient evidence on physical
injuries that Meñez sustained, Meñez is not entitled to moral damages.

O.2. Cruz v. People of the Philippines, G.R. No. 166441, 08 October 2014.

FACTS:

○ In December 1993, at about 2:00 o'clock in the morning, along the Bangar-Luna
Road, Barangay Central West No. 2, Municipality of Bangar, Province of La
Union, Philippines, while AAA, an unmarried woman, fifteen (15) years old, was
sleeping inside the tent along Bangar-Luna Road.

○ Norberto Cruz removed her panty and underwear and lay on top of AAA,
embracing and touching her vagina and breast with intent of having carnal
knowledge of her by means of force but did not succeed because of the
resistance of AAA.

○ At about 3:00 o’clock in the morning of the same day, Cruz unlawfully and
feloniously touched the vagina of BBB against her will and with no other purpose
but to satisfy his lascivious desire to the damage and prejudice of said offended
party.

○ The Prosecution narrated that Norberto Bartolome and [his wife] Belinda Cruz
were engaged in the selling of plastic wares and glass wares in different
municipalities around the country. On December 20, 1993, Norberto and Belinda
employed AAA and BBB to help them in selling their wares in Bangar, La Union
which was then celebrating its fiesta.

○ From Libsong East, Lingayen, Pangasinan to Bangar, La Union, AAA and BBB
boarded a passenger jeepney owned by Norberto. Upon reaching Bangar, La
Union, at around 8:00 in the evening of December 20, 1993, they parked in front
of Maroon enterprises. They brought out all the goods and wares for display.

○ Two tents were fixed in order that they will have a place to sleep. Belinda and the
driver proceeded to Manila in order to get more goods to be sold.

○ On December 21, 1993, at around 1:00 o’clock in the morning, AAA and BBB
went to sleep. Less than an hour later, AAA was awakened when she felt that
somebody was on top of her. Norberto allegedly tried to rape her and ordered her
not to scream or she’ll be killed. AAA was able to fight back and resist Norberto.

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 ○ Thirty minutes later, when AAA returned to their tent, she saw Norberto touching
the private parts of BBB. AAA saw her companion awake but her hands were
shaking. When she finally entered the tent, Norberto left and went outside.

○ Norberto denied the criminal acts imputed to him. He claimed that it was not
possible for him to commit the crimes hurled against him because there were
many people around who were preparing for “simbang gabi”, considering that the
tents were located near the road and the municipal hall.

○ RTC: The RTC found petitioner guilty beyond reasonable doubt for attempted
rape and acts of lasciviousness. Payment of Php20,000 to AAA and Php10,000
to BBB for moral damages.

○ CA: Affirmed the decision of the trial court but acquitted Norberto of acts of
lasciviousness because BBB did not testify.

ISSUE:

Whether AAA is entitled to moral damages under Article 2219. (YES)

HELD:

○ The SC ruled that there is no attempted rape but found Norberto guilty of acts of
lasciviousness towards AAA.

○ The Supreme Court increased the award of moral damages from Php20,000 to
Php30,000 and awarded AAA Php20,000 in civil indemnity with 6% interest per
annum.

○ In acts of lasciviousness, the victim suffers moral injuries because the offender
violates her chastity by his lewdness. Moral damages include physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury.

○ Article 2219, (3), of the Civil Code expressly recognizes the right of the
victim in acts of lasciviousness to recover moral damages.

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 RIGHT OF JURIDICAL PERSONS TO RECOVER MORAL DAMAGES

Q.1. Filipinas Broadcasting Network, Inc. v. AGO Medical and Educational Center,
G.R No. 141994, 17 January 2005.

FACTS:

○ "Exposé" is a radio documentary program hosted by Carmelo ‘Mel’ Rima and

Hermogenes ‘Jun’ Alegre. Exposé is aired every morning over DZRC-AM which
is owned by Filipinas Broadcasting Network, Inc.

○ In the morning of 14 and 15 December 1989, Rima and Alegre exposed various
alleged complaints from students, teachers and parents against Ago Medical and
Educational Center-Bicol Christian College of Medicine (AMEC) and its
administrators.

○ February 1990: Claiming that the broadcasts were defamatory, AMEC and
Angelita Ago, as Dean of AMEC’s College of Medicine, filed a complaint for
damages against FBNI, Rima and Alegre.

○ The complaint further alleged that AMEC is a reputable learning institution. With
the supposed exposés, FBNI, Rima and Alegre “transmitted malicious
imputations, and as such, destroyed plaintiffs’ (AMEC and Ago) reputation.”
AMEC and Ago included FBNI as defendant for allegedly failing to exercise due
diligence in the selection and supervision of its employees, particularly Rima and
Alegre.

○ Rima and Alegre replied in saying that their broadcasts against AMEC were fair
and true. FBNI, Rima and Alegre claimed that they were plainly impelled by a
sense of public duty to report the “going on in AMEC, [which is] an institution
imbued with public interest.
○ RTC: Held that FBNI and Alegre liable for libel except Rima. The trial court held
that the broadcasts are libelous per se. The defamation was presumed harmful
and therefore not needed to be proved.

○ CA: The CA affirmed the trial court’s judgment with modification. The appellate
court made Rima solidarily liable with FBNI and Alegre.

○ FBNI then argued that AMEC is not entitled to moral damages because they are
a juridical entity.

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ISSUE:

Whether AMEC is entitled to moral damages. (YES)

HELD:

○ The Supreme Court affirmed the CA decision but reduced the amount of
moral damages from Php300,000 to Php150,000 and deleted the award of
attorney's fees. The Court of Appeals failed to point out any circumstance to
justify the award. The reduction was done because AMEC has not suffered any
substantial or material damage to its reputation.

○ A juridical person is generally not entitled to moral damages because, unlike a

natural person, it cannot experience physical suffering or such sentiments as
wounded feelings, serious anxiety, mental anguish or moral shock. Nevertheless,
AMEC’s claim for moral damages falls under item 7 of Article 2219 of the
Civil Code. This provision expressly authorizes the recovery of moral damages
in cases of libel, slander or any other form of defamation.

○ Article 2219(7) does not qualify whether the plaintiff is a natural or juridical
person. Therefore, a juridical person such as a corporation can validly
complain for libel or any other form of defamation and claim for moral
damages.

Additional Notes:

Whether the broadcasts are libelous

A libel is a public and malicious imputation of a crime, or of a vice or defect, real or

imaginary, or any act or omission, condition, status, or circumstance tending to cause
the dishonor, discredit, or contempt of a natural or juridical person, or to blacken the
memory of one who is dead. There is no question that the broadcasts were made public
and imputed to AMEC defects or circumstances tending to cause it dishonor, discredit
and contempt. Rima and Alegre's remarks such as “greed for money on the part of
AMEC's administrators”; “AMEC is a dumping ground, garbage of...moral and physical
misfits”; “The Dean of Student Affairs of AMEC is Justita Lola, as the family name
implies. She is too old to work, being an old woman”; and AMEC students who graduate
“will be liabilities rather than assets” of the society are libelous per se. Taken as a
whole, the broadcasts stated that AMEC is a money-making institution where
physically and morally unfit teachers abound.

Torts

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The basis of the present action is a tort. Joint tortfeasors are jointly and severally liable
for the tort which they commit. Joint tortfeasors are all the persons who command,
instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for their benefit. Thus,
AMEC correctly anchored its cause of action against FBNI on Articles 2176 and 2180 of
the Civil Code

Due Diligence in the Selection and Supervision of Employees

There is insufficient evidence on record that FBNI exercised due diligence in the
selection and supervision of its employees, particularly Rima and Alegre. FBNI did not
show how it exercised diligence in supervising its broadcasters. No clear and convincing
evidence shows that Rima and Alegre underwent FBNI's “regimented process” of
application. Hence, FBNI is solidarily liable to pay damages together with Rima and
Alegre.

Q.2. Crystal v. Bank of the Philippine Islands, G.R No. 172428, 28 November 2008.

FACTS:

○ In March 1978, spouses Raymundo and Desamparados Crystal obtained a

P300,000.00 loan in behalf of the Cebu Contractors Consortium Co. (CCCC)
from BPI-Butuan. The loan was secured by a chattel mortgage on heavy
equipment and machinery of CCCC.

○ A promissory note for the amount of P300,000.00, also in favor of BPI-Butuan

was executed.

○ August 1979: CCCC renewed a previous loan, this time from BPI-Cebu City. A
promissory note was executed that holds them jointly and severally liable for the
loan with CCCC.

○ CCCC had no real property to offer as security for the loan; hence, the spouses
executed a real estate mortgage over their own real property in September 1977.
They executed another real estate mortgage over the same lot in favor of
BPI-Cebu City, to secure an additional loan of P20,000.00 for CCCC.

○ CCCC, as well as the spouses, failed to pay its loans to both BPI-Butuan and
BPI-Cebu City when they became due. Thus, BPI resorted to the foreclosure of
the chattel mortgage and the real estate mortgage.

○ April 1985: The spouses filed an action for Injunction With Damages, With A
Prayer For A Restraining Order and/ or Writ of Preliminary Injunction.

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 ○ RTC: The RTC, Cebu dismissed the spouses’ complaint and ordered them to pay
moral and exemplary damages and attorney’s fees to BPI. The spouses
appealed the decision of the trial court to the Court of Appeals.

○ CA: The CA dismissed the spouses’ appeal. They then argued that the Court of
Appeals erred in awarding moral damages to BPI, which is a corporation.

ISSUE:

Whether BPI is entitled to moral damages. (NO)

HELD:

○ The Supreme Court denied the petition. The SC affirmed the CA’s decision with
modification: that the award of moral damages to the Bank of the Philippine
Islands is deleted. BPI is not entitled to moral damages. Generally, juridical
persons are not entitled to moral damages because, unlike a natural person, it
cannot experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock.

○ Indeed, while the Court may allow the grant of moral damages to
corporations, it is not automatically granted; there must still be proof of the
existence of the factual basis of the damage and its causal relation to the
defendant’s acts. This is so because 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.

○ BPI may have been inconvenienced by the suit, but the Court did not see how it
could have possibly suffered besmirched reputation on account of the single suit
alone.

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