BOMBA NOTES 19-20

JRU LAW

TORTS AND DAMAGES

CASE DIGESTS
WEEK 8
 MAGALLANES WATERCRAFT ASSOCIATION, INC. VS. MARGARITO AUGUIS AND
DIOSCORO BASNIG
G.R. NO. 211485; MAY 30, 2016
PONENTE: JUSTICE MENDOZA
FACTS OF THE CASE: Petitioner Magallanes Watercraft Association, Inc. (MWAI) is a local
association of motorized banca owners and operators ferrying cargoes and passengers where
respondents Margarito C. Auguis and Dioscoro C. Basnig are members.

On December 5, 2003, the Board of Trustees of MWAI suspended the rights and privileges of Auguis
and Basnig for thirty (30) days for their refusal to pay their membership dues and berthing fees
because of their pending oral complaint and demand for financial audit of the association funds.In
spite of their suspension, Auguis and Basnig still failed to settle their obligations with MWAI. For said
reason, the Board issued another memorandum suspending their rights and privileges for another
thirty (30) days.

On February 6, 2004, respondents filed an action for damages and attorney's fees with a prayer for
the issuance of a writ of preliminary injunction before the RTC. In its January 11, 2007 decision, the
trial court ordered Auguis and Basnig to pay their unpaid accounts but, nonetheless, required MWAI
to pay them actual damages and attorney's fees.

Aggrieved, MWAI appealed before the CA. In its March 14, 2013 decision, the CA affirmed with
modification to the RTC decision. According to the appellate court, the RTC correctly held that MWAI
was guilty of an ultra vires act. Thus, MWAI was bound to indemnify respondents because they
suffered financial losses as a result of the illegal suspension of their berthing privileges and their right
to operate their bancas.

The appellate court also agreed with the RTC that MWAI was liable for damages in favor of the
respondents. However, CA deleted the award of actual damages for their failure to adduce evidence
to prove the claimed loss of actual income and awarded them temperate damages in recognition of
the pecuniary loss they suffered. Moreover, the CA saw it fit to grant a reduced amount of attorney's
fees because Auguis and Basnig were compelled to litigate or incur expenses to protect their
interests.

MWAI moved for reconsideration, but its motion was denied by the CA in its January 17, 2014
resolution. Hence, MWAI filed a petition for review to the Supreme Court.

ISSUE TO BE RESOLVED: WON CA erred in granting respondents with Attorneys fees;

RULING OF THE COURT: NO, The suspension of Auguis and Basnig was in the lawful exercise of
MWAI’s rights and powers as a corporation. They shal bear the losses they may have suffered as a
consequence of their lawful suspension. Therefore, the award of Attorney’s fees is without legal
basis.
It is a settled rule that attorney’s fees shall not be recovered as cost where the party’s
persistence in litigation is based on his mistaken belief in the righteousness of his case.
 LUZ CRISTOBAL VS EMPLOYEES COMPENSATION COMMISSION AND GOVERNMENT
SERVISE INSURANCE SYSTEM (GSIS)
G.R. NO. L-49280; FEBRUARY 26, 1981
PONENTE: JUSTICE MAKASIAR

FACTS OF THE CASE: Luz Cristobal, the herein petitioner, was the widow of the deceased
Fortunato Cristobal, who died of rectal cancer. Petitioner believes that her husband contracted rectal
cancer or at least the risk of contracting the same had been increased by the conditions under which
he was working and accordingly ordered respondent G SI S:

1) to pay the petitioner the sum of P12,000.00 as death benefits;

2) to reimburse petitioner medical, surginal and hospital expenses duly supported by

proper receipts;

3) to pay petitioner the sum of P700.00 as funeral expenses; and

4) to pay the petitioner attorney's fees equivalent to 10% of the death benefits.

GSIS and ECC filed an MR questioning the award of damages alleging that rectal cancer is not
a compensable illness and therefore they are not liable with said damages.

ISSUE TO BE RESOLVED: WON THE AWARD OF ATTORNEY’S FEES, EQUIVALENT TO 10%

OF THE DEATH BENEFITS, IS CORRECT;
RULING OF THE COURT: YES. Nothing is wrong with the court's award of attorney's fees which is
separate and distinct from the other benefits awarded. The defaulting employer or governement
agency remains libale for attorney's fees; because it compelled the claimant to employ the services of
counsel by unjustly refusing to recognize the validity of the claim of peitioner.
Fairness dictates that the counsel should receive compensation for his services; otherwise, it
would be entirely difficult for claimants, majority of whom are notlearned in the intrecacies of the
law, to get good legal service. To deny counsel compensation for his professional services, would
amount to deprivation of property without due process of law.
The court further ruled that, notwithstanding the fact that petitioner appealed via forma
pauperis, the Court merely exempts a pauper litigant from the payment of legal fees and from the
filing of appeal bond, printed record and printed brief, but does not exempt him from the payment of
attorney’s fees.
 MODESTA BORCENA, ANTONIO GIMENO, JR., ESTELA GIMENO, ROLANDO GIMENO,
EDGARDO GlMENO and ANELIA GIMENO vs.
INTERMEDIATE APPELLATE COURT, HON. CLEMENTE D. PAREDES, ROMULO C. BASA,
LEOVINO LEGASPI and HON. ZOTICO TOLETE
G.R. NO. 70099; JANAURY 7, 1987
PONENTE: JUSTICE GUTIERREZ
FACTS OF THE CASE: The petitioners in this case are questioning the amount which the respondent
Court of Appeals and Trial Court ordered to be paid to their former lawyer, as his compensation.
The petitioners engaged the legal servies of Atty. Gil De Guzman for their case against Nam
Kwang, Socea Bonna and MWSS who are parties to the total and partial destruction of some of the
road and residential lots at the Memorial Park Subdivision in Bulacan.
Atty. De Guzman then acted on the case of herein petitioners and filed a motion for
preliminary attachment praying that an order be issued attaching properties of the defendants
amounting to 710K plus 20% representing attorney’s fees, or a total of 852K. MWSS was then
ordered by the court to issue a check in the name of Rolando Gimeno for the amount of 852K and to
release the said check to him upon proper identification. MWSS complied.
Later on, Rolando Gimeno, on behalf of the other petitioner, terminated the service of Atty. De
Guzman for failure/ refusal to return to Mr. Gimeno the checks for deposit with the Municipal
Treasurer of Sta Maria Bulacan. Atty. de Guzman then filed his comment stating that he has no
objection to the substitution of counsel provided that the agreed honorarium is complied with, and
subject to the attomey's lien.
Petitioners filed a manifestation and motion praying that: (1) the Court ascertain and fix the
fees of Atty. de Guzman to be paid after the judgment award to the petitioners shall have been
satisfied; and (2) that Atty. de Guzman be ordered to deposit in Court the PNB Checks and to deliver
to the petitioners all documents in his possession.
Court ordered the termination of Atty. De Guzman by petitioners as unjustified and ordered
them to pay Atty. Guzman, P177,500.00 as per contract of legal services plus and apart from 20% of
whatever attorney's fees may be finally awarded to plaintiffs should they ultimately prevail
ISSUE TO BE RESOLVED: WON ATTY GIL DE GUZMAN IS ENTITLED FOR HIS LEGAL
SERVICES TO THE PETITIONERS, AS AWARDED BY THE LOWER COURTS;
RULING OF THE COURT: NO. Granting that the dismissal of Atty. Gil de Guzman was unjustified, it
is obvious that, in the light of the services rendered, the stipulation of attorney's fees in the contract
for legal services becomes unconscionable and unreasonable. Moreover, the Court agrees with the
petitioners that Atty. de Guzman was dismissed for a justifiable cause. The petitioners contend that
Rolando Gimeno delivered to Atty. de Guzman the PNB checks in the amount of P852,000.00 issued
by the MWSS as a result of the writ of attachment and ordered them to be deposited with the
municipal treasurer of Sta. Maria, Bulacan; that after three months, Atty. de Guzman had not
delivered said checks so that Gimeno decided to take the checks and deposit them himself but Atty.
de Guzman denied having the checks and refused to return them forcing the petitioners to dismiss
him.
 Considering that: (1) the stipulation on payment for legal services appears unconscionable and
unreasonable; and (2) Atty. Gil de Guzman was dismissed for justifiable cause, the amount due to
the lawyer should be fixed on a quantum meruit . This Court has stated that:

In determining the compensation of an attorney, the following circumstances should be

considered:

 the amount and character of the services rendered, the responsibility imposed;

 the amount of money or the value of the property affected by the controversy,
or involved in the employment;

 the skill and experience caged for in the performance of the service;

 the professional standing of the attorney;

 the results secured; and

 whether or not the fee is contingent or absolute, it being a recognized rule that
an attorney may properly charge a much larger fee when it is to be contingent
than when it is not. 

Within the period of his employment by the petitioners, Atty. de Guzman filed the complaint,
had the defendants Nam Kwang and Socea Bonna declared in default and finally, on his motion, the
lower court issued the writ of attachment against MWSS. At the time of Atty. de Guzman's
termination as counsel, the case had not gone through pre-trial.

Nothing in the case so far appears complicated and no extra ordinary skill was needed for
Atty. de Guzman to accomplish what he had done in the case before he was terminated.

For these services of Atty. de Guzman, we rule that he is entitled to the amount of P10,000.00
as reasonable attorney's compensation.
 G.R. No. 92383
SUN INSURANCE OFFICE, LTD., petitioner, vs.
THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

July 17, 1992

Cruz, J.:
FACTS OF THE CASE: The wife of Felix Lim, Jr. sought the intercession of the Court when Sun
Insurance Office, Ltd. rejected her insurance claims amounting to Php200,000. The death of her
husband happened on October 6, 1982 at 10:00 AM as witnessed by Pilar Nalagon. Mr. Lim was
playing with his unloaded handgun when he pointed it to Ms. Nalagon. She pushed it aside and said
it might be loaded. The former assured her and pointed the gun to his temple and pull the trigger. An
explosion occur. The gun was loaded resulting to the death of Mr. Lim.
Suicide is uninsurable. Petitioner admitted that the incident was not but also argued that it is neither
an accident. Respondent sued and won in the RTC of Zamboanga City. CA affirmed, hence the
petition.

ISSUE: WHETHER OR NOT THE INCIDENT CAN BE CONSIDERED AS AN ACCIDENT THUS

COVERED BY THE INSURANCE

DECISION: An accident is an event which happens without any human agency or, if happening
through human agency, an event which, under the circumstances, is unusual to and not expected by
the person to whom it happens. It has also been defined as an injury which happens by reason of
some violence or casualty to the injured without his design, consent, or voluntary co-operation. As
such, what happened to the respondent’s husband was an accident.
While Mr. Lim was negligent, the difference lies with the fact that the victim did not know that the
gun was loaded as far as Lim is concerned since he has removed the magazine. There is a difference
when in a situation, a person overly estimates his capacity knowing the danger of the situation. In
this case, Lim did not deliberately exposed himself to any danger.
Insurance contracts moreover are interpreted liberally in favor of the assured. There is no reason for
deviation.
Lastly, as this is a case of first impression, the Court cannot grant the payment of moral damages
since the petitioner was acting in good faith when it resisted respondent’s claim.
 G.R. No. 190957
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Petitioner, v.
APAC MARKETING CORPORATION, REPRESENTED BY CESAR M. ONG,JR., Respondents.

June 05, 2013

Sereno, CJ.

FACTS OF THE CASE:On March 1998, a simple purchase transaction was entered into by the two
parties whereby APAC Marketing Corporation shall deliver to PNCC the crushed basalt rocks. It
supposes that the defendant would issue a check before delivery but was extended to a payment of
30 days. After making the deliveries, defendant failed to pay a payment for the sum of
Php782,296.80 including 6% interest rate starting April, 1999.

In August 17, 1999, petitionerfiled a case against defendants. On November 16, 1999, defendant
filed a motion to dismissed but was dismissed on January 17, 2000 thus trial ensued. Only petitioner
presented its evidence. Defendant’s right to present was waived due to non-appearance. On July 10,
2006, trial court decided in favor of the respondents. Petitioner filed for a motion of reconsideration
due to full payment. Decision was revised. Hence, petitioner was ordered to pay Php220,234.083;
Php5,000 as attorney’s fees and Php3,000 per court appearance; and the cost of the suit.

Decision was appealed to CA which ruled the decision of the RTC but modified the interest rate to
6%. Petitioner moved to reconsider with the main focus on the issue of attorney’s fees. Dissatisfied
still, petitioner proceeded to file the case at the Supreme Court on July 29.

ISSUE: WHETHER OR NOT THE COURT ERRED IN AWARDING ATTORNEY’S FEES

DECISION: As a general rule, parties may stipulate the recovery of reasonable attorney’s fees to a
litigant. In ABS-CBN Broadcasting Corp. v. CA, attorney’s fees may be recovered as actual and
compensatory damages. Further in Benedicto v. Villaflores, attorney’s fees are exception rather than
rule which demands factual, legal and equitable justification to avoid speculation and conjecture. It is
not enough just to state the amount of the fee.
In the case at bar, the Court did not find any factual, legal and equitable justification for the said
award. As such, the award of attorney’s fees in the amount of Php50,000 as acceptance fee and
Php3,000 as appearance fee, in favor of respondent APAC Marketing Incorporated, was deleted.
 BENITA SALAO, et al., plaintiffs-appellants, 
vs.
JUAN S. SALAO, later substituted by PABLO P. SALAO, Administrator of the Intestate of
JUAN S. SALAO; now MERCEDES P. VDA. DE SALAO, ROBERTO P. SALAO, MARIA SALAO
VDA. DE SANTOS, LUCIANA P. SALAO, ISABEL SALAO DE SANTOS, and PABLO P. SALAO,
as successors-in-interest of the late JUAN S. SALAO, together with PABLO P. SALAO,
Administrator, defendants-appellants
G.R. No. L-26699 March 16, 1976.

FACTS: Spouses Manuel Salao and Valentina Ignacio begot four children named Patricio, Alejandra,
Juan and Ambrosia. Patricio died ang was survived by his only child Valentin Salao.

Manuel Salao died in 1885 while Valentina in 1914. The estate of the latter was administered by
Ambrosia and was partitioned extrajudicially between her four legal heirs AlejandraSalao, JuanSalao,
Sr., AmbrosiaSalao and ValentinSalao. Part of the estate includes the disputed Calunuran fishpond.
However, a documentary evidence proves that the Calunuran fishpond was registered in the names
of Juan Salao, Sr. and Ambrosia Salao prior to the death of Valentina. Juan and Ambrosia purchased
another fishpond, the Lewa fishpond.

Juan Salao Sr. died. His son, Juan Salao, Jr became the owner of the other half of the two fishponds
which he inherited from the former. Later on, Valentin died, and his intestate estate was
extrajudicially partitioned between his two daughters Victorina and herein petitioner Benita Salao.
Part of the estate was Valentin’s ownership over the Calunuran fishpond.

Petitioner Benita allege that Ambrosia donated three lots to her, such lots form part of the Calunuran
fishpond.

However, Juan Jr. contends that prior to the death of Ambrosia, the latter donated her ownership
over the two fishponds. Ambrosia died.

Petitioners filed a complaint against Juan Salao, Jr. for the annulment of the donation made to the
latter and for the reconveyance to them of the Calunuran fishpond as Valentin Salao’s supposed
share. Their contention was that the said share of Valentin over the fishponds were held in trust by
Juan Sr and Ambrosia.

In his answer, Juan Salao, Jr. raised as defense the indefeasibility of Torrens Title secured by his
father and Ambrosia over their names, as well as statute of frauds, prescription and laches. As
counter-claims, he asked for moral damages amounting to P200,000, attorney's fees and litigation
expenses of not less than P22,000 and reimbursement of the premiums which he has been paying on
his bond for the lifting of the receivership Juan S. Salao, Jr. died in 1958 at the age of seventy-one.
He was substituted by his widow, Mercedes Pascual and his six children and by the administrator of
his estate.
ISSUE: WON the Calunuran fishpond was held in trust for Valentin Salao by Juan Y. Salao, Sr. and
Ambrosia Salao. That issue is tied up with the question of whether plaintiffs' action for reconveyance
had already prescribed.

RULING: There was no resulting trust in this case because there never was any intention on the
part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any trust. There was no
constructive trust because the registration of the two fishponds in the names of Juan and Ambrosia
was not vitiated by fraud or mistake.

Petitoner’saction was filed in 1952 or after the lapse of more than forty years from the date of
registration. The plaintiffs and their predecessor-in-interest, Valentin Salao, slept on their rights if
they had any rights at all.

On the matter of damages, the defendants contend that they are entitled to damages because the
plaintiffs acted maliciously or in bad faith in suing them. They ask for P25,000 attorney’s fees and
litigation expenses and, in addition, moral damages. The SC held that the defendant’s appeal is not
meritorious. The record shows that the plaintiffs presented fifteen witnesses during the protracted
trial of this case which lasted from 1954 to 1959. They fought tenaciously. They obviously incurred
considerable expenses in prosecuting their case. Although their causes of action turned out to be
unfounded, yet the pertinacity and vigor with which they pressed their claim indicate their sincerity
and good faith.Considering those circumstances, it cannot be concluded with certitude that plaintiffs'
action was manifestly frivolous or was primarily intended to harass the defendants. An award for
damages to the defendants does not appear to be just and proper.

The worries and anxiety of a defendant in a litigation that was not maliciously instituted are not the
moral damages contemplated in the law (Solis &Yarisantos vs. Salvador, L-17022, August 14, 1965,
14 SCRA 887; Ramos vs. Ramos, supra). The instant case is not among the cases mentioned in
articles 2219 and 2220 of the Civil Code wherein moral damages may be recovered. Nor can it be
regarded as analogous to any of the cases mentioned in those articles.

The defendants invoke article 2208 (4) (11) of the Civil Code which provides that attorney's fees may
be recovered "in case of a clearly unfounded civil action or proceeding against the plaintiff"
(defendant is a plaintiff in his counterclaim) or "in any other case where the court deems it just and
equitable" that attorney's fees should he awarded.

But once it is conceded that the plaintiffs acted in good faith in filing their action there would be no
basis for adjudging them liable to the defendants for attorney's fees and litigation expenses (See
Rizal Surety & Insurance Co., Inc. vs. Court of Appeals, L-23729, May 16, 1967, 20 SCRA 61).

It is not sound public policy to set a premium on the right to litigate. An adverse decision does not
ipso facto justify the award of attorney's fees to the winning party (Herrera vs. Luy Kim Guan, 110
Phil. 1020, 1028; Heirs of Justiva vs. Gustilo, 61 O. G. 6959).
 PUBLIC ESTATES AUTHORITY, petitioner, 
vs.
ELPIDIO S. UY, doing business under the name and style EDISON DEVELOPMENT &
CONSTRUCTION, AND THE COURT OF APPEALS, respondents.
G.R. Nos. 147933-34            December 12, 2001

YNARES-SANTIAGO, J.:

FACTS: Petitioner Public Estates Authority is the government agency tasked by the Bases Conversion
Development Authority to develop the first-class memorial park known as the Heritage Park, located
in Fort Bonifacio, Taguig, Metro Manila. On November 20, 1996, petitioner executed with respondent
Elpidio S. Uy, doing business under the name and style Edison Development & Construction, a
Landscaping and Construction Agreement, whereby respondent undertook to perform all landscaping
works on the 105-hectare Heritage Park.

The Agreement stipulated that the completion date for the landscaping job was within 450 days. Due
to delays, the contracted period was extended to 693 days. Among the causes of the delay was
petitioner's inability to deliver to respondent 45 hectares of the property for landscaping, because of
the existence of squatters and a public cemetery.

Respondent instituted with the Construction Industry Arbitration Commission an action, docketed as
CIAC Case No. 02-2000, seeking to collect from petitioner damages arising from its delay in the
delivery of the entire property for landscaping. Specifically, respondent alleged that he incurred
additional rental costs for the equipment which were kept on standby and labor costs for the idle
manpower. Likewise, the delay incurred by petitioner caused the topsoil at the original supplier to be
depleted, which compelled respondent to obtain the topsoil from a farther source, thereby incurring
added costs. He also claims that he had to mobilize water trucks for the plants and trees which have
already been delivered at the site. Furthermore, it became necessary to construct a nursery shade to
protect and preserve the young plants and trees prior to actual transplanting at the landscaped area.

Petitioner argues that its liability to respondent has been extinguished by novation when it assigned
and turned over all its contracted works at the Heritage Park to the Heritage Park Management
Corporation.Petitioner filed a counterclaim against defendant which includes attorney’s fees.

CIAC ruled in favor of respondent.

ISSUE: WON the denial of petitioner’s claim for attorney’s fees was proper.

RULING: Attorney's fees are in the nature of actual damages, which must be duly
proved.17 Petitioner failed to show with convincing evidence that it incurred attorney's fees.
 TIU PO VS.HON. PEDRO JL. BAUTISTA

MELENCIO-HERRERA, J.:
FACTS:
Juan Pambuan, Jr., filed a Complaint for Reconveyance and Damages of approximately P400,000.00
against petitioners before the CFI of Rizal, Pasay City for an alleged wrongful sale at public auction of
a certain real property. Petitioners presented their Answer with a counter-claim, on account of the
"malicious and unfounded action.”Then, petitioners filed an ex-parte Motion for exemption from
payment of legal fees on their counterclaim alleging that it was compulsory in nature and that under
section 5(a), Rule 141, only a permissive counterclaim is subject to payment of legal fees.
However, on March 15, 1976, petitioners was required to deposit P1,410.00 pending resolution by
the Court and subject to refund. Petitioners' Motion remained unresolved. Eventually, on December
28, 1979, respondent Judge denied petitioners' Motion for refund on the ground that petitioners'
counterclaim is permissive and not compulsory. Reconsideration was denied. Hence, the petition.

ISSUE: WON THE PETITIONER’S COUNTERCLAIM IS COMPULSARY AND SHOULD BE

REFUNDED.

HELD: YES
Petitioners' counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim.
They are damages claimed to have been suffered by petitioners as a consequence of the action filed
against them. They have to be pleaded in the same action, otherwise, petitioners would be precluded
by the judgment from invoking the same in an independent action.Also, the same evidence that
sustains petitioners' counterclaim will refute private respondent's own claim for damages. This is an
additional factor that characterizing petitioners' counterclaim as compulsory.
In respect of attorney's fees, it should also be held that where a claim therefor arises out of the filing
of the complaint they, too, should be considered as in the nature of a compulsory counterclaim. They
should be pleaded or prayed for in the answer to the complaint in order to be recoverable, otherwise,
they would be barred.
NOTE:
Under section 4, Rule 9, a counterclaim is compulsory in nature 1) if it arises out of, or is necessarily
connected with the transaction or occurrence that is the subject matter of the opposing party's claim;
2) if it does not require for its adjudication the presence of third parties over whom the Court cannot
acquire jurisdiction; and 3) if the Court has jurisdiction to entertain the claim. A compulsory
counterclaim is barred if not set up.
Conversely, a counterclaim is permissive where it has no necessary connection with the transaction
or occurrence that is the subject matter of the opposing party's claim, or even where there is such
connection, the Court has no jurisdiction to entertain the claim, or if it requires for its adjudication
the presence of third persons over whom the Court, cannot acquire jurisdiction.
 JOSE C. QUIRANTE VS.HONORABLE INTERMEDIATE APPELLATE COURT

REGALADO, J.:
FACTS:
Dr. Indalecio Casasola, had a contract with a building contractor named Norman GUERRERO. The
Philippine American General Insurance Co. Inc. (PHILAMGEN, for short) acted as bondsman for
GUERRERO. GUERRERO'S fail to perform his part of the contract within the period specified, thus, Dr.
Indalecio Casasola, thru hiscounsel, Atty. John Quirante, sued both GUERRERO and PHILAMGEN.
RTC rendered a decisionin favor of the plaintiff by rescinding the contract and ordering GUERRERO
and PHILAMGEN to pay damages. PHILAMGEN filed a notice of appeal but was allegedly filed out of
time. RTC issued a writ of execution and a petition was filed for the quashal of the writ of execution
and to compel RTC to give due course to the appeal but was dismissed by IAC. The case was
elevated to SC.
In the meantime, Dr. Casasola died.Herein petitioner Quirante filed a motion in the trial court for the
confirmation of his attorney's fees. According to him, there was an oral agreement between him and
the late Dr. Casasola, which agreement was allegedly confirmed in writing by the widowand
daughters of the deceased. The trial court granted the motion for confirmation.
Upon appeal, IAC set aside the decision. It ruled that the petition is pending in SC, the award of
damages confirmed may be premature. Also, assuming that the grant of damages is eventually
ratified, the alleged confirmation of attorney's fees will not and should not adversely affect non-
signatories thereto.

ISSUE: WON THE ATTORNEY’S FEES SHOULD BE AWARDED EVEN IF THE CASE IS STILL
ON APPEAL.

RULING: NO
Well settled is the rule that counsel's "claim for attorney's fees may be asserted either in the very
action in which the services in question have been rendered, or in a separate action."However, what
is being claimed here as attorney's fees by petitioners is different from attorney's fees under Article
2208, wherein the award is made in favor of the litigant, not of his counsel, and the litigantmay
enforce the judgment. Here, the petitioners' claims are based on an alleged contract for professional
services
Thus, we agree with the respondent court that the confirmation of attorney's fees is premature. Since
the main case from which the petitioner's claims for their fees may arise has not yet become final,
the determination of the propriety of said fees and the amount thereof should be held in abeyance.
This procedure gains added validity in the light of the rule that the remedy for recovering attorney's
fees, as an incident of the main action, may be availed of only when something is due to the client.
With regard to the effect of the alleged confirmation of the attorney's fees by some of the heirs of
the deceased, the court ruled that such issue should be determined by the court a quo inasmuch as it
also necessarily involves the same contingencies in determining the propriety and assessing the
extent of recovery of attorney's fees by both petitioners herein.
 G.R. No. L-50473; January 21, 1985
SPOUSES JOSE TAN KAPOE and CONCEPCION NGO KAN vs. SILVESTRE MASA, ENRIQUE
MASA, JESUS MASA, FRANCISCO MASA, ROGELIO MASA, AURELIA HERNANDEZ, ANGEL
MALUNAY, PRESCILA HERNANDEZ, SIMPLICIA HERNANDEZ, Minors ENRICO MASA and
BRIGIDO MASA, and the HONORABLE COURT OF APPEALS

MELENCIO-HERRERA, J:
FACTS:Respondent Silvestre Masa is petitioners' tenant of a parcel of land located at Bo. Dila, Bay
Lagunafor ten (10) years. The other respondents are his co-workers.Masa wrote the latter asking for
the conversion of their share tenancy relationship to one of leasehold, which petitioners rejected.
Masa then filed before the Agrarian Court a petition for conversion which petitioners opposed and
who, instead filed a petition for ejectment. Eventually, the conversion was authorized and the same
was affirmed.
Even at the beginning of the agrarian dispute, petitioners started filing one criminal case after
another against Masa and his co-respondents, totalling six cases in all: 1) Grave Threats; 2) Oral
Defamation; 3) Violation of Sec 39 of RA 1199; 4) Usurpation of Real Rights; 5) Malicious Mischief
against Masa; 6) Malicious Mischief against Masa and other respondents – incarcerated but posted
bail. All cases were eventually dismissed.
Private respondents filed a Complaint for moral and exemplary damages against petitioners for
Malicious Prosecution. The lower court awarded moral and exemplary damages and attorney's fees.
CA affirmed.

ISSUE:
1) Whether or not petitioner’s claim that moral damages cannot be awarded in the absence of
any testimony as to physical suffering, mental anguish, fright, serious anxiety, social
humiliation and similar injuries is correct; and
2) Whether or not moral damages and exemplary damages can be merged in one award.

RULING:

1) Yes. The results of the filling of the unfounded successive complaints satisfactorily prove the
existence of the factual basis for moral damages and the causal relation to petitioners' acts.
Case after case was filed by petitioners. Not a single one prospered. Private respondents also
suffered the humiliation of incarceration. Beyond doubt, petitioners' motive was obviously for
harrassment and embarrassment of private respondents and as a retaliatory measure for the
agrarian case for conversion that they had filed, making the latter suffer moral suffering and
anxiety.
2) Yes. The award of moral and exemplary damages in an aggregate amount may not be the
usual way of awarding said damages. However, there can be no question that the entitlement
to moral damages having been established, exemplary damages may be awarded. And
exemplary damages may be awarded even though not so expressly pleaded in the complaint
nor proved.

Attorney's fees are also recoverable when exemplary damages are awarded, and in criminal
cases of malicious prosecution against the plaintiff.
 G.R. No. 133643; June 6, 2002
RITA SARMING, et. al. vs.CRESENCIO DY, et. al

QUISUMBING, J.:
FACTS:Petitioners are the successors-in-interest of original defendant Silveria Flores, while
respondents are the successors-in-interest of the original plaintiff Alejandra Delfin.
A controversy arose regarding the sale of Lot4163 which was half-owned by the original defendant,
Silveria Flores, although it was solely registered under her name. The other half was originally owned
by Silveria’s brother, Jose.Two rows of coconut trees planted in the middle of this lot serves as
boundary line.
In January 1956, the grandchildren of Jose and now owners of one-half of said lot, entered into a
contract with plaintiff Alejandra Delfino, for the sale of one-half share of the lot after offering the
same to their co-owner, Silveria, who declined for lack of money. Silveria did not object to the sale of
said portion to Alejandra.
Atty. DeograciasPinili, Alejandra’s lawyer then prepared the document of sale. In the preparation of
the document however, OCT no. 4918-A, covering Lot 5734, and not the correct title covering Lot
4163 was the one delivered to Atty. Pinili. Unaware of the mistake committed, Alejandra immediately
took possession of Lot 4163 and introduced improvements on the said lot, which was actually one-
half of Lot 4163 instead of Lot 5734 as designated in the deed.
Two years later, when Alejandra purchased the adjoining portion of the lot she had been occupying,
she discovered that what was designated in the deed, Lot 5734, was the wrong lot. Thus, Alejandra
and the vendors filed for the reformation of the Deed of Sale with damages.
In her answer, Silveria Flores claimed that she was the sole owner of Lot 4163 as shown by the OCT
and consequently, respondents had no right to sell the lot. She also asked for compensatory, moral,
and exemplary damages and attorney's fees.The RTC ruled in favor of respondents and ordered the
reformation of the instrument. They were also awarded the sum of P5,000.00 as actual damages and
the sum of P10,000.00 as moral damages; and P2,000.00 as attorney's fees plus the costs of suit. CA
affirmed.
ISSUE: Whether or not the heirs of Alejandra Delfino are entitled to actual and moral damages
including attorney's fees.
RULING:The award to respondents of attorney's fees in the amount of P2,000 is AFFIRMED.
However, the award of actual damages in the amount of P5,000 and of moral damages in the
amount of P10,000 are both SET ASIDE.
The award of actual damages in the amount of P5,000 lacks evidentiary support. Actual damages if
not supported by the evidence on record cannot be granted. Moral damages for P10,000 was also
improperly awarded, absent a specific finding and pronouncement from the trial court that petitioners
acted in bad faith or with malice.
However, the award of attorney's fees for P2,000 is justified under Article 2208(2) of the Civil Code,
in view of the trial court's finding that the unjustified refusal of petitioners to reform or to correct the
document of sale compelled respondents to litigate to protect their interest.
 Metropolitan Bank vs Tan Chuan Leong, et. al., G.R. No. L-46539, June 25, 1986

FACTS:
Tan Chuan Leong a.k.a Ramon C. L. Palanca, as President of the Pan-Philippine Trading
Corporation,has unliquidated balance of P63,561.00, despite numerous demand, with Metropolitan
Bank & Trust Co. for an overdraft line ofP300,000.00 to help finance its copra business.Hence, the
filing for collection case was done by Metropolitan Bank which eventually decided in its favor. Despite
it, the remaining amount is not settled.

It appears that prior to the collection case, Tan Chuan Leong sold his only known asset of parcel of
land to his son Gilbert K. Palanca. The same property was mortgage to defendant B & I Realty, Inc.
The same property was also mortgaged in favor of the other defendant Chen Siy Yuan by way of
second mortgage. However, the first mortgage was subsequently cancelled.

The sale and mortgages were sought to be annulled allegedly that the transactions were fraud of
creditors, sale being fictitious and simulated and the mortgage entered into in bad faith. RTC
dismissed the case and ordered the plaintiff to pay attorney’s fees defendants B&I Realty
Inc and Chen Siy Yuan in the amount of P5,000 each as they were compelled to litigate and
defend themselves against the Metropolitan Bank’s unfounded claims.

Pending appeal to CA, plaintiff Metropolitan Bank and responded Tan Chuan Leong entered into
compromise agreement and was duly approved by the appellate court. Despite the compromise their
compromise agreement, CA affirmed RTC’s award of attorney’s fees to other respondents B&I Realty
Inc and Chen Siy Yuan.

ISSUE:
Whether or not plaintiff Metropolitan Bank is liable attorney’s fees to respondents B&I Realty Inc and
Chen Siy Yuan

RULING:
Yes. The trial court's award of attorney's fees and its affirmation by the respondent court ispredicated
on Paragraph 4, Article 2208 of the Civil Code which provides: “In the absence of stipulation,
attorney's fees and expenses oflitigation, other than judicial costs, cannot be recovered, except:(4) In
cases of clearly unfounded civil action or proceeding against plaintiff.”

The Court concluded that action against B&I Realty Inc is unfound because its mortgage with Tan
Chuan Leong was cancelled prior to the institution of this case. The property in question had already
been released from the emcumbrance infavor of B & I Realty Co., Inc. Thus, the mortgage did not in
any way affect petitioner'srights. It were as if said mortgage had never even existed.

Although the respondent corporation may have had knowledge of the simulated sale betweenTan
Chuan Leong and his son and had entered into the contract of mortgage pursuant to adesign to
defraud Leong's creditors, no damage or prejudice appears to have been sufferedby the petitioner
thereby. Absent damage or prejudice, no right of action arises in favor ofthe petitioner. Actio non
datur non damnificato.
As to the second mortgage in favor of Chen Siy Yuan, the same was entered into, the certificate of
title stood in thename of respondent Gilbert K. Tan Palanca, without any annotation of encumbrance
in favor
of the petitioner or anyone else. The mortgagee Yuan then had every right to rely uponwhat
appeared in that certificate of title and there being nothing to excite suspicion, did nothave to inquire
further.Thus, being in good faith, respondent Chen Siy Yuan stands as an innocent mortgagee
forvalue with the rights of an innocent purchaser for value and this right must be protected. The
award of attorney's fees in Chen Siy Yuan'sfavor should be beyond question.
 Phoenix Publishing House vs Ramos, G.R. No. L-32339, March 29, 1988

FACTS:
Phoenix charged Ramos with gross violation of the copyright law and prayed for actual, moral and
exemplary as well as attorney’s fees.

RTC dismissed the complaint and ordered Phoenix to pay Ramos P5,000.00 attorney’s fees by way of
damages as the case filed against Ramos is “clearly unfounded”

CA affirmed RTC’s decision.

ISSUE:
Whether or not Phoenix is liable to Ramos for attorney’s fees

RULING:
No. The award of attorney’s fees, if at all, is proper in case of a “clearly unfounded civil action or
proceedings.”

The evidence on record shows that petitioner secured the corresponding copyrights for its books.
These copyrights were found to be all right by the Copyright Office and petitioner was always
conceded to be the real owner thereof. It was on the strength of these facts that petitioner filed the
complaint against respondents. Through a proper search warrant obtained after petitioner was
convinced that respondents were selling spurious copies of its copyrighted books, the books were
seized from respondents and were indentified to be spurious. In the face of these facts, it cannot be
said that the case is clearly an unfounded civil action or proceeding.
 G.R. Nos. 77930-31 February 9, 1989
JEREMIAS EBAJAN, petitioner,
vs.
THE HON. COURT OF APPEALS, (former Special Second Criminal Cases Division),
respondent.

MEDIALDEA, J.:

FACTS: Petitioner Jeremias Ebajan y Edicto, a PC Constable, was charged in two separate cases for
homicide for the death of Arturo Lubrico and Emeterio Rodas, Jr.

After a joint trial of the cases, the trial court rendered a decision on October 22, 1984, convicting the
petitioner of the offenses charged. The dispositive portion of which reads:

“…to pay the heirs of Arturo Lubrico the sum of Twelve Thousand (P12,000.00) Pesos; to pay
P7,748.00 as actual expenses incurred by the heirs of Arturo Lubrico; to pay P2,000.00 as reasonable
attorney's fees; and to pay the costs.”

“…to pay the heirs of Emeterio Rodas, Jr. the sum of the Twelve Thousand (P12,000.00) Pesos; to
pay P1,964.00 as actual expenses incurred by the heirs of Emeterio Rodas, Jr.; to pay P2,000.00 as
reasonable attorney's fees; and to pay the costs.”

On appeal, the respondent Intermediate Appellate Court (now Court of Appeals) rendered a decision
which affirmed the judgment of the trial court convicting the petitioner herein except that the
circumstance of voluntary surrender was appreciated, the indemnity award raised to P30,000.00 and
the attorney's fees eliminated.

ISSUE: Whether or not the CA erred in deleting the award for attorney’s fees in the two criminal
cases.

RULING: The CA is correct in deleting the award for attorney’s fees.

Attorney’s fees awarded in the two cases is without legal basis. Under Article 2308 (No. 9) of the Civil
Code of the Philippines provides that attorney's fees can only be recovered "in a separate civil action
to recover civil liability arising from crime."
 G.R. No. 151890             June 20, 2006
PRUDENTIAL GUARANTEE and ASSURANCE INC., petitioner,
vs.
TRANS-ASIA SHIPPING LINES, INC., Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 151991             June 20, 2006
TRANS-ASIA SHIPPING LINES, INC., petitioner,
vs.
PRUDENTIAL GUARANTEE and ASSURANCE INC., Respondent.

CHICO-NAZARIO, J:

FACTS: Plaintiff TRANS-ASIA is the owner of the vessel M/V Asia Korea. In consideration of payment
of premiums, defendant PRUDENTIAL insured M/V Asia Korea for loss/damage of the hull and
machinery arising from perils, inter alia, of fire and explosion for the sum of P40 Million.

While the policy was in force, a fire broke out while M/V Asia Korea was. undergoing repairs at the
port of Cebu. Plaintiff TRANS-ASIA then filed its notice of claim for damage sustained by the vessel.

TRANS-ASIA also reserved its right to subsequently notify defendant PRUDENTIAL as to the full
amount of the claim upon final survey and determination by average adjuster Richard Hogg
International (Phil.) of the damage sustained by reason of fire.

On May 29, 1995, plaintiff received from PRUDENTIAL the sum of P3,000,000.00 as a loan without
interest under Policy No. MH 93/1353, repayable only in the event and to the extent that any net
recovery is made by Trans-Asia Shipping Corporation, from any person or persons, corporation or
corporations, or other parties, on account of loss by any casualty for which they may be liable
occasioned by the fire.

In a letter dated 21 April 1997 defendant PRUDENTIAL denied plaintiff’s claim and declared that it is
not compensable. The letter said that TRANS-ASIA breached the policy conditions among them
"WARRANTED VESSEL CLASSED AND CLASS MAINTAINED”.

This was followed by defendant’s letter dated 21 July 1997 requesting the return or payment of the
P3,000,000.00 within a period of 10 days from receipt of the letter.

The Court of Appeals, contrary to the ruling of the court a quo, interpreted the transaction between
PRUDENTIAL and TRANS-ASIA as one of subrogation, instead of a loan. The Court of Appeals
concluded that TRANS-ASIA has no obligation to pay back the amount of P3,000.000.00 to
PRUDENTIAL based on its finding that the aforesaid amount was PRUDENTIAL’s partial payment to
TRANS-ASIA’s claim under the policy. Finally, the Court of Appeals denied TRANS-ASIA’s prayer for
attorney’s fees, but held TRANS-ASIA entitled to double interest on the policy for the duration of the
delay of payment of the unpaid balance, citing Section 244of the Insurance Code.

ISSUE:
1. Whether or not the CA erred when it directed PRUDENTIAL to pay TRANS-ASIA the amount of
P8,395,072.26, representing the balance of the loss suffered by TRANS-ASIA and covered by
Marine Policy No. MH93/1363 and
2. Whether or not the CA erred when it directed it pay TRANS-ASIA, damages in the form of
attorney’s fees equivalent to 10% of P8,395,072.26.

RULING: The Court of Appeals denied the grant of attorney’s fees. It held that attorney’s fees
cannot be awarded absent a showing of bad faith on the part of PRUDENTIAL in rejecting TRANS-
ASIA’s claim, notwithstanding that the rejection was erroneous. According to the Court of Appeals,
attorney’s fees can be awarded only in the cases enumerated in Article 2208 of the Civil Code which
finds no application in the instant case.
We disagree. Sec. 244 of the Insurance Code grants damages consisting of attorney’s fees and other
expenses incurred by the insured after a finding by the Insurance Commissioner or the Court, as the
case may be, of an unreasonable denial or withholding of the payment of the claims due. Moreover,
the law imposes an interest of twice the ceiling prescribed by the Monetary Board on the amount of
the claim due the insured from the date following the time prescribed in Section 242 or in Section
243, as the case may be, until the claim is fully satisfied. Finally, Section 244 considers the failure to
pay the claims within the time prescribed in Sections 242 or 243, when applicable, as prima facie
evidence of unreasonable delay in payment.

To the mind of this Court, Section 244 does not require a showing of bad faith in order that
attorney’s fees be granted. As earlier stated, under Section 244, a prima facie evidence of
unreasonable delay in payment of the claim is created by failure of the insurer to pay the claim within
the time fixed in both Sections 242 and 243 of the Insurance Code. As established in Section 244, by
reason of the delay and the consequent filing of the suit by the insured, the insurers shall be
adjudged to pay damages which shall consist of attorney’s fees and other expenses incurred by the
insured.

As can be gleaned from the foregoing, there was an unreasonable delay on the part of PRUDENTIAL
to pay TRANS-ASIA, as in fact, it refuted the latter’s right to the insurance claims, from the time
proof of loss was shown and the ascertainment of the loss was made by the insurance adjuster.
Evidently, PRUDENTIAL’s unreasonable delay in satisfying TRANS-ASIA’s unpaid claims compelled the
latter to file a suit for collection.

Section 244 of the Insurance Code is categorical in imposing an interest twice the ceiling prescribed
by the Monetary Board due the insured, from the date following the time prescribed in Section 242 or
in Section 243, as the case may be, until the claim is fully satisfied. In the case at bar, we find
Section 243 to be applicable as what is involved herein is a marine insurance, clearly, a policy other
than life insurance.