[No. 14335. January 28, 1920.
] of damage in a civil action for physical injuries
MANUEL DE GUIA, plaintiff and appellant, vs. THE
MANILA ELECTIC RAILROAD & LIGHT COMPANY,
defendant and appellant.
1. 1.CONTRACTS; NEGLIGENT
PERFORMANCE; POWER OF COURT TO
MODERATE LIABILITY.In determining the
extent of liability for losses or damages
resulting from negligence in the fulfillment of
707
VOL. 40, JANUARY 28, 1920
De Guia, vs. Manila Electric Railroad & Light Co.
1. a contractual obligation the courts have a
discretionary power to moderate liability
according to the circumstances.
1. 2.CARRIERS; CARRIAGE OF PASSENGERS
FOR HIRE; CONTRACTUAL OBLIGATION
OF CARRIER.The obligation assumed by a
street-railway company, engaged in the
transportation of passengers for hire, towards a
person who embarks for conveyance in one of its
coaches, is of a contractual nature; and the
company is bound to convey its passengers
safely and securely with reference to the degree
of care required by law and custom applicable
to the case.
1. 3.ID.; ID.; ID.; LIABILITY OF CARRIER FOR
NEGLIGENCE OF EMPLOYEE.Upon
failure to comply with this obligation the
carrier incurs the liability commonly incident to
the breach of contractual obligations; and
where the delinquency is due to the negligence
if its employee, the carrier cannot avail itself of
the defense that it had exercised due care in the
selection and instruction of such employee and
that he was in fact an experienced and reliable
servant.
1. 4.ID.; ID.; ID.; EXTENT OF CARRIER'S
LIABILITY FOR LOSSES AND
DAMAGES; GOOD FAITH.A street-railway
company which has exercised due care in the
selection and instruction of the motorman upon
one of its cars should be considered a debtor in
good faith as regards liability towards a
passenger who is injured by the negligence of
the motorman in directing the car; and the
liability of the carrier to the injured party
extends to such losses and damages only as
could be reasonably foreseen as a probable
consequence of the physical injuries inflicted
upon the passenger and which are in fact a
necessary result of those injuries.
1. 5.PHYSICAL
INJURIES; DAMAGES; EXPENSES OF
MEDICAL SERVICE.A person who is
entitled to recover expenses of cure as an item
cannot recover doctor's bills for services
gratuitously rendered; and the claim must
furthermore be limited to medical services
reasonably suited to the case. Charges of
professional experts retained merely with a
view to promote the success of the action for
damages should not be allowed.
APPEAL from a judgment of the Court of First Instance
of Manila. Del Rosario, J.
The facts are stated in the opinion of the court.
Sumulong & Estrada, Crossfield &
O'Brien
707and Francisco A. Delgado for plaintiff-appellant.
Lawrence & Ross for defendant-appellant.
708
708 PHILIPPINE REPORTS ANNOTATED
De Guia vs. Manila Electric Railroad & Light Co.
STREET, J.:
This is an appeal prosecuted both by the plaintiff and the
defendant from a judgment of the Court of First Instance
of the City of Manila, whereby the plaintiff was awarded
the sum of P6,100, with interest and costs, as damages
incurred by him in consequence of physical injuries
sustained while riding on one of the defendant's car.
The accident which gave rise to the litigation occurred
on September 4, 1915, near the end of the street-car line
in Caloocan, Rizal, a northern suburb of the city of
Manila. It appears that, at about 8 o'clock p. m., of the
date mentioned, the plaintiff Manuel de Guia, a physician
residing in Caloocan, boarded a car at the end of the line
with the intention of coming to the city. At about 30
meters from the starting point the car entered a switch,
the plaintiff remaining on the back platform holding the
handle of the right-hand door. Upon coming out of the
switch, the small wheels of the rear truck left the track,
ran for a short distance along the macadam filling, which
was flush with the rails, and struck a concrete post at the
left of the track. The post was shattered; and as the car
stopped the plaintiff was thrown against the door with
some violence, receiving bruises and possibly certain
internal injuries, the extent of which is a subject of
dispute.
The trial court found that the motorman of the
derailed car was negligent in having maintained too rapid
a speed. This inference appears to be based chiefly upon
the results of the shock, involving the shattering of the
post and the bending of the kingpost of the car. It is
insisted for the defendant company that the derailment
was due to the presence of a stone, somewhat larger than
a goose egg, which had become accidentally lodged
between the rails at the juncture of the switch and which
was unobserved by the motorman. In this view the
derailment of the car is supposed to be due to casus
fortuitos and not chargeable to the negligence of the
motorman.
709
VOL. 40, JANUARY 28, 1920 70
De Guia vs. Manila Electric Railroad & Light Co.
Even supposing that the derailment of the car was due to
the accidental presence of such a stone as suggested, we
do not think that the existence of negligence is disproved.
The motorman says that upon approaching the switch he
reduced the electrical energy to the point that the car
barely entered the switch under its own momentum, and
this operation was repeated as he passed out. Upon
getting again on the straight track he put the control
successively at points one, two, three and lastly at point
four. At the moment when the control was placed at point
four he perceived that the rear wheels were derailed and
applied the brake; but at the same instant the car struck
the post, some 40 meters distant from the exit of the
switch. One of the defendant's witnesses stated in court
that the rate of a car propelled by electricity with the
control at point "four" should be about five or 6 miles per
hour. There was some other evidence to the effect that the
car was behind schedule time and that it was being
driven, after leaving the switch, at a higher rate than
would ordinarily be indicated by the control at point four.
This inference is rendered more tenable by the
circumstance that the car was practically empty. On the
whole, we are of the opinion that the finding of negligence
in the operation of the car must be sustained, as not being
clearly contrary to the evidence; not so much because of
excessive speed as because of the distance which the car
was allowed to run with the front wheels of the rear truck
derailed. It seems to us that an experienced and attentive
motorman should have discovered that something was
wrong and would have stopped before he had driven the
car over the entire distance from the point where the
wheels left the track to the place where the post was
struck.
The conclusion being accepted that there was
negligence on the part of the motorman in driving the car,
it, results that the company is liable for the damage
resulting to the plaintiff as a consequence of that
negligence. The plaintiff had boarded the car as a
passenger for the city of Manila and the company
undertook to convey him for hire. The
710
710 PHILIPPINE REPORTS ANNOTATED
De Guia, vs. Manila Electric Railroad & Light Co.
relation between the parties was, therefore, of a
contractual nature, and the duty of the carrier is to be
determined with reference to the principles of contract
law, that is, the company was bound to convey and deliver
the plaintiff safely and securely with reference to the
degree of care which, under the circumstances, is required
by law and custom applicable to the case (art. 1258, Civil
Code). Upon failure to comply with that obligation the
company incurred the liability defined in articles 1103-
1107 of the Civil Code. (Cangco vs. Manila Railroad
Company, 38 Phil. Rep., 768; Manila Railroad
Company vs. Compaia Trasatlantica, and Atlantic, Gulf
& Pacific Co., 38 Phil. Rep., 875.)
From the nature of the liability thus incurred, it is
clear that-the defendant company can not avail itself of
the last paragraph of article 1903 of the Civil Code, since
that provision has reference to liability incurred by
negligence in the absence of contractual relation, that is,
to the culpa aquiliana of the civil law. It was therefore
irrelevant for the defendant company to prove, as it did,
that the company had exercised due care in the selection
and instruction of the motorman who was in charge of its
car and that he was in fact an experienced and reliable
servant.
At this point, however, it should be observed that
although in case like this the defendant must answer for
the consequences of the negligence of its employee, the
court has the power to moderate liability according- to the
circumstances of the case (art. 1103, Civ. Code).
Furthermore, we think it obvious that an employer who
has in fact displayed due diligence in choosing and
instructing his servants is entitled to be considered a
debtor in good faith, within the meaning of article 1107 of
the same Code. Construing these two provisions together,
and applying them to the facts of this case, it results that
the defendant's liability is limited to such damages as
might, at the time of the accident, have been reasonably
foreseen as a probable consequence of the physical
injuries inflicted upon the plaintiff and which were in fact
a necessary result of those injuries. There is nothing novel
in this proposition, since both the civil and
711
VOL. 40, JANUARY 28, 1920 71
De Guia vs. Manila Electric Railroad & Light Co.
the common law are agreed upon the point that the
damages ordinarily recoverable for the breach of a
contractual obligation, against a person who has acted in
good faith, are such as can reasonably be foreseen at the
time the obligation is contracted. In
Daywalt vs. Corporacin de PP. Agustinos Recoletos (39
Phil., 587), we said: "The extent of the liability for the
breach of a contract must be determined in the light of the
situation in existence at the time the contract is made;
and the damages ordinarily recoverable are in all events
limited to such as might be reasonably foreseen in the
light of the facts then known to the contracting parties."
This brings us to consider the amount which may be
awarded to the plaintiff as damages. Upon this point the
trial judge found that, as a result of the physical and
nervous derangement resulting from the accident, Dr. De
Guia was unable properly to attend to his prof essional
labors for three months and suspended his practice for
that period. It was also proved by the testimony of the
plaintiff that his customary income, as a physician, was
about P300 per month. The trial judge accordingly
allowed P900, as damages for loss of professional
earnings. This allowance is attacked upon appeal by the
defendant as excessive both as to the period and rate of
allowance. Upon examining the evidence we fell
disinclined to disturb this part of the judgment, though it
must be conceded that the estimate of the trial judge on
this point was liberal enough to the plaintiff.
Another item allowed by the trial judge consists of
P3,900, which the plaintiff is supposed to have lost by
reason of his inability to accept a position as district
health officer in Occidental Negros.. It appears in this
connection that Mr. Alunan, representative from
Occidental Negros, had asked Dr. Montinola, who
supposedly had. the authority to make the appointment,
to nominate the plaintiff to such position. The job was
supposed to be good for two years, with a salary of ?1,600
per annum, and possibility of outside practice worth P350.
Accepting these sugestions as true, it is evident that the
damages thus incurred are too specu-
712
712 PHILIPPINE REPORTS ANNOTATED
De Guia vs. Manila Electric Railroad & Light Co.
lative to be the basis of recovery in a civil action. This
element of damages must therefore be eliminated. It goes
without saying that damage of this character could not,
at. the time of the accident, have been foreseen by the
delinquent party as a probable consequence of the injury
inflicteda circumstance which makes applicable article
1107 of the Civil Code, as already expounded.
The last element of damages to be considered is the
item of the plaintiff's doctor's bills, a subject which we
momentarily pass for discussion further on, since the
controversy on this point can be more readily understood
in connection with the question raised by the plaintiff's
appeal.
The plaintiff alleges in the complaint that the
damages incurred by him as a result of the injuries in
question ascend to the amount of P40,000. Of this amount
the sum of P10,000 is supposed to represent the cost of
medical treatment and other expenses incident to the
plaintiff's cure, while the remainder (P30,000) represents
the damage resulting from the character of his injuries,
which are supposedly such as to incapacitate him for the
exercise of the medical profession in the future. In support
of these claims the plaintiff introduced evidence,
consisting of his own testimony and that of numerous
medical experts, tending to show that as a result of the
injuries in question he had developed infarct of the liver
and traumatic neurosis, accompanied by nervousness,
vertigo, and other disturbing symptoms of a serious and
permanent character, it being claimed that these
manifestations of disorder rendered him liable to a host of
other dangerous diseases, such as pleuresy, tuberculosis,
pneumonia, and pulmonary gangrene, and that
restoration to health could only be accomplished, if at all,
after long years of complete repose. The trial judge did not
take these pretensions very seriously, and, as already
stated, limited the damages to the three items of
professional earnings, expenses of medical treatment, and
the loss of the appointment as medical inspector in
Occidental Negros. As the appeal of the plaintiff opens the
whole case upon the question of damages, it is desirable
to present a somewhat
713
VOL. 40, JANUARY 28; 1920
De Guia vs. Manila Electric Railroad & Light Co.
fuller statement than that already given with respect to
extent and character of the injuries in question.
The plaintiff testified that, at the time the car struck
against the concrete post, he was standing on the rear
platform, grasping the handle of the right-hand door. The
shock of the impact threw him f orward, and the left t part
of his chest struck against the door causing him to fall. In
falling, the plaintiff says, his head struck one of the seats
and he became unconscious. He was presently taken to his
home which was only a short distance away, where he was
seen at about 10 o'clock p. m., by a physician in the
employment of the defendant company. This physician
says that the plaintiff was then walking about and
apparently suffering somewhat from bruises on his chest.
He said nothing about his head being injured and refused
to go to a hospital. Later, during the same night Dr.
Carmelo Basa was called in to see the plaintiff. This
physician says that he found Doctor De Guia lying in bed
and complaining of a severe pain in the side. During the
visit of Doctor Basa the plaintiff several times spit up
blood, a manifestation no doubt due to the effects of the
bruises received in his side. The next day Doctor De Guia
went into Manila to consult another physician, Doctor
Miciano, and during the course of a few weeks he called
into consultation other doctors who were introduced as
witnesses in his behalf at the trial of this case. According
to the testimony of these witnesses, as well as that of the
plaintiff himself, the symptoms of physical and nervous
derangement in the plaintiff speedily developed in
portentous degree.
Other experts were introduced by the defendant
whose testimony tended to show that the plaintiff's
injuries, considered in their physical effects, were trivial
and that the attendant nervous derangement, with its
complicated train of ailments, was merely simulated.
Upon this question the opposing medical experts
ventilated a considerable mass of professional learning
with reference to the nature and effects of the baffling
disease
714
714 PHILIPPINE REPORTS ANNOTATED
De Guia vs. Manila Electric Railroad & Light Co.
known as traumatic neurosis, or traumatic hysteriaa
topic which has been the occasion of much controversy in
actions of this character in the tribunals of Europe and
America. The subject is one of considerable interest from
a medico-legal point of view, but we deem it unnecessary
in this opinion to enter upon a discussion of its
voluminous literature. It is enough to say that in our
opinion the plaintiff's case f or large damages in respect
to his supposed incapacitation for future professional
practice is not made out. Of course in this jurisdiction
damages can not be assessed in favor of the plaintiff as
compensation for the physical or mental pain which he
may have endured (Marcelo vs. Velasco, 11 Phil. Rep.,
287); and the evidence relating to the injuries, both
external and internal, received by him must be examined
chiefly in its bearing upon his material welfare, are, that
is, in its results upon his earning capacity and the
expenses incurred in restoration to the usual condition of
health.
The evidence before us shows that immediately after
the accident in question Doctor De Guia, sensing in the
713
situation a possibility of profit, devoted himself with great
assiduity to the promotion of this litigation; and with the
aid of his own professional knowledge, supplemented by
suggestions obtained from his professional friends and
associates, he enveloped himself more or less
unconsciously in an atmosphere of delusion which
rendered him incapable of appreciating at their true value
the symptoms of disorder which he developed. The trial
court was in our opinion fully justified in rejecting the
exaggerated estimate of damages thus created.
We now pass to the consideration of the amount
allowed to the plaintiff by the trial judge as the expenses
incurred for medical service. In this connection Doctor
Montes testified that he was first called to see the plaintiff
upon September 14, 1915, when he found him suffering
from traumatic neurosis. Three months later he was
called upon to treat the same patient for an acute
catarrhal condition, involving disturbance in the
pulmonary region. The treat-
715
VOL. 40, JANUARY 28, 1920 71
De Guia vs. Manila Electric Railroad & Light Co.
ment for this malady was successful after two months, but this character is not primary evidence in any sense, since
at the end of six months the same trouble recurred and it is f undamentally of a hearsay nature; and the only
required f urther treatment. In October of the year 1916, legitimate use to which one of these certificates could be
or more than a year after the accident in question put, as evidence for the plaintiff, was to allow the
occurred, Doctor Montes was called in consultation with physician who issued it to refer thereto to refresh his
Doctor Guerrero to make an examination of the plaintiff. memory upon details which he might have forgotten. In
Doctor Montes says that his charges altogether for Zwangizer vs. Newman (83 N. Y. Supp., 1071) which was
services rendered to the plaintiff amount to P350, of also an action to recover damages for personal injury, it
which the sum of P200 had been paid by the plaintiff upon appeared that a physician, who had been sent by one of
bills rendered from time to time. This physician speaks in the parties to examine the plaintiff, had made at the time
the most general terms with respect to the times and a written memorandum of the results of the examination;
extent of the services rendered; and it is by no means clear and it was proposed to introduce this document in
that those services which were rendered many months, or evidence at the trial. It was excluded by the trial judge,
year, after the accident had in fact any necessary or and it was held upon appeal that this was proper. Said the
legitimate relation to the injuries received by the plaintiff. court: "There was no failure or exhaustion of the
In view of the vagueness and uncertainty of the testimony 717
relating to Doctor Montes's services we are of the opinion VOL. 40, JANUARY 29, 1920 71
that the sum of P200, or the amount actually paid to him
by the plaintiff, represents the extent of the plaintiff's Rivera, vs. Roman Catholic Archbishop of Manila.
obligation with respect to treatment for said injuries. memory, and no impeachment of the memorandum on
With regard to the obligation supposedly incurred by crossexamination; and the document was clearly
the plaintiff to three other physicians, we are of the incompetent as evidence in chief."
opinion that they are not a proper subject of recovery in It results from the foregoing that the judgment
this action; and this for more than one reason. In the first appealed from must be modified by reducing the amount
place, it does not appear that said physicians have in fact of the recovery to eleven hundred pesos (P1,100), with
made charges for those services with the intention of legal interest from November 8, 1916. As thus modified
imposing obligations on the plaintiff to pay for them. On the judgment is affirmed, without any special
the contrary it would seem that said services were pronouncement as to costs of this instance. So ordered.
gratuitously rendered out of courtesy to the plaintiff as a Arellano, C.
member of the medical profession. The suggestions made J., Torres, Araullo, Malcolm, and Avancea, JJ., concur.
on the stand by these physicians to the effect that their Judgment modified.
services were worth the amounts stated by them are not
sufficient to prove that the plaintiff had incurred the ____________
obligation to pay those amounts. In the second place, we
are convinced that in employing so many physicians the Copyright 2017 Central Book Supply, Inc. All rights
plaintiff must have had in view the successful promotion reserved.
of the issue of this lawsuit rather than the bona
fide purpose of effecting the cure of his injuries. In order
to constitute a proper element of
716
716 PHILIPPINE REPORTS ANNOTATED
De Guia vs. Manila Electric Railroad & Light Co.
recovery in an action of this character, the medical service
for which reimbursement is claimed should not only be
such as to have created a legal obligation upon the
plaintiff but such as was reasonably necessary in view of
his actual condition. It can not be permitted that a litigant
should retain an unusual and unnecessary number of
professional experts with a view to the successful
promotion of a lawsuit and expect to recover against his
adversary the entire expense thus incurred. His claim f or
medical services must be limited to such expenditures as
were reasonably suited to the case.
The second error assigned in the brief of the defendant
company presents a question of practice which, though
not vital to the solution of this case, is of sufficient general
importance to merit notice. It appears that f our of the
physicians examined as witnesses for the plaintiff had
made written statements at various dates certifying the
results of their respective examinations into the condition
of the plaintiff. When these witnesses were examined in
court they identified their respective signatures to these
certificates and the trial judge, over the defendant's
objection, admitted the documents as primary evidence in
the case. This was undoubtedly erroneous. A document of
122 SUPREME COURT REPORTS ANNOTATED
Sarmiento vs. Cabrido
G.R. No. 141258. April 9, 2003.*
TOMASA SARMIENTO, petitioner, vs. SPS. LUIS &
ROSE SUNCABRIDO and MARIA LOURDES SUN,
respondents.
Civil Law; Contracts; Negligence; Obligations
arising from contracts have the force of law between the
contracting parties.Obligations arising from contracts
have the force of law between the contracting parties.
Corollarily, those who in the performance of their
obligations are guilty of fraud, negligence or delay and
those who in any manner contravene the tenor thereof,
are liable for damages. The fault or negligence of the
obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds
with the circumstances of the persons, of the time and of
the place.
Same; Same; Damages; Moral damages; As
general rule, moral damages are not recoverable in actions
for damages predicated on breach of contract.As a
general rule, moral damages are not recoverable in
actions for damages predicated on a breach of contract for
it is not one of the items enumerated under Article 2219
of the Civil Code. Moral damages may be awarded in a
breach of contract only when there is proof that defendant
acted in bad faith, or was guilty of gross negligence
amounting to bad faith, or in wanton disregard of his
contractual obligation.
______________
*THIRD DIVISION.
123
VOL. 401, APRIL 9, 2003
Sarmiento vs. Cabrido
PETITION for review on certiorari of a decision of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Liberato G. Casilan, Jr. for petitioner.
Alfonso Dela Serna for respondents.
CORONA, J.:
This appeal by certiorari stems from the Decision1 of
respondent Court of Appeals promulgated on November
26, 1999 in CA-G.R. SP No. 47431 declaring the private
respondents not liable for damages.
Petitioner, Tomasa Sarmiento, states that sometime
in April 1994, a friend, Dra. Virginia Lao, requested her
to find somebody to reset a pair of diamond earrings into
two gold rings.2 Accordingly, petitioner sent a certain Tita
Payag with the pair of earrings to Dingdings Jewelry
Shop, owned and managed by respondent spouses Luis
and Rose Cabrido,3 which accepted the job order for
P400.4
Petitioner provided 12 grams of gold to be used in
crafting the pair of ring settings.5 After 3 days, Tita Payag
delivered to the jewelry shop one of Dra. Laos diamond
earrings which was earlier appraised as worth .33 carat
and almost perfect in cut and clarity.6 Respondent Ma.
Lourdes (Marilou) Sun went on to dismount the diamond
from its original setting. Unsuccessful, she asked their
goldsmith, Zenon Santos, to do it. Santos removed the
diamond by twisting the setting with a pair of pliers,
breaking the gem in the process.7
______________
1 Penned by Associate Justice Ma. Alicia Austria-
Martinez and concurred in by Associate Justices B.A.
Adefuin-de la Cruz and Presbitero J. Velasco, Jr., Rollo,
pp. 17-23.
2 TSN, December 14, 1994, pp. 7-8.
3 Exhibit I; TSN, February 7, 1995, p. 4.
4 Exhibit 1; TSN, November 8, 1994, pp. 3-4.
5 Exhibit C.
6 TSN, December 14, 1995, p. 9.
7 TSN, November 8, 1994, pp. 6-7.
124
124 SUPREME COURT REPORTS ANNOTATED
Sarmiento vs. Cabrido
a Petitioner required the respondents to replace the
diamond with the same size and quality. When they
refused, the petitioner was forced to buy a replacement in
the amount of P30,000.8
Respondent Rose Cabrido, manager of Dingdings
Jewelry Shop, denied having entered into any transaction
with Tita Payag whom she met only after the latter came
to the jewelry shop to seek compensation from Santos for
the broken piece of jewelry.9 However, it was possible that
Payag may have availed of their services as she could not
have known every customer who came to their shop. Rose
disclosed that she usually arrived at 11:00 a.m. When she
was not around, her mother and sister tended the shop.10
Marilou admitted knowing Payag who came to
Dingdings Jewelry Shop to avail of their services
regarding a certain piece of jewelry. After a short
123
conversation, Payag went inside the shop to see Santos.
When the precious stone was broken by Santos, Payag
demanded PI5,000 from him. As the latter had no money,
she turned to Marilou for reimbursement apparently
thinking that Marilou was the owner of the shop.11
For his part, Santos recalled that Payag requested
him to dismount what appeared to him was a sapphire.
While clipping the setting with the use of a small pair of
pliers, the stone accidentally broke. Santos denied being
an employee of Dingdings Jewelry Shop.12
Attempts to settle the controversy before
the barangay lupon proved futile.13 Consequently,
petitioner filed a complaint for damages on June 28, 1994
with the Municipal Trial Court in Cities (MTCC) of
Tagbilaran City docketed as Civil Case No. 2339 which
rendered a decision14 in favor of the petitioner, the
dispositive portion of which reads:
______________
Exhibit B; TSN, December 14, 1994, pp. 12-14.
8
TSN, February 7, 1995, pp. 4-5.
9
10 Id., p. 9.
11 TSN, August 18, 1995, pp. 3-4.
12 TSN, June 8, 1995, pp. 2-5.
13 Exhibit D.
14 Petition, Annex D, Rollo, pp. 29-36. Penned by
Judge Emma Eronico-Supremo.
125
VOL. 401, APRIL 9, 2003 12
Sarmiento vs. Cabrido
WHEREFORE, Decision is hereby rendered in favor of
plaintiff Tomasa Sarmiento and against defendants
Spouses Luis and Rose Sun-Cabrido, ordering defendants
to pay jointly and severally the amount of Thirty
Thousand Pesos (P30,000.00) as actual or compensatory
damages; Three Thousand Pesos (P3,000.00) as moral
damages; Five Thousand Pesos (P5,000.00) as attorneys
fees; Two Thousand Pesos (P2,000.00) as litigation
expenses, with legal interest of 6% per annum from the
date of this decision and 12% per annum from the date
when this decision becomes final until the amounts shall
have been fully paid and to pay the costs.
This case as against defendant Maria Lourdes Sun as
well as defendants counterclaim are dismissed for lack of
merit.
SO ORDERED.
On appeal, the Regional Trial Court (RTC) of Tagbilaran
City, Branch 3, reversed the decision of the MTCC, thus
absolving the respondents of any responsibility arising
from breach of contract.15 Finding no reversible error, the
Court of Appeals (CA) affirmed the judgment of the RTC
in its Decision promulgated on November 26, 1999. 16
Unable to accept the decision, the petitioner filed the
instant petition for review with the following assigned
errors:
I interest. We are therefore inclined to agree with the
THE COURT OF APPEALS ERRED IN MAINTAINING
AND SO HOLDING THAT ZENON SANTOS IS NOT AN
EMPLOYEE OF DEFENDANT (herein respondent)
ROSE SUN-CABRIDO, AND IS THEREFORE
ANSWERABLE FOR HIS OWN ACTS OR OMISSIONS
II
THE HONORABLE COURT OF APPEALS ERRED
IN SUSTAINING THE REGIONAL TRIAL COURTS
PRONOUNCEMENTS THAT THERE EXISTS NO
AGREEMENT BETWEEN THE PETITIONER AND
RESPONDENTS THAT THE LATTER WOULD
ANSWER FOR ANY LIABILITY SHOULD THE
DIAMOND BE DAMAGED IN THE PROCESS OF
DISMOUNTING THEM FROM THE EARRINGS.
______________
15 Petition, Annex B, Rollo, pp. 24-28. Penned by
Judge Pacito A. Yape.
16 See footnote no. 1.
126
126 SUPREME COURT REPORTS ANNOTATED
Sarmiento vs. Cabrido
Essentially, petitioner claims that the dismounting of the
diamond from its original setting was part of the
obligation assumed by the private respondents under the
contract of service. Thus, they should be held liable for
damages arising from its breakage. On the other hand,
the version of the private respondents, upheld by the RTC
and the CA, is that their agreement with the petitioner
was for crafting two gold rings mounted with diamonds
only and did not include the dismounting of the said
diamonds from their original setting.17Consequently, the
crux of the instant controversy is the scope of the
obligation assumed by the private respondents under the
verbal contract of service with the petitioner.
The Court notes that, during the trial, private
respondents vigorously denied any transaction between
Dingdings Jewelry Shop and the petitioner, through Tita
Payag. Rose Cabrido, for instance, denied having ever met
Payag before the latter came to seek reimbursement for
the value of the broken diamond. Likewise, while Marilou
acknowledged acquaintance with Payag, she nevertheless
denied accepting any job order from her. Debunking their
protestations, however, the MTCC of Tagbilaran City
rendered its decision on November 26, 1999 in favor of
herein petitioner.
Apparently realizing the weakness and futility of
their position, private respondents conceded, on appeal,
the existence of an agreement with the petitioner for
crafting a pair of gold rings mounted with diamonds. This
apparent concession by the private respondents, however,
was really nothing but an ingenious ma-neuver, designed
to preclude, just the same, any recovery for damages by
the petitioner. Thus, while ostensibly admitting the
existence of the said agreement, private respondents,
nonetheless denied assuming any obligation to dismount
the diamonds from their original settings.18
The inconsistent position of the private respondents
impugns their credibility. They cannot be permitted to
adopt a certain stance, only to vacillate later to suit their
MTCC in giving credence to the version of the petitioner.
The MTCC had the unique opportunity to
______________
17Comment, Rollo, p. 57.
18Appellants Brief, Original Records, pp. 97-101.
127
VOL. 401, APRIL 9, 2003 12
Sarmiento vs. Cabrido
actually observe the behavior and demeanor of the
witnesses as they testified during the trial.19
At any rate, the contemporaneous and subsequent
acts of the parties20 support the version of the petitioner.
Thus, when Tita Payag asked Marilou of Dingdings
Jewelry Shop to reset a pair of diamond earrings, she
brought with her the said pieces of jewelry so that the
diamonds which were still mounted could be measured
and the new ring settings crafted accordingly. On the said
occasion, Marilou expressed no reservation regarding the
dismounting of the diamonds which, after all, was an
integral part of petitioners job order. She should have
instructed Payag to have them dismounted first if Marilou
had actually intended to spare the jewelry shop of the task
but she did not. Instead, petitioner was charged P400 for
the job order which was readily accepted. Thus, a
perfected contract to reset the pair of diamond earrings
arose between the petitioner, through Payag, and
Dingdings Jewelry Shop, through Marilou.
Marilous subsequent actuations were even more
revealing as regards the scope of obligation assumed by
the jewelry shop. After the new settings were completed
in 3 days, she called up the petitioner to bring the
diamond earrings to be reset.21 Having initially examined
one of them, Marilou went on to dismount the diamond
from its original setting. Unsuccessful, she then delegated
the task to their goldsmith, Zenon Santos. Having acted
the way she did, Marilou cannot now deny the shops
obligation to reset the pair of earrings.
 Obligations arising from contracts have the force of
law between the contracting parties.22 Corollarily, those
who in the performance of their obligations are guilty of
fraud, negligence or delay and those who in any manner
contravene the tenor thereof, are liable for
damages.23 The fault or negligence of the obligor consists
in the omission of that diligence which is required by the
nature of the
______________
People vs. Lacsa, 339 SCRA 178, 190 [2000]; People
19
vs. Continente, 339 SCRA 1, 29 [2000]; People vs. Barro,
Sr. 338 SCRA 312, 322 [2000].
20 Tanguilig vs. CA, 334 Phil. 68, 74; 266 SCRA
78 [1997].
21 TSN, December 14, 1994, p. 11.
22 Article 1159, Civil Code of the Philippines.
23 Article 1170, Civil Code of the Philippines.
128
128 SUPREME COURT REPORTS ANNOTATED
Sarmiento vs. Cabrido
obligation and corresponds with the circumstances of the
persons, of the time and of the place.24
In the case at bar, it is beyond doubt that Santos acted
negligently in dismounting the diamond from its original
setting. It appears to be the practice of the trade to use a
miniature wire saw in dismounting precious gems, such
as diamonds, from their original settings.25 However,
Santos employed a pair of pliers in clipping the original
setting, thus resulting in breakage of the diamond. The
jewelry shop failed to perform its obligation with the
ordinary diligence required by the circumstances. It
should be pointed out that Marilou examined the diamond
before dismounting it from the original setting and found
the same to be in order. Its subsequent breakage in the
hands of Santos could only have been caused by his
negligence in using the wrong equipment. Res ipsa
loquitur. Private respondents seek to avoid liability by
passing the buck to Santos who claimed to be an
independent worker. They also claim, rather lamely, that
Marilou simply happened to drop by at Dingdings
Jewelry Shop when Payag arrived to place her job order.26
We do not think so.
The facts show that Santos had been working at
Dingdings Jewelry Shop as goldsmith for about 6 months
accepting job orders through referrals from private
respondents.27 On the other hand, Payag stated that she
had transacted with Dingdings Jewelry Shop on at least
10 previews occasions, always through Marilou.28 The
preponderance of evidence supports the view that Marilou
and Zenon Santos were employed at Dingdings Jewelry
Shop in order to perform activities which were usually
necessary or desirable in its business.29
______________
Article 1173, Civil Code of the Philippines.
24
TSN, January 20, 1995, p. 3.
25
26 TSN, August 18, 1995, p. 3.
27 TSN, June 8, 1995, pp. 6-7.
28 TSN, November 8, 1994, p. 4.
29 Article 280 of the Labor Code pertinently provides:
Art. 280. Regular and Casual Employment.The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform ac-
129
VOL. 401, APRIL 9, 2003 12
Sarmiento vs. Cabrido
We therefore hold that an obligation to pay actual
damages arose in favor of the petitioner against the
respondents spouses who admittedly owned and managed
Dingdings Jewelry Shop. It was proven that petitioner
replaced the damaged jewelry in the amount of P30,000.30
The facts of the case also justify the award of moral
damages. As a general rule, moral damages are not
recoverable in actions for damages predicated on a breach
of contract for it is not one of the items enumerated under
Article 2219 of the Civil Code.31 Moral damages may be
awarded in a breach of contract only when there is proof
that defendant acted in bad faith, or was guilty of gross
negligence amounting to bad faith, or in wanton disregard
of his contractual obligation.32 Santos was a goldsmith for
more than 40 years.33 Given his long experience in the
trade, he should have known that using a pair of pliers
instead of a miniature wire saw in dismounting a precious
stone like a diamond would have entailed an unnecessary
risk of breakage. He went on with it anyway. Hence,
respondent spouses are liable for P10,000 as moral
damages due to the gross negligence of their employee.
However, private respondents refusal to pay the
value of the damaged jewelry emanated from an honest
belief that they were not responsible therefor, hence,
negating any basis for the award of attorneys fees.34
WHEREFORE, the instant petition is GRANTED and
the assailed decision of the Court of Appeals dated
November 26, 1999 is hereby reversed and set aside.
Private respondents Luis Cabrido and Rose Sun-Cabrido
are hereby ordered to pay, jointly and severally, the
amount of P30,000 as actual damages and P10,000 as
moral damages in favor of the petitioner.
No costs.
______________
tivities which are usually necessary or desirable in the
usual business or trade of the employer x x x.
30 Exhibits B; F; G.
31 Calalas vs. Court of Appeals, 302 SCRA 356 [2000].
32 Magat, Jr. vs. Court of Appeals, 337 SCRA 298, 308
[2000]; Integrated Packaging Corporation vs. Court of
Appeals, 333 SCRA 170 [2000].
33 TSN, June 8, 1995, p. 4.
34 Bernardo vs. Court of Appeals, 275 SCRA 413, 432
[1997].
130
130 SUPREME COURT REPORTS ANNOTATED
Republic vs. Manila Electric Company
SO ORDERED.
Puno (Chairman), Panganiban, Sandoval-
Gutierrez and Carpio-Morales, JJ., concur.
Petition granted.
Note.Article 1370 of the Civil Code is applicable
only to valid and enforceable contracts. (Nool vs. CA, 276
SCRA 149 [1997])
o0o
 Copyright 2017 Central Book Supply, Inc. All rights
reserved.
528 SUPREME COURT REPORTS ANNOTATED
Crisostomo vs. Court of Appeals
G.R. No. 138334. August 25, 2003.*
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT
OF APPEALS and CARAVAN TRAVEL & TOURS
INTERNATIONAL, INC., respondents.
Civil Law; Common Carriers; Damages; Definition
of common carrier.By definition, a contract of carriage
or transportation is one whereby a certain person or
association of persons obligate themselves to transport
persons, things, or news from one place to another for a
fixed price. Such person or association of persons are
regarded as carriers and are classified as private or
special carriers and common or public carriers. A common
carrier is defined under Article 1732 of the Civil Code as
persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or
goods or both, by lane, water or air, for compensation,
offering their services to the public.
Same; Same; Same; Respondent is not an entity
engaged in the business of transporting either passengers
or goods and is therefore neither a private nor a common
carrier.It is obvious from the above definition that
respondent is not an entity engaged in the business of
transporting either passengers or goods and is there fore,
neither, a private nor a common carrier. Respondent did
not undertake to transport petitioner from one place to
another since its covenant with its customers is simply to
make travel arrangements in their behalf. Respondents
services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking
customers for tours.
Same; Same; Same; Respondent not being a hours before her flight on board British Airways.
common carrier but a travel agency is not bound under the
law to observe extraordinary diligence in the performance
of its obligation.The nature of the contractual relation
between petitioner and respondent is determinative of the
degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy,
a common carrier in a contract of carriage is bound by law
to carry passengers as far as human care and foresight
can provide using the utmost diligence of very cautious
persons and with due regard for all the circumstances. As
earlier stated, however, respondent is not a common
carrier but a travel agency. It is thus not bound under the
law to observe extraordinary diligence in the performance
of its obligation, as petitioner claims.
_______________
*FIRST DIVISION.
529
VOL. 409, AUGUST 25, 2003
Crisostomo vs. Court of Appeals
Same; Same; The degree of diligence required
depends on the circumstances of the specific obligation and
whether one has been negligent is a question of fact.The
negligence of the obligor in the performance of the
obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence
of the obligor consists in his failure to exercise due care
and prudence in the performance of the obligation as the
nature of the obligation so demands. There is no fixed
standard of diligence applicable to each and every
contractual obligation and each case must be determined
upon its particular facts. The degree of diligence required
depends on the circumstances of the specific obligation
and whether one has been negligent is a question of fact
that is to be determined after taking into account the
particulars of each case.
PETITION for review on certiorari of a decision of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Bonifacio Law Office for petitioner.
Cabochan, Reyes & Capones Law Offices for
private respondent.
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted
the services of respondent Caravan Travel and Tours
International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of
Europe. The package tour included the countries of
England, Holland, Germany, Austria, Liechstenstein,
Switzerland and France at a total cost of P74,322.70.
Petitioner was given a 5% discount on the amount, which
included airfare, and the booking fee was also waived
because petitioners niece, Meriam Menor, was
respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts
residence on June 12, 1991a Wednesdayto deliver
petitioners travel documents and plane tickets.
Petitioner, in turn, gave Menor the full payment for the
package tour. Menor then told her to be at the Ninoy
Aquino International Airport (NAIA) on Saturday, two
Without checking her travel documents, petitioner
went to NAIA on Saturday, June 15, 1991, to take the
flight for the first leg of her journey from Manila to Hong
Kong. To petitioners dismay, she
530
530 SUPREME COURT REPORTS ANNOTATED
Crisostomo vs. Court of Appeals
discovered that the flight she was supposed to take had
already departed the previous day. She learned that her
plane ticket was for the flight scheduled on June 14, 1991.
She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to
take another tourthe British Pageantwhich
included England, Scotland and Wales in its itinerary.
For this tour package, petitioner was asked anew to pay
US$785.00 or P20,881.00 (at the then prevailing
exchange rate of P26.60). She gave respondent US$300 or
P7,980.00
529 as partial payment and commenced the trip in
July 1991.
Upon petitioners return from Europe, she demanded
from respondent the reimbursement of P61,421.70,
representing the difference between the sum she paid for
Jewels of Europe and the amount she owed respondent
for the British Pageant tour. Despite several demands,
respondent company refused to reimburse the amount,
contending that the same was non-refundable.1 Petitioner
was thus constrained to file a complaint against
respondent for breach of contract of carriage and
damages, which was docketed as Civil Case No. 92-
133 and raffled to Branch 59 of the Regional Trial Court
of Makati City.
 In her complaint,2 petitioner alleged that her failure
to join Jewels of Europe was due to respondents fault
since it did not clearly indicate the departure date on the
plane ticket. Respondent was also negligent in informing
her of the wrong flight schedule through its employee
Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such
that the cost of the former should be properly set-off
against the sum paid for the latter.
For its part, respondent company, through its
Operations Manager, Concepcion Chipeco, denied
responsibility for petitioners failure to join the first tour.
Chipeco insisted that petitioner was informed of the
correct departure date, which was clearly and legibly
printed on the plane ticket. The travel documents were
given to petitioner two days ahead of the scheduled trip.
Petitioner had only herself to blame for missing the flight,
as she did not bother to read or confirm her flight schedule
as printed on the ticket.
_______________
1TSN, March 4, 1993, pp. 4-6.
2RTC Records, p. 1.
531
VOL. 409, AUGUST 25, 2003
Crisostomo vs. Court of Appeals
Respondent explained that it can no longer reimburse the
amount paid for Jewels of Europe, considering that the
same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed
the same even if petitioner did not join the tour. Lotus
European tour organizer, Insight International Tours
Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this
reason, it is accepted industry practice to disallow refund
for individuals who failed to take a booked tour.3
Lastly, respondent maintained that the British
Pageant was not a substitute for the package tour that
petitioner missed. This tour was independently procured
by petitioner after realizing that she made a mistake in
missing her flight for Jewels of Europe. Petitioner was
allowed to make a partial payment of only US$300.00 for
the second tour because her niece was then an employee
of the travel agency. Consequently, respondent prayed
that petitioner be ordered to pay the balance of
P12,901.00 for the British Pageant package tour.
After due proceedings, the trial court rendered a
decision,4the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered as follows:
1. 1.Ordering the defendant to return and/or refund
to the plaintiff the amount of Fifty Three
Thousand Nine Hundred Eighty Nine Pesos
and Forty Three Centavos (P53,989.43) with
legal interest thereon at the rate of twelve
percent (12%) per annum starting January 16,
1992, the date when the complaint was filed;
2. 2.Ordering the defendant to pay the plaintiff the
amount of Five Thousand (P5,000.00) Pesos as
and for reasonable attorneys fees;
3. 3.Dismissing the defendants counterclaim, for
lack of merit; and
4. 4.With costs against the defendant.
SO ORDERED.5
The trial court held that respondent was negligent in
erroneously advising petitioner of her departure date
through its employee, Menor, who was not presented as
witness to rebut peti-
_______________
3 TSN, August 30, 1994, pp. 6-9.
4 Rollo, pp. 38-43.
5 Id., at p. 43; penned by Judge Lucia Violago Isnani.
532
532 SUPREME COURT REPORTS ANNOTATED
Crisostomo vs. Court of Appeals
tioners testimony. However, petitioner should have
verified the exact date and time of departure by looking
at her ticket and should have simply not relied on Menors
verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and
accordingly, deducted 10% from the amount being
claimed as refund.
Respondent appealed to the Court of Appeals, which
likewise found both parties to be at fault. However, the
appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person,
531
she should have known better than to simply rely on what
was told to her. This being so, she is not entitled to any
form of damages. Petitioner also forfeited her right to the
Jewels of Europe tour and must therefore pay
respondent the balance of the price for the British
Pageant tour. The dispositive portion of the judgment
appealed from reads as follows:
WHEREFORE, premises considered, the decision of the
Regional Trial Court dated October 26, 1995 is hereby
REVERSED and SET ASIDE. A new judgment is hereby
ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British
Pageant Package Tour, the same to earn legal interest at
the rate of SIX PERCENT (6%) per annum, to be
computed from the time the counterclaim was filed until
the finality of this decision. After this decision becomes
final and executory, the rate of TWELVE PERCENT
(12%) interest per annum shall be additionally imposed
on the total obligation until payment thereof is satisfied.
The award of attorneys fees is DELETED. Costs against
the plaintiff-appellee.
SO ORDERED.6
Upon denial of her motion for reconsideration,7 petitioner
filed the instant petition under Rule 45 on the following
grounds:
I
It is respectfully submitted that the Honorable Court of
Appeals committed a reversible error in reversing and
setting aside the decision of the trial court by ruling that
the petitioner is not entitled to a refund of the cost of
unavailed jewels of Europe tour she being equally, if not
more,
_______________
6Id., at p. 36.
7Id., at p. 37.
533
VOL. 409, AUGUST 25, 2003 53
 Crisostomo vs. Court of Appeals
negligent than the private respondent, for in the contract
of carriage the common carrier is obliged to observe
utmost care and extra-ordinary diligence which is higher
in degree than (he ordinary diligence required of the
passenger. Thus, even if the petitioner and private
respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the
private respondent. At best, petitioners negligence is only
contributory while the private respondent [is guilty] of
gross negligence making the principle of pari
delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not
ruling that the Jewels of Europe tour was not indivisible
and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the
petitioner the consequential damages due her as a result
of breach of contract of carriage.8
Petitioner contends that respondent did not observe the
standard of care required of a common carrier when it
informed her wrongly of the flight schedule. She could not
be deemed more negligent than respondent since the
latter is required by law to exercise extraordinary
diligence in the fulfillment of its obligation. If she were
negligent at all, the same is merely contributory and not
the proximate cause of the damage she suffered. Her loss
could only be attributed to respondent as it was the direct
consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation
is one whereby a certain person or association of persons
obligate themselves to transport persons, things, or news
from one place to another for a fixed price.9 Such person
or association of persons are regarded as carriers and are
classified as private or special carriers and common or
public carriers.10 A common carrier is defined under
Article 1732 of the Civil Code as persons, corporations,
firms or associations engaged in the business of carrying
or transporting
_______________
Id., at p. 15.
8 performance of an obligation is: did the defendant in doing
Commentaries
9 and Jurisprudence on the
Commercial Laws of the Philippines, Vol. 4 (1993 Edition),
Aguedo F. Agbayani, p. 1, citing I Blanco 640.
10 Id., at p. 4.
534
534 SUPREME COURT REPORTS ANNOTATED
Crisostomo vs. Court of Appeals
passengers or goods or both, by lane, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent
is not an entity engaged in the business of transporting
either passengers or goods and is there fore, neither, a
private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to
another since its covenant with its customers is simply to
make travel arrangements in their behalf. Respondents
services as a travel agency include procuring tickets and
facilitating travel permits or visas as well as booking
customers for tours.
While petitioner concededly bought her plane ticket
through the efforts of respondent company, this does not
mean that the latter ipso facto is a common carrier. At
most, respondent acted merely as an agent of the airline,
with whom petitioner ultimately contracted for her
carriage to Europe. Respondents obligation to petitioner
in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date
and time. Her transport to the place of destination,
meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with
respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and
accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of
passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for
services and not one of carriage. Petitioners submission
is premised on a wrong assumption.
The nature of the contractual relation between
petitioner and respondent is determinative of the degree
of care required in the performance of the latters
obligation under the contract. For reasons of public policy,
a common carrier in a contract of carriage is bound by law
to carry passengers as far as human care and foresight
can provide using the utmost diligence of very cautious
persons and with due regard for all the
circumstances.11 As earlier stated, however, respondent is
not a common carrier but a travel agency. It is thus not
bound under the law to observe extraordinary diligence in
the performance of its obligation, as petitioner claims.
_______________
11Civil Code of the Philippines, Article 1755.
535
VOL. 409, AUGUST 25, 2003 53
Crisostomo vs. Court of Appeals
Since the contract between the parties is an ordinary one
for services, the standard of care required of respondent
is that of a good father of a family under Article 1173 of
the Civil Code.12This connotes reasonable care consistent
with that which an ordinarily prudent person would have
observed when confronted with a similar situation. The
test to determine whether negligence attended the
the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have
used in the same situation? If not, then he is guilty of
negligence.13
In the case at bar, the lower court found Menor
negligent when she allegedly informed petitioner of the
wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged
negligent act since respondent did not call Menor to the
witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e)14 of
the Rules of Court that evidence willfully suppressed
would be adverse if produced and thus considered
petitioners uncontradicted testimony to be sufficient
proof of her claim.
On the other hand, respondent has consistently
denied that Menor was negligent and maintains that
petitioners assertion is belied by the evidence on record.
The date and time of departure
_______________
Article 1173. The fault or negligence of the obligor
12
consists in the omission of that diligence which is required
by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place.
When negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2, shall apply.
If the law or contract does not state the diligence
which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
13 Jarco Marketing Corporation v. Court of
Appeals, 378 Phil. 991, 1003; 321 SCRA 375 (1999),
citing Picart v. Smith, 37 Phil. 809 (1918).
14 This rule states:
SEC. 3. Disputable presumptions.The following
presumptions are satisfactory if uncontradicted, but may
be contradicted and overcome by other evidence:
xxx xxx xxx
(e) That evidence willfully suppressed would be
adverse if produced;
xxx xxx xxx
536
536 SUPREME COURT REPORTS ANNOTATED
Crisostomo vs. Court of Appeals
was legibly written on the plane ticket and the travel
papers were delivered two days in advance precisely so
that petitioner could prepare for the trip. It performed all
its obligations to enable petitioner to join the tour and
exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to
rebut petitioners testimony could not give rise to an
inference unfavorable to the former. Menor was already
working in France at the time of the filing of the
complaint,15 thereby making it physically impossible for
respondent to present her as a witness. Then too, even if
it were possible for respondent to secure Menors
testimony, the presumption under Rule 131, Section 3(e)
would still not apply. The opportunity and possibility for
obtaining Menors testimony belonged to both parties,
considering that Menor was not just respondents
employee, but also petitioners niece. It was thus error for
the lower court to invoke the presumption that
respondent willfully suppressed evidence under Rule 131,
Section 3(e). Said presumption would logically be
inoperative if the evidence is not intentionally omitted but
is simply unavailable, or when the same could have been
obtained by both parties.16
In sum, we do not agree with the finding of the lower
court that Menors negligence concurred with the
negligence of petitioner and resultantly caused damage to
the latter. Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score
was petitioners uncorroborated narration of the events.
It is well-settled that the party alleging a fact has the
burden of proving it and a mere allegation cannot take the
place of evidence.17 If the plaintiff, upon whom rests the
burden of proving his cause of action, fails to show in a
satisfactory manner facts upon which he bases his claim,
the defendant is under no obligation to prove his exception
or defense.18
_______________
Supra, note 3 at 10.
15
The Revised Rules of Court in the Philippines, Vol.
16
VII, Part II (1999 Edition) V. Francisco, p. 92.
17 Pimentel v. Court of Appeals, 307 SCRA 38 (1999).
18 Castilex Industrial Corporation v. Vasquez, Jr., 378
Phil. 1009, 1018; 321 SCRA 393 (1999), citing Belen v.
Belen, 13 Phil. 202, 206 (1909), cited in Martin v. Court of
Appeals, G.R. No. 82248, 205 SCRA 591 (1992).
537
VOL. 409, AUGUST 25, 2003 53
Crisostomo vs. Court of Appeals
Contrary to petitioners claim, the evidence on record
shows that respondent exercised due diligence in
performing its obligations under the contract and followed
standard procedure in rendering its services to petitioner.
As correctly observed by the lower court, the plane
ticket19 issued to petitioner clearly reflected the departure
date and time, contrary to s petitioners contention. The
travel documents, consisting of the tour itinerary,
vouchers and instructions, were likewise delivered to
petitioner two days prior to the trip. Respondent also
properly booked petitioner for the tour, prepared the
necessary documents and procured the plane tickets. It
arranged petitioners hotel accommodation as well as
food, land transfers and sightseeing excursions, in
accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its
prestation under the contract as well as everything else
that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her
affairs, there would have been no reason for her to miss
the flight. Needless to say, after the travel papers were
delivered to petitioner, it became incumbent upon her to
take ordinary care of her concerns. This undoubtedly
would require that she at least read the documents in
order to assure herself of the important details regarding
the trip.
The negligence of the obligor in the performance of the
obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence
of the obligor consists in his failure to exercise due care
and prudence in the performance of the obligation as the
nature of the obligation so demands.20 There is no fixed
standard of diligence applicable to each and every
contractual obligation and each case must be determined
upon its particular facts. The degree of diligence required
depends on the circumstances of the specific obligation
and whether one has been negligent is a question of fact
that is to be determined after taking into account the
particulars of each case.21
_______________
Supra, note 2 at 60 & 94.
19
Bayne Adjusters and Surveyors, Inc. v. Court of
20
Appeals, G.R. No. 116332, 323 SCRA 231 (2000), citing
Articles 1170, 1172-73, Civil Code; Southeastern College,
Inc. v. Court of Appeals, 354 Phil 434; 292 SCRA
422 (1998).
21 Commentaries and Jurisprudence on the Civil Code
of the Philippines, Vol. IV (1999 Edition), Arturo M.
Tolentino, p. 124.
538
538 SUPREME COURT REPORTS ANNOTATED
Crisostomo vs. Court of Appeals
The lower court declared that respondents employee was
negligent. This factual finding, however, is not supported
by the evidence on record. While factual findings below
are generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial court
overlooked, misunderstood, or misapplied some facts or
circumstances of weight and substance which will affect
the result of the case.22
In the case at bar, the evidence on record shows that
respondent company performed its duty diligently and did
not commit any contractual breach. Hence, petitioner
cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for
lack of merit. The decision of the Court of Appeals in CA-
G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner
is ordered to pay respondent the amount of P12,901.00
representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the
rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision.
After this Decision becomes final and executory, the rate
of 12% per annum shall be imposed until the obligation is
fully settled, this interim period being deemed to be by
then an equivalent to a forbearance of credit.23
SO ORDERED.
Davide, Jr. (C.J.,
Chairman), Vitug, Carpio and Azcuna, JJ., concur.
Petition denied, assailed judgment affirmed.
Note.A common carrier is a person or corporation
whose regular business is to carry passengers or property
for all persons who may choose to employ and to
remunerate him. (Caltex [Philippines], Inc. vs. Sulpicio
Lines, Inc., 315 SCRA 709 [1999])

o0o

_______________

22 Supra, note 13, citing Borillo v. Court of

Appeals, G.R. No. 55691, 209 SCRA 130 (1992); Mckee v.
Intermediate Appellate Court, G.R. No. 68102, 211 SCRA
7 (1992); and Salvador v. Court of Appeals, 313 Phil.
36; 243 SCRA 239 (1995).
23 Eastern Shipping Lines, Inc. v. Court of
Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78, 97.
539
Copyright 2017 Central Book Supply, Inc. All rights
reserved.
 VOL. 32, APRIL 30, 1970 of P690.00
547 for actual, temperate and moral damages and
attorneys fees.
Chaves vs. Gonzales The appealed judgment, which is brief, is hereunder
No. 27454, April 30, 1970. quoted in full:
ROSENDO O. CHAVES, plaintiff- 549
appellant, vs. FRUCTUOSO GONZALES, defendant- VOL. 32, APRIL 30, 1970 54
appellee.
Chaves vs. Gonzales
Civil law; Obligations; Nature and effect of
obligations;Obligation of a person obliged to do something In the early part of July, 1963, the plaintiff delivered to
and fails to do it.Under Article 1167 of the Civil Code, the defendant, who is a typewriter repairer, a portable
a person who is obliged to do something and fails to do it typewriter for routine cleaning and servicing. The
shall be liable for the cost of executing the obligation in a defendant was not able to finish the job after some time
proper manner. despite repeated reminders made by the plaintiff. The
Same; Same; Same; Same; Cost of obligation; Case defendant merely gave assurances, but failed to comply
at bar.The cost of execution of the obligation to repair with the same. In October, 1963, the defendant asked
a typewriter is the cost of the labor or service expended in from the plaintiff the sum of P6.00 for the purchase of
the repair of the typewriter. In addition, the obligor, under spare parts, which amount the plaintiff gave to the
Article 1170 of the Code, is liable for the cost of the defendant. On October 26, 1963, after getting exasperated
missing parts because in with the delay of the repair of the typewriter, the plaintiff
_______________ went to the house of the defendant and asked for the
return of the typewriter. The defendant delivered the
82 Republic of the Philippines vs. Hernaez, et al., 31 typewriter in a wrapped package. On reaching home, the
plaintiff examined the typewriter returned to him by the
SCRA 219, 225-227.
defendant and found out that the same was in shambles,
548
with the interior cover and some parts and screws
548 SUPREME COURT REPORTS ANNOTATED missing. On October 29, 1963, the plaintiff sent a letter to
Chaves vs. Gonzales the defendant formally demanding the return of the
his obligation to repair the typewriter he is bound to missing parts, the interior cover and the sum of P6.00
return the typewriter in the same condition it was when (Exhibit D). The following day, the defendant returned to
he received it. the plaintiff some of the missing parts, the interior cover
Same; Same; Obligation with period; Where and the P6.00.
obligation does not fix a period; When fixing a period is On August 29, 1964, the plaintiff had his typewriter
mere formality.Where the defendant virtually admitted repairfed by Freixas Business Machines, and the repair
non-performance by returning the typewriter he was job cost him a total of P89.85, including labor and
obliged to repair in a non-working condition, with materials (Exhibit C ) .
essential parts, missing, he cannot invoke Article 1137 of On August 23, 1965, the plaintiff commenced this
the Civil Code. The time for compliance having evidently action before the City Court of Manila, demanding from
expired, and there being a breach of contract by non- the defendant the payment of P90.00 as actual and
performance, it was academic for the plaintiff to have first compensatory damages, P100.00 for temperate damages,
petitioned the court to fix a period for the performance of P500.00 for moral damages, and P500.00 as attorneys
the contract before filing his complaint in this case. The fees.
fixing of a period would thus be a mere formality and In his answer as well as in his testimony given before
would serve no purpose than to delay. this court, the defendant made no denials of the facts
Same; Damages; Claims for damages and attorneys narrated above, except the claim of the plaintiff that the
fees must be alleged and proved.Claims for damages and typewriter was delivered to the defendant through a
attorneys fees must be pleaded, and the existence of the certain Julio Bocalin, which the defendant denied
actual basis thereof must be proved. Where there is no allegedly because the typewriter was delivered to him
findings of fact on the claims for damages and attorneys personally by the plaintiff.
fees in the lower courts decision, there is no factual basis The repair done on the typewriter by Freixas
upon which to make an award therefor. Business Machines with the total cost of P89.85 should
not, however, be fully chargeable against the defendant.
DIRECT APPEAL from a decision of the Court of First The repair invoice, Exhibit C, shows that the missing
Instance of Manila. Vasquez, J. parts had a total value of only P31.10.
WHEREFORE, judgment is hereby rendered
ordering the defendant to pay the plaintiff the sum of
The facts are stated in the opinion of the Court.
P31.10, and the costs of suit.
Chaves, Elio, Chaves & Associates for plaintiff-
SO ORDERED.
appellant.
550
Sulpicio E. Platon for defendant-appellee.
550 SUPREME COURT REPORTS ANNOTATED
REYES, J.B.L., J.: Chaves vs. Gonzales
The error of the court a quo, according to the plaintiff-
This is a direct appeal by the party who prevailed in a suit appellant, Rosendo O. Chaves, is that it awarded only the
for breach of oral contract and recovery of damages but value of the missing parts of the typewriter, instead of the
was unsatisfied with the decision rendered by the Court whole cost of labor and materials that went into the repair
of First Instance of Manila, in its Civil Case No. 65138,
because it awarded him only P31.10 out of his total claim
of the machine, as provided for in Article 1167 of the Civil
Code, reading as follows:
ART. 1167. If a person obliged to do something fails to do
it, the same shall be executed at his cost.
This same rule shall be observed if he does it in
contravention of the tenor of the obligation. Furthermore,
it may be decreed that what has been poorly done be
undone.
On the other hand, the position of the defendant-appellee,
Fructuoso Gonzales, is that he is not liable at all, not even
for the sum of P31.10, because his contract with plaintiff-
appellant did not contain a period, so that plaintiff-
appellant should have first filed a petition for the court to
fix the period, under Article 1197 of the Civil Code, within
which the defendant-appellee was to comply with the
contract before said defendant-appellee could be held
liable for breach of contract.
Because the plaintiff appealed directly to the Supreme
Court and the appellee did not interpose any appeal, the
facts, as found by the trial court, are now conclusive and
non-reviewable.1
The appealed judgment states that the plaintiff
delivered to the defendant x x x a portable typewriter for
routine cleaning and servicing; that the defendant was
not able to finish the job after some time despite repeated
reminders made by the plaintiff; that the defendant
merely gave assurances, but failed to comply with the
same; and that after getting exasperated with the delay
of the repair of the typewriter, the plaintiff went to the
house of the defendant and asked for its return, which was
done. The inferences derivable from these findings of fact
are that the appellant and the appellee had a perfected
contract
________________
1 Perez v. Araneta, L-18414. 15 Julv 1968. 24 SCRA
43; Cebu Portland Cement Co, v. Mun. of Naga, L-24116-
17, 22 August 1968. 24 SCRA 708.
551
VOL. 32, APRIL 30, 1970
Chaves vs. Gonzales
for cleaning and servicing a typewriter; that they
intended that the defendant was to finish it at some
future time although such time was not specified; and
that such time had passed without the work having been
accomplished, for the defendant returned the typewriter
cannibalized and unrepaired, which in itself is a breach of
his obligation, without demanding that he should be given
more time to finish the job, or compensation for the work
he had already done. The time for compliance having
evidently expired, and there being a breach of contract by
non-performance, it was academic for the plaintiff to have
first petitioned the court to fix a period for the
performance of the contract before filing his complaint in
this case. Defendant cannot invoke Article 1197 of the
Civil Code for he virtually admitted non-performance by
returning the typewriter that he was obliged to repair in
a nonworking condition, with essential parts missing. The
fixing of a period would thus be a mere formality and
would serve no purpose than to delay (cf. Tiglao, et al. v.
Manila Railroad Co., 98 Phil. 181).
It is clear that the defendant-appellee contravened the
tenor of his obligation because he not only did not repair
the typewriter but returned it in shambles, according to
the appealed decision. For such contravention, as
appellant contends, he is liable under Article 1167 of the
Civil Code, jam quot, for the cost of executing the
obligation in a proper manner. The cost of the execution
of the obligation in this case should be the cost of the labor
or service expended in the repair of the typewriter, which
is in the amount of P58.75. because the obligation or
contract was to repair it.
In addition, the defendant-appellee is likewise liable,
under Article 1170 of the Code, for the cost of the missing
parts, in the amount of P31.10, for in his obligation to
repair the typewriter he was bound, but failed or
neglected, to return it in the same condition it was when
he received it.
Appellants claims for moral and temperate damages
552
552 SUPREME COURT REPORTS ANNOTATED
Chaves vs. Gonzales
and attorneys fees were, however, correctly rejected by
the trial court, for these were not alleged in his complaint
(Record on Appeal, pages 1-5). Claims for damages and
attorneys fees must be pleaded, and the existence of the
actual basis thereof must be proved.2 The appealed
judgment thus made no findings on these claims, nor on
the fraud or malice charged to the appellee. As no findings
of fact were made on the claims for damages and
attorneys fees, there is no factual basis upon which to
make an award therefor. Appellant is bound by such
judgment of the court, a quo, by reason of his having
resorted directly to the Supreme Court on questions of
law.
IN VIEW OF THE FOREGOING REASONS, the
appealed judgment is hereby modified, by ordering the
defendant-appellee to pay, as he is hereby ordered to pay,
the plaintiff-appellant the sum of P89.85, with interest at
the legal rate from the filing of the complaint. Costs in all
instances against appellee Fructuoso Gonzales.
Concepcion,
C.J., Dizon, Makalintal, Zaldivar, Castro,Fernando, Tee
hankee and Villamor, JJ., concur,
551Barredo, J., did not take part.
Judgment modified.
Notes.(a) Liability for negligent performance of
obligation.Under Article 1170 of the Civil Code, those
who in the performance of their obligation are guilty of
fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages. And
under Article 1173, the fault or negligence of the obligor
consists in the omission of that diligence which is required
by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place
xxx. If the law or contract does not state the diligence
which is to be observed in the performance, that which is
expected of a good father of a family shall be required.
_______________
Malonzo v. Galang, L-13851. 27 July 1960: Darang
2
v. Belizear, L-22399. 31 March 1967, 19 SCRA 214.
553
VOL. 32, APRIL 30, 1970 55
Vda. De Macabenta vs. Davao Stevedore Terminal Company
(b) Damages and attorneys fees must be alleged.See the
notes under De la Cruz vs. Cruz, L-27759, Aug. 17, 1970,
this volume.
 _______________

Copyright 2017 Central Book Supply, Inc. All rights

reserved.
 VOL. 158, FEBRUARY 29, 1988
Telefast Communications /Philippine Wireless, Inc. vs. Castro, Sr. companies to observe due diligence in transmitting their
No. L-73867. February 29, 1988.*
TELEFAST COMMUNICATIONS/PHILIPPINE
WIRELESS, INC., petitioner, vs. IGNACIO CASTRO,
SR., SOFIA C. CROUCH, IGNACIO CASTRO JR.,
AURORA CASTRO, SALVADOR CASTRO, MARIO
CASTRO, CONRADO CASTRO, ESMERALDA C.
FLORO, AGERICO CASTRO, ROLANDO CASTRO,
VIRGILIO CASTRO AND GLORIA CASTRO, and
HONORABLE INTERMEDIATE APPELLATE COURT,
respondents.
Civil
Law; Damages; Obligations; Telegrams; Failure
telegram company to send the sender's telegram overseas
despite payment of the required charges, makes it guilty of
contravening its obligation and is liable for damages.In
the case at bar, petitioner and private respondent Sofia C.
Crouch entered into a contract whereby, for a fee,
petitioner undertook to send said private respondent's
message overseas by telegram. This, petitioner did not do,
despite performance by said private respondent of her
obligation by paying the required charges. Petitioner was
therefore guilty of contravening its obligation to said
private respondent and is thus liable for damages.
Same; Same; Same; Same; Liability of telegram
company is not limited to actual or quantified damages.
This liability is not limited to actual or quantified
damages. To sustain petitioner's contrary position in this
regard would result in an inequitous situation where
petitioner will only be held liable for the actual cost of a
telegram fixed thirty (30) years ago.
Same; Same; Same; Same; Moral damages, concept
of, under Art. 2217 of the Civil Code; Moral damages,
recoverable in case at bar.We find Art. 2217 of the Civil
Code applicable to the case at bar. It states: "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 results of the defendant's wrongful act or
omission."
Same; Same; Same; Same; Petitioners act
omission amounted to gross negligence.Here,
petitioner's act or omission, which amounted
____________
* SECOND DIVISION.
446
446 SUPREME COURT REPORTS ANNOTATED
Telefast Communications Philippine Wireless, Inc. vs. Castro, Sr.
to gross negligence, was precisely the cause of the
suffering private respondents had to undergo.
Same; Same; Same; Same; Compensatory damages,
award of, proper, as petitioner was remiss in performing
its obligations.We also sustain the trial court's award of
P1 6,000.00 as compensatory damages to Sofia C. Crouch
representing the expenses she incurred when she came to
the Philippines from the United States to testify before
the trial court. Had petitioner not been remiss in
performing its obligation, there would have been no need
for this suit or for Mrs. Crouch's testimony.
Same; Same; Same; Same; Exemplary
445 damages,
award of, justified to serve as a warning to all telegram
customers' messages.The award of exemplary damages
by the trial court is likewise justified and, therefore,
sustained in the amount of P1,000.00 for each of the
private respondents, as a warning to all telegram
companies to observe due diligence in transmitting the
messages of their customers.
HERRERA, J., concurring;
Civil Law; Obligations; Damages; In addition to
compensatory and exemplary damages, moral damages
of are recoverable in actions for breach of contract where the
breach has been wanton and reckless.I concur. In
addition to compensatory and exemplary damages, moral
damages are recoverable in actions for breach of contract,
as in this case, where the breach has been wanton and
reckless, tantamount to bad faith.
PETITION for certiorari to review the decision of the
Intermediate Appellate Court
The facts are stated in the opinion of the Court
PADILLA, J.:
Petition for review on certiorari of the decision** of the
Intermediate Appellate Court, dated 11 February 1986,
in AC-G.R. No. CV-70245, entitled "Ignacio Castro, Sr., et
al., Plaintiffs-Appellees, versus Telefast
Communications/Philippine Wireless, Inc., Defendant-
Appellant."
____________
** Penned by Justice Serafin E. Camilon, with the
concurrence of Justices Crisolito Pascual, Jose C. Campos,
Jr. and Desiderio P. Jurado.
447
VOL. 158, FEBRUARY 29, 1988 44
Telefast Communications Philippine Wireless, Inc. vs. Castro, Sr.
The facts of the case are as follows:
On 2 November 1956, Consolacion Bravo-Castro, wife
of plaintiff Ignacio Castro, Sr. and mother of the other
or plaintiffs, passed away in Lingayen, Pangasinan. On the
same day, her daughter Sofia C. Crouch, who was then
vacationing in the Philippines, addressed a telegram to
plaintiff Ignacio Castro, Sr. at 685 Wanda, Scottsburg,
Indiana, U.S.A., 47170 announcing Consolacion's death.
The telegram w as accepted by the defendant in its
Dagupan office, for transmission, after payment of the
required fees or charges.
The telegram never reached its addressee.
Consolacion was interred with only her daughter Sofia in
attendance. Neither the husband nor any of the other
children of the deceased, then all residing in the United
States, returned for the burial.
When Sofia returned to the United States, she
discovered that the wire she had caused the defendant to
send, had not been received. She and the other plaintiffs
thereupon brought action for damages arising from
defendant's breach of contract. The case was filed in the
Court of First Instance of Pangasinan and docketed
therein as Civil Case No. 15356. The only defense of the
defendant was that it was unable to transmit the
telegram because of "technical and atmospheric factors
beyond its control."1 No evidence appears on record that
defendant ever made any attempt to advise the plaintiff
Sofia C. Crouch as to why it could not transmit the
telegram.
The Court of First Instance of Pangasinan, after trial,
ordered the defendant (now petitioner) to pay the
plaintiffs (now private respondents) damages, as follows,
with interest at 6% per annum:
1. "1.Sofia C. Crouch, P31.92 and P16,000.00 as
compensatory damages and P20,000.00 as
moral damages.
2. 2.Ignacio Castro Sr., P20,000.00 as moral
damages.
3. 3.Ignacio Castro Jr., P20,000.00 as moral
damages.
4. 4.Aurora Castro, P10,000.00 moral damages.
5. 5.Salvador Castro, P10,000.00 moral damages.
___________
1 Rollo at 8.
448
448 SUPREME COURT REPORTS ANNOTATED social humiliation, and similar injury. Though incapable
Telefast Communications Philippine Wireless, Inc. vs. Castro, Sr.
1. 6.Mario Castro, P10,000.00 moral damages.
2. 7.Conrado Castro, P1 0,000 moral damages.
3. 8.Esmeralda C. Floro, P20,000.00 moral
damages.
4. 9.Agerico Castro, P10,000.00 moral damages.
5. 10.Rolando Castro, P10,000.00 moral damages.
6. 11.Virgilio Castro, P10,000.00 moral damages.
7. 12.Gloria Castro, P10,000.00 moral damages.
Defendant is also ordered to pay P5,000.00 attorney's fees,
exemplary damages in the amount of P1,000.00 to each of
the plaintiffs and costs."2
On appeal by petitioner, the Intermediate Appellate
Court affirmed the trial court's decision but eliminated
the award of P1 6.000.00 as compensatory damages to
Sofia C. Crouch and the award of P1,000.00 to each of the
private respondents as exem plary damages. The award
of P20,000.00 as moral damages to each of Sofia C.
Crouch, Ignacio Castro, Jr. and Esmeralda C. Floro was
also reduced to P1 0,000.00 for each.3
Petitioner appeals from the judgment of the appellate
court, contending that the award of moral damages
should be eliminated as defendant's negligent act was not
motivated by "fraud, malice or recklessness."
In other words, under petitioner's theory, it can only
be held liable for P31.92, the fee or charges paid by Sofia
C. Crouch for the telegram that was never sent to the
addressee thereof.
Petitioner's contention is without merit.
Art. 1170 of the Civil Code provides that "those who
in the performance of their obligations are guilty of fraud,
negligence or delay, and those who in any manner
contravene the tenor thereof, are liable for damages." Art.
2176 also provides that "whoever by act or omission
causes damage to another, there being fault or negligence,
is obliged to pay for the damage done."
In the case at bar, petitioner and private respondent
Sofia C. Crouch entered into a contract whereby, for a fee,
petitioner undertook to send said private respondent's
message overseas
____________
2Rollo at 9-10.
3Rollo at 14.
449
VOL. 158, FEBRUARY 29, 1988 44
Telefast Communications / Philippine Wireless, Inc. vs. Castro, Sr.
by telegram. This, petitioner did not do, despite
performance by said private respondent of her obligation
by paying the required charges. Petitioner was therefore
guilty of contravening its obligation to said private
respondent and is thus liable for damages.
This liability is not limited to actual or quantified
damages. To sustain petitioner's contrary position in this
regard would result in an inequitous situation where
petitioner will only be held liable for the actual cost of a
telegram fixed thirty (30) years ago.
We find Art. 2217 of the Civil Code applicable to the
case at bar. It states: "Moral damages include physical
suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock,
of pecuniary computation, moral damages may be
recovered if they are the proximate results of the
defendant's wrongful act or omission." (Italics supplied).
Here, petitioner's act or omission, which amounted to
gross negligence, was precisely the cause of the suffering
private respondents had to undergo.
As the appellate court properly observed:
"[Who] can seriously dispute the shock, the mental
anguish and the sorrow that the overseas children must
have suffered upon learning of the death of their mother
after she had already been interred, without being given
the opportunity to even make a choice on whether they
wanted to pay her their last respects? There is no doubt
that these emotional sufferings were proximately caused
by appellant's omission and substantive law provides for
the justification for the award of moral damages."4
We also sustain the trial court's award of P16,000.00 as
compensatory damages to Sofia C. Crouch representing
the expenses she incurred when she came to the
Philippines from the United States to testify before the
trial court. Had petitioner not been remiss in performing
its obligation, there would have been no need for this suit
or for Mrs. Crouch's testimony.
The award of exemplary damages by the trial court is
likewise justified and, therefore, sustained in the amount
of P1 ,000.00 for each of the private respondents, as a
warning to all telegram
____________
4 Rollo at 13.
450
450 SUPREME COURT REPORTS ANNOTATED
Telefast Communications /Philippine Wireless, Inc. vs. Castro, Sr.
companies to observe due diligence in transmitting the
messages of their customers.
WHEREFORE, the petition is DENIED. The decision
appealed from is modified so that petitioner is held liable
to private respondents in the following amounts:
 1. (1)P10,000.00 as moral damages, to each of
private respondents;
2. (2)P1,000.00 as exemplary damages, to each of
private respondents;
3. (3)P1 6,000.00 as compensatory damages, to
private respondent Sofia C. Crouch;
4. (4)P5,000.00 as attorney's fees; and
5. (5)Costs of suit.

SO ORDERED.
Yap (Chairman), Paras and Sarmiento,
JJ., concur.
Melencio-Herrera, J., I concur. In addition to
compensatory and exemplary damages, moral damages
are recoverable in actions for breach of contract, as in this
case, where the breach has been wanton and reckless,
tantamount to bad faith.
Petition denied. Decision modified.
Notes.Telegraph corporation, as employer is liable
directly for the acts of its employees. Action for damages
must be based on Articles 19 and 20 of the Civil Code, not
on subsidiary liability of corporation under Article 1161,
New Civil Code. (Radio Com munications of the Phil. vs.
Court of Appeals, 143 SCRA 657.)
Since negligence may be hard to substantiate in some
cases, the application of the doctrine of res ipsa loquitur is
proper. (Radio Communications of the Phil. vs. Court of
Appeals, 143 SCRA 657.)

o0o

451
Copyright 2017 Central Book Supply, Inc. All rights
reserved.
 VOL. 10, JANUARY 31, 1964
Arrieta vs. National Rice and Corn Corporation
No. L-15645. January 31, 1964.
PAZ P. ARRIETA and VITALIADO ARRIETA, plaintiffs-
appellees, vs. NATIONAL RICE AND CORN
CORPORATION, defendant-appellant, MANILA
UNDERWRITERS INSURANCE CO., INC., defendant-
appellee.
Obligations and contracts; Liability for non-
performance; Failure to put up letter of credit within
agreed period.One who assumes a contractual
obligation and fails to perform the same on account of his
inability to meet certain bank requirements which
inability he knew and was aware of when he entered into
the contract, should be held liable in damages for breach
of contract.
Under Article 1170 of the Civil Code, not only debtors
guilty of fraud, negligence or default but also every debtor,
in general, who fails in the performance of his obligations
is bound to indemnify for the losses and damages caused
thereby.
Same; Same; Meaning of phrase "in any manner
contravene the tenor" of the obligation in Art. 1170, Civil
Code.The phrase "in any manner contravene the tenor"
of the obligation in Art. 1170, Civil Code, includes any
illicit task which impairs the strict and faithful
fulfillment of the obligation, or every kind of defective
performance.
Same; Same; Waiver of breach of contract not
presumed.Waivers are not presumed, but must be
clearly and convincingly shown, either by express
stipulation or acts admitting no other reasonable
explanation.
Same; Payment of award; Philippine currency.In
view of Republic Act 527 which specifically requires the
discharge of obligations only "in any coin or currency
which at the time of payment is legal tender for public and
private debt", the award of "damages in U S. dollars made
by the lower court in the case at bar is modified by
converting it into Philippine pesos at the rate of exchange
prevailing at the time the obligation was incurred, or
when the contract in question was executed.
80
80 SUPREME COURT REPORTS ANNOTATED
Arrieta vs. National Rice and Corn Corporation
APPEAL from a decision of the Court of First Instance of
Manila. Macadaeg, J.
The facts are stated in the opinion of the Court.
Teehankee & Carreon for plaintiffs-appellees.
The Government Corporate Counsel for
defendantappellant.
Isidro A. Vera for defendant-appellee.
REGALA, J.:
This is an appeal of the defendant-appellant NARIC from
the decision of the trial court dated February 20, 1958,
awarding to the plaintiffs-appellees the -amount of
$286,000.00 as damages for breach of contract and
dismissing the counterclaim and third party complaint of
the defendant-appellant NARIC.
In 79
accordance with Section 13 of Republic Act No.
3452, "the National Rice and Corn Administration
(NARIC) is hereby abolished and all its assets, liabilities,
functions, powers which are not inconsistent with the
provisions of this Act, and all personnel are transferred"
to the Rice and Corn Administration (RCA).
All references, therefore, to the NARIC in this
decision must accordingly be adjusted and read as RCA
pursuant to the aforementioned law.
On May 19, 1952, plaintiff-appellee participated in
the public bidding called by the NARIC for the supply of
20,000 metric tons of Burmese rice. As her bid of $203.00
per metric ton was the lowest, she was awarded the
contract for the same. Accordingly, on July 1, 1952,
plaintiffappellee Paz P. Arrieta and the appellant
corporation entered into a Contract of Sale of Rice, under
the terms of which the former obligated herself to deliver
to the latter 20,000 metric tons of Burmess Rice at
$203.00 per metric ton, CIF Manila. In turn, the
defendant corporation committed itself to pay for the
imported rice "by means of an irrevocable, confirmed and
assignable letter of credit in U.S. currency in favor of the
plaintiff-appellee and/or supplier in Burma,
immediately."
Despite the commitment to pay immediately "by
means of an irrevocable, confirmed and assignable Letter
of Credit," however, it was only on July 30, 1952, or a full
month
81
VOL. 10, JANUARY 31, 1964 8
Arrieta vs. National Rice and Corn Corporation
from the execution of the contract, that the defendant
corporation, thru its general manager, took the first step
to open a letter of credit by forwarding to the Philippine
National Bank its Application for Commercial Letter of
Credit. The application was accompanied by a transmittal
letter, the relevant paragraphs of which read:
"In view of the fact that we do not have sufficient deposit
with your institution with which to cover the amount
required to be deposited as a condition for the opening of
letters of credit, we will appreciate it if this application
could be considered a special case.
"We understand that our supplier, Mrs. Paz P.
Arrieta, has a deadline to meet which is August 4, 1952,
and in order to comply therewith, it is imperative that the
L/C be opened prior to that date. We would therefore
request your full cooperation on this matter."
On the same day, July 30, 1952, Mrs. Paz P. Arrieta, thru
counsel, advised the appellant corporation of the extreme
necessity for the immediate opening of the letter of credit
since she had by then made a tender to her supplier in
Rangoon, Burma, "equivalent to 5% of the F.O.B. price of
20,000 tons at $180.70 and in compliance with the
regulations in Rangoon this 5% will be confiscated if the
required letter of credit is not received by them before
August st 4, 1952."
On August 4 1952, the Philippine National Bank
informed the appellant corporation that its application,
"for a letter of credit for $3,614,000.00 in favor of Thiri
Setkya has been approved by the Board of Directors with
the condition that 56% marginal cash deposit be paid and
that drafts are to be paid upon presentment." (Exh. J-pl.;
Exh. 10-def., p. 19, Folder of Exhibits). Furthermore, the
Bank represented that it "will hold your application in
abeyance pending compliance with the above stated
requirement."
As it turned out, however, the appellant corporation
was not in any financial position to meet the condition. As
a matter of fact, in a letter dated August 2, 1952, the
NARIC bluntly confessed essed to the appellee its
dilemma: "In this connection, please be advised that our
application for the opening of the letter of credit has been
presented to the bank since July 30th but the latter
requires that we first deposit 50% of the value of the letter
amounting to ap-
82
82 SUPREME COURT REPORTS ANNOTATED
Arrieta vs. National Rice and Corn Corporation
proximately $3,614,000.00 which we are not in a position
to meet." (Italics supplied. Exh. 9-Def.; Exh. 1-Pe., p. 18,
Folder of Exhibits)
Consequently, the credit instrument applied for was
opened only on September 8, 1952 "in favor of Thiri
Setkya, Rangoon, Burma, and/or assignee for
$3,614,000.00," (which is more than two months from the
execution of the contract) the party named by the appellee
as beneficiary of the letter of credit.
As a result of the delay, the allocation of appellee's
supplier in Rangoon was cancelled and the 5% deposit,
amounting to 524,000 kyats or approximately
P200,000.00 was forfeited. orf eited. In this connection, it
must be made of record that although the Burmese
authorities had set August 4, 1952, as the deadline for the
remittance of the required letter of credit, the cancellation
of the allocation and the confiscation of the 5% deposit
were not effected until August 20, 1952, or, a full half
month after the expiration of the deadline. And yet, even
with the 15-day grace, appellant corporation was unable
to make good its commitment to open the disputed letter
of credit.
The appellee endeavored, but failed, to restore the
cancelled Burmese rice allocation. When the futility of
reinstating the same became apparent, she offered to
substitute Thailand rice instead to the defendant NARIC,
communicating at the same time that the offer was "a
solution which should be beneficial to the NARIC and to
us at the same time." (Exh. X-Pe., Exh. 25Def., p. 38,
Folder of Exhibits). This offer for substitution, however,
was rejected by the appellant in a resolution dated
November 15, 1952.
On the foregoing, the appellee sent a letter to the
appellant, demanding compensation for the damages
caused her in the sum of $286,000.00, U.S. currency,
representing unrealized profit. The demand having been
rejected, she instituted this case now on appeal.
At the instance of the NARIC, a counterclaim was
filed and the Manila Underwriters Insurance Company
was brought to the suit as a third party defendant to hold
it liable on the performance bond it executed in favor of
the plaintiff-appellee.
83
VOL. 10, JANUARY 31, 1964
Arrieta vs. National Rice and Corn Corporation
We find for the appellee.
It is clear upon the records that the sole and principal
reason for the cancellation of the allocation contracted by
the appellee herein in Rangoon, Burma, was the failure of
the letter of credit to be opened with the contemplated
period. This failure must, therefore, be taken as the
immediate cause for the consequent damage which
resulted. As it is then, the disposition of this case depends
on a determination of who was responsible for such
failure. ailure. Stated differently, the issue is whether
appellant's failure to open immediately the letter of credit
in dispute amounted to a breach of the contract of July 1,
1952 for which it may be held liable in damages.
Appellant corporation disclaims responsibility for the
delay in the opening of the letter of credit. On the
contrary, it insists that the fault lies with the appellee.
Appellant contends that the disputed negotiable
instrument was not promptly secured because the
appellee failed to seasonably furnish data necessary and
required for opening the same, namely, "(1) the amount of
the letter of credit, (2) the person, company or corporation
in whose favor it is to be opened, and (3) the place and
bank where it may be negotiated." Appellant would have
this Court believe, therefore, that had these informations
been forthwith furnished it, there would have been no
delay in securing the instrument.
Appellant's explanation has neither force nor merit.
In the first place, the explanation reaches into an area of
the proceedings into which We are not at liberty to
encroach. The explanation refers to a question of fact.
Nothing in the record suggests any arbitrary or abusive
conduct on the part of the trial judge in the formulation
ormulation of the ruling. His conclusion on the matter is
sufficiently borne out by the evidence presented. We are
denied, therefore, the prerogative to disturb that finding,
consonant to the time-honored tradition of this Tribunal
to hold trial judges better situated to make conclusions on
questions of fact. For the record, We quote hereunder the
lower court's ruling on the point:
"The defense that the delay, if any in opening the letter of
credit was due to the failure of plaintiff to name the
supplier,
84
84 SUPREME COURT REPORTS ANNOTATED
Arrieta vs. National Rice and Corn Corporation
the amount and the bank is not tenable. Plaintiff stated
in Court that these facts were known to defendant even
before the contract was executed because these facts were
necessarily revealed to the defendant before she could
qualify as a bidder. She stated too that she had given the
necessary data immediately after the execution of Exh.
"A" (the contract of July 1, 1952) to Mr. GABRIEL
BELMONTE, General Manager of the NARIC, both orally
and in writing and that she also pressed for the opening
of the letter of credit on these occasions. These statements
have not been controverted and defendant NARIC,
notwithstanding its previous intention to do so, failed to
present Mr. Belmonte to testify or refute this. x x x."
Secondly, from the correspondence and communications
which form part of the record of this case, it is clear that
what singularly delayed the opening of the stipulated
letter of credit and which, in turn, caused the cancellation
of the 83allocation in Burma, was the inability of the
appellant corporation to meet the condition imposed by
the Bank for granting the same.
We do not think the appellant corporation can refute
the fact that had it been able to put up the 50% marginal
cash deposit demanded by the bank, then the letter of
credit would have been approved, opened and released as
early as August 4, 1952. The letter of the Philippine
National Bank to the NARIC was plain and explicit that
as of the said date, appellant's "application for a letter of
credit x x x has been approved by the Board of Directors
with the condition that 50% marginal cash deposit be paid
and that drafts are to be paid upon presentment." (Italics
supplied)
The liability of the appellant, however, stems not
alone from this failure or inability to satisfy the
requirements of the bank. Its culpability arises from its
willful and deliberate assumption of contractual
obligations even as it was well aware of its financial
incapacity to undertake the prestation. We base this
judgment upon the letter which accompanied the
application filed by the appellant with the bank, a part of
which letter was quoted earlier in this decision. In the
said accompanying correspondence, appellant admitted
and owned that it did "not have sufficient deposit with
your institution (the PNB) with which to cover the
amount required to be deposited as a condition for or the
opening of letters of credit. x x x."
85
VOL. 10, JANUARY 31, 1964
Arrieta vs. National Rice and Corn Corporation
A number of logical inferences may be drawn from the
aforementioned admission. First, that the appellant knew
the bank requirements for opening letters of credit;
second, that appellant also knew it could not meet those
requirements. When, therefore, despite this awareness
that it was financially incompetent to open a letter of
credit immediately, appellant agreed in paragraph 8 of
the contract to pay immediately "by means of an
irrevocable, confirmed and assignable letter of credit," it
must be similarly held to have bound itself to answer for
all and every consequences that would result from the
representation. As aptly observed by the trial court:
"x x x. Having called for bids for the importation of rice
involving millions, $4,260,000.00 to be exact, it should
have ascertained its ability and capacity to comply with
the inevitable requirements in cash to pay for such
importation. Having announced the bid, it must be
deemed to have impliedly assured suppliers of its capacity
and facility to finance the importation within the required
period, especially since it had imposed on the supplier the
90-day period within which the shipment of the rice must
be brought into the Philippines. Having entered into the
contract, it should have taken steps immediately to
arrange for the letter of credit for the large amount
involved and in quired into the possibility of its issuance."
In relation to the aforequoted observation of the trial
court, We would like to make reference also to Article
1170 of the Civil Code which provides:
"Those who in the performance of their obligation are
guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable in
damages."
Under this provision, not only debtors guilty of fraud,
negligence or default in the performance of obligations are
decreed liable; in general, every debtor who fails in the
performance of his obligations is bound to indemnify for
the losses and damages caused thereby (De la Cruz v.
Seminary of Manila, 18 Phil. 330; Municipality of
Moncada v. Cajuigan, 21 Phil. 184; De la Cavada v.
Diaz, 37 Phil. 982; Maluenda & Co. v. Enriquez, 46 Phil.
916; Pasumil v. Chong, 49 Phil. 1003; Pando v.
Gimenez, 54 Phil. 459; Acme Films v. Theaters
Supply, 63 Phil. 657). The phrase "in any manner
contravene the tenor" of the obligation includes
86
86 SUPREME COURT REPORTS ANNOTATED
Arrieta vs. National Rice and Corn Corporation
any illicit act which impairs the strict and faithful
fulfillment of the obligation, or every kind or defective
performance. (IV Tolentino, Civil Code of the Philippines,
citing authorities, p. 103.)
The NARIC would also have this Court hold that the
subsequent offer to substitute Thailand rice for the
originally contracted Burmese rice amounted to a waiver
by the appellee of whatever rights she might have derived
from the breach of the contract. We disagree. Waivers are
not presumed, but must be clearly and convincingly
shown, either by express stipulation or acts admitting no
other reasonable explanation. (Ramirez v. Court of
Appeals, 52 O.G. 779.) In the case at bar, no such intent
to waive has been established.
We have carefully ully examined and studied the oral
and documentary evidence presented in this case and
85
upon which the lower court based its award. Under the
contract, the NARIC bound itself to buy 20,000 metric
tons of Burmese rice at "$203.00 U.S. Dollars per metric
ton, all net shipped weight, and all in U.S. currency, C.I.F.
Manila. x x x." On the other hand, documentary and other
evidence establish with equal certainty that the plaintiff-
appellee was able to secure the contracted commodity at
the cost price of $180.70 per metric ton from her supplier
in Burma. Considering freights, insurance and charges
incident to its shipment here and the forfeiture of the 5%
deposit, the award granted by the lower court is fair and
equitable. For a clearer view of the equity of the damages
awarded, We reproduce below the testimony of the
appellee, adequately supported by the evidence and
record:
"Q. Will you please tell the court, how much is the damage you suffered ?
"A. Because the selling price of my rice is $203.00 per metric ton, and the cost
price of my rice is $180.00 We had to pay also $6.25 for shipping and about
$164 for insurance. So adding the cost of the rice. the freight. the insurance,
the total would be about $187.99 that would be $15.01 gross profit per metric
ton, multiply by 20,000 equals $300,200. that is my supposed profit if I went
through the contract."
The above testimony of the plaintiff was a general
approximation of the actual figures involved in the
transac-
87
VOL. 10, JANUARY 31, 1964 8
Arrieta vs. National Rice and Corn Corporation
tion. A precise and more exact demonstration of the equity
of the award herein is provided by Exhibit HH of the
plaintiff and Exhibit 34 of the defendant, hereunder
quoted so far as germane.
"It is equally of record now that as shown in her request,
dated July 29, 1959, and other communications
subsequent thereto for the opening by your corporation of
the required letter of credit, Mrs. Arrieta was supposed to
pay her supplier in Burma at the rate of One Hundred
Eighty Dollars and Seventy Cents ($180.70) in U.S.
Currency, per ton plus Eight Dollars ($8.00) in the same
currency per ton for shipping and other handling
expenses, so that she is already assured of a net profit of
Fourteen Dollars and Thirty Cents ($14.30), U.S., of exchange at the time the obligation was incurred (Sec.
Currency, per ton or a total of Two Hundred and Eighty 1, idem)."
Six Thousand Dollars ($286,000.00), U.S. Currency, in the UPON ALL THE FOREGOING, the decision appealed
aforesaid transaction. x x x." from is hereby affirmed, with the sole modification that
Lastly, herein appellant filed a counterclaim asserting the award should be converted into the Philippine peso at
that it has suffered, likewise by way of unrealized profit, the rate of exchange prevailing at the time the obligation
damages in the total sum of $406,000.00 from the failure was incurred or on July 1, 1952 when the contract was
of the projected contract to materialize. This counterclaim executed. The appellee insurance company, in the light of
was supported by a cost study made and submitted by the this judgment, is relieved of any liability under this suit.
appellant itself and wherein it was illustrated how No pronouncement as to costs.
indeed, had the importation pushed thru, NARIC would Bengzon,
have realized in profit the amount asserted in the C.J., Padilla, Concepcion, Paredes, Dizon and Makalinta
counterclaim. And yet, the said amount of P406,000.00 l, JJ., concur.
was realizable by the appellant despite a number of Reyes, J.B.L., J., reserves his vote.
expenses which the appellee, under the contract, did not Barrera, J., took no part.
have to incur. Thus, under the cost study submitted by Decision affirmed with modification,
the appellant, banking and unloading charges were to be 89
shouldered by it, including an Import License Fee Copyright 2017 Central Book Supply, Inc. All rights
of 2% and superintendence fee of $0.25 per metric ton. If reserved.
the NARIC stood to profit over P400,000.00 from the
disputed transaction inspite of the above extra
expenditures from which the herein appellee was exempt,
we are convinced of the fairness of the judgment presently
under appeal.
In the premises, however, a minor modification must
be effected in the dispositive portion of the decision
appealed from insofar as it expresses the amount of
damages in U.S. currency and not in Philippine Peso.
Republic Act 529 specifically requires the discharge of
obligations only "in any coin or currency which at the time
of payment is legal tender for public and private debts."
In view of that law, therefore, the award should be
converted into and ex-
88
88 SUPREME COURT REPORTS ANNOTATED
Arrieta vs. National Rice and Corn Corporation
pressed in Philippine Peso.
This brings us to a consideration of what rate of
exchange should apply in the conversion here decreed.
Should it be at the time of the breach, at the time the
obligation was incurred or at the rate of exchange
prevailing on the promulgation of this decision.
In the case of Engel v. Velasco & Co., 47 Phil. 115, We
ruled that in an action for recovery of damages for breach
of contract, even if the obligation assumed by the
defendant was to pay the plaintiff a sum of money
expressed in American currency, the indemnity to be
allowed should be expressed in Philippine currency at the
rate of exchange at the time of the judgment rather than
at the rate of exchange prevailing on the date of
defendant's breach. This ruling, however, can neither be
applied nor extended to the case at bar for the same was
laid down when there was no law against stipulating
foreign currencies in Philippine contracts. But now we
have Republic Act No. 529 which expressly declares such
stipulations as contrary to public policy, void and of no
effect. And, as We already pronounced in the case
of Eastboard Navigation, Ltd. v. Juan Ysmael & Co.,
Inc., G.R. No. L-9090, September 10, 1957, if there is any
agreement to pay an obligation in a currency other than
Philippine legal tender, the same is null and void as
contrary to public policy (Republic Act 529), and the most
that could be demanded is to pay said obligation in
Philippine currency "to be measured in the prevailing rate
418 SUPREME COURT REPORTS ANNOTATED
Magat vs. Medialdea
No. L-37120. April 20, 1983.*
VICTORINO D. MAGAT, petitioner, vs. HON. LEO D. MEDIALDEA and
SANTIAGO A. GUERRERO, respondents.
Action; Contracts; A complaint that alleges that the defendant violated his
prestations under a contract such that by reason thereof the plaintiff will suffer
damages, sufficiently states a valid cause of action.After a thorough examination
of the complaint at bar, We find the test of legal sufficiency of the cause of action
adequately satisfied. In a methodical and logical sequence, the complaint recites
the circumstances that led to the perfection of the contract entered into by the
parties. It further avers that while petitioner had fulfilled his part of the bargain
[paragraph 8 of the Complaint], private respondent failed to comply with his
correlative obligation by refusing to open a letter of credit to cover payment of the
goods ordered by him [paragraphs 11 & 12 of the Complaint], and that
consequently, petitioner suffered not only loss of his expected profits, but moral and
exemplary damages as well. From these allegations, the essential elements of a
cause of action are present, to wit: [1] the existence of a legal right to the plaintiff;
[2] a correlative duty of the defendant and [3] an act or omission of the defendant
in violation of the plaintiffs right, with consequent injury or damage to the latter
for which he may maintain an action for recovery of damages or other appropriate
relief.
Same; Same; Same.Indisputably, the parties, both businessmen, entered
into the aforesaid contract with the evident intention of deriving some profits
therefrom. Upon breach of the contract by either of them, the other would
necessarily suffer loss of his expected profits. Since the loss comes into being at the
very moment of breach, such loss is real, fixed and vested and, therefore,
recoverable under the law.
Same; Same; Damages; Damages cover not only actual loss (dao emergente),
but also profits that may be lost (lucro cesante). An averment that plaintiff stand, to
lose expected profits, goodwill, etc. due to defendants breach of contract sufficiently
states a cause of action.The damages which the obligor is liable for includes not
only the value of the loss suffered by the obligee [dao emergente] but also
________________
*SECOND DIVISION.
419
VOL. 121, APRIL 20, 1983 419
Magat vs. Medialdea
the profits which the latter failed to obtain [lucro cesante]. If the obligor acted
in good faith, he shall be liable for those damages that are the natural and probable
consequences of the breach of the obligation and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted; and in
case of fraud, bad faith, malice or wanton attitude, he shall be liable for all damages
which may be reasonably attributed to the non-performance of the obligation.
PETITION for certiorari to review the order of the Court of First Instance of
Rizal. Medialdea, J.
The facts are stated in the opinion of the Court.
Sinesio S. Vergara tor petitioner.
Eladio B. Samson for respondents.
ESCOLIN, J.:
Put to test in this petition for review on certiorari is the sufficiency of the averments
contained in the complaint for alleged breach of contract filed by petitioner
Victorino D. Magat against respondent Santiago A. Guerrero in Civil Case No.
17827 of the Court of First Instance of Rizal, presided by respondent Judge Leo D.
Medialdea, now Deputy Judicial Administrator, which complaint was dismissed for
failure to state a cause of action.
The pertinent allegations in the complaint, subject of inquiry, are as follows: 1
3. That sometime in September 1972, the defendant entered into a contract with
the U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a fleet of
taxicabs, each taxicab to be provided with the necessary taximeter and a radio
transceiver for receiving and sending of messages from mobile taxicab to fixed base
stations within the Naval Base at Subic Bay, Philippines;
4. That Isidro Q. Aligada, acting as agent of the defendant herein conducted
the necessary project studies on how best the defendant may meet the requirements
of his contract with the U.S. Navy Exchange, Subic Bay, Philippines, and because
of the experience of
_______________
1Annex A of the petition.
420
420 SUPREME COURT REPORTS ANNOTATED
Magat vs. Medialdea
the plaintiff in connection with his various, contracts with the U.S. Navy, Subic
Bay, Philippines, and his goodwill already established with the Naval personnel of
Subic Bay, Philippines, especially in providing the U.S. Navy with needed
materials or goods on time as specified by the U.S. Navy, be they of local origin or
imported either from the United States or from Japan, the said Isidro Q. Aligada
approached the plaintiff herein in behalf of the defendant and proposed to import
from Japan thru the plaintiff herein or thru plaintiffs Japanese business
associates, all taximeters and radio transceivers needed by the defendant in
connection with his contract with the U.S. Navy Exchange, Subic Bay, Philippines;
5. That the defendant herein and his aforesaid agent Isidro Q. Aligada were
able to import from Japan with the assistance of the plaintiff and his Japanese
business associates the necessary taximeters for defendants taxicabs in partial
fulfillment of defendants commitments with the U.S. Navy Exchange, Subic Bay,
Philippines, the plaintiffs assistance in this matter having been given to the
defendant gratis et amore;
 6. That Isidro Q. Aligada, also acting as agent of the defendant, made
representations with the plaintiff herein to the effect that defendant desired to
procure from Japan thru the plaintiff herein the needed radio transceivers and to
this end, Isidro Q. Aligada secured a firm offer in writing dated September 25, 1972,
a copy of which is hereto attached marked as Annex A and made an integral part
of this complaint, wherein the plaintiff quoted in his offer a total price of $77,620.59
[U.S. dollars] FOB Yokohama, the goods or articles therein offered for sale by the
plaintiff to the defendant to be delivered sixty to ninety [60-90] days after receipt
of advice from the defendant of the radio frequency assigned to the defendant by
the proper authorities;
7. That the plaintiff received notice of the fact that the defendant accepted
plaintiffs offer to sell to the defendant the items specified in Annex A, as well as
the terms and conditions of said offer, as shown by the signed conformity of the
defendant appearing on Annex A which was duly delivered by the defendants
agent to the plaintiff herein, whereupon all that the plaintiff had to do in the
meantime was to await advice from the defendant as to the radio frequency to be
assigned by the proper authorities to the defendant;
8. That believing that the defendant would faithfully fulfill his contract with
the plaintiff herein, considering his signed conformity appearing in Annex A
hereof as well as the letter dated October 4, 1972, of his agent aforementioned
which is attached hereto
421
VOL. 121, APRIL 20, 1983 421
Magat vs. Medialdea
and marked as Annex B and made an integral part of this complaint, and in order
that plaintiffs promised delivery would not be delayed, the plaintiff herein took
steps to advise the Japanese entity entrusted with the manufacture of the items
listed in Annex A to the effect that the contract between the defendant herein and
the plaintiff has been perfected and that advice with regards to radio frequency
would follow as soon as same is received by the plaintiff from the defendant;
9. That in his letter dated October 6, 1972, a copy of which is hereto attached
marked as Annex C, the defendant advised his aforementioned agent to the effect
that the U.S. Navy provided him with the radio frequency of 34.2 MHZ [Megahertz]
and defendant requested his said agent to proceed with his order placed with the
plaintiff herein, which fact was duly communicated to the plaintiff by the
defendants aforementioned agent;
10. That by his letter dated October 7, 1972, addressed to the plaintiff by the
defendants agent, a copy of which is hereto attached and marked as Annex D,
defendants agent qualified defendants instructions contained in his letter of
October 6, 1972 [Annex C] in the sense that plaintiff herein should proceed to fulfill
defendants order only upon receipt by the plaintiff of the defendants letter of
credit;
11. That it being normal business practice in case of foreign importation that
the buyer opens a letter of credit in favor of the foreign supplier before delivery of
the goods sold, the plaintiff herein awaited the opening of such a letter of credit by
the defendant;
12. That the defendant and his agent have repeatedly assured plaintiff herein
of the defendants financial capabilities to pay for the goods ordered by him and in
fact he accomplished the lecessary application for a letter of credit with his banker,
but he subsequently instructed his banker not to give due course to his application
for a letter of credit and that for reasons only known to the defendant, he fails and
refuses to open the necessary letter of credit to cover payment of the goods ordered
by him;
13. That it has come to the knowledge of the plaintiff herein that the defendant
has been operating his taxicabs without the required radio transceivers and when
the U.S. Navy Authorities of Subic Bay, Philippines, were pressing defendant for
compliance with his commitments with respect to the installations of radio
transceivers on his taxicabs, he impliedly laid the blame for the delay upon the
plaintiff herein, thus destroying the reputation of the plaintiff herein with the said
Naval Authorities of Subic Bay, Philippines, with whom plaintiff herein transacts
business;
422
422 SUPREME COURT REPORTS ANNOTATED
Magat vs. Medialdea
14. That on March 27, 1973, plaintiff wrote a letter thru his counsel, copy attached
marked as Annex E, to ascertain from the defendant as to whether it is his
intention to fulfill his part of the agreement with the plaintiff herein or whether he
desired to have the contract between them definitely cancelled, but defendant did
not even have the courtesy to answer plaintiffs demand;
15. That the defendant herein entered into a contract with the plaintiff herein
as set forth in Annex A without the least intention of faithfully complying with his
obligations thereunder, but he did so only in order to obtain the concession from
the U.S. Navy Exchange, Subic Bay, Philippines, of operating a fleet of taxicabs
inside the U.S. Naval Base to his financial benfefit and at the expense and prejudice
of third parties such as the plaintiff herein;
16. That in view of the defendants failure to fulfill his contractual obligations
with the plaintiff herein, the plaintiff will suffer the following damages:
1. [a]As the radio transceivers ordered by the defendant are now in the hands
of the plaintiffs Japanese representative, the plaintiff will have to pay
for them, thus he will have to suffer as total loss to him the amount of
P523,938.98 (converting the amount of $77,620.59 to pesos at the rate of
P6.75 to the dollar) as said radio transceivers were purposely made or
manufactured solely for the use of the defendant herein and cannot
possibly be marketed by the plaintiff herein to the general public;
2. [b]The amount of P52,393.89 or 10% of the purchase price by way of loss
of expected profits from the transaction or contract between plaintiff and
the defendant;
3. [c]Loss of confidence in him and goodwill of the plaintiff which will result
in the impairment of his business dealings with Japanese firms, thereby
resulting also in loss of possible profits in the future which plaintiff
assess at no less than P200,000.00;
 4. [d]That in view of the defendants bad faith in inducing plaintiff to enter
into the contract with him as set forth hereinabove, defendant should be
assessed by this Honorable Court in favor of the plaintiff the sum of
P200,000.00 as moral and exemplary damages;
5. [e]That in view of the defendants fault and to protect his interests,
plaintiff herein is constrained to retain the services of counsel with whom
he agreed to pay by way of attorneys fees the sum of P50,000.00.
423
VOL. 121, APRIL 20, 1983 423
Magat vs. Medialdea
Respondent Guerrero filed a motion to dismiss said complaint for lack of cause of
action, which ground is propounded by respondents counsel thus:2
x x x it is clear that plaintiff was merely anticipating his loss or damage which
might result from the alleged failure of defendant to comply with the terms of the
alleged contract. Hence, plaintiffs right of recovery under his cause of action is
premised not on any loss or damage actually suffered by him but on a non-existing
loss or damage which he is expecting to incur in the near future. Plaintiffs right
therefore under his cause of action is not yet fixed or vested.
Inasmuch as there is no other allegation in the present Complaint wherein the
same could be maintained against defendant, the present Complaint should be
dismissed for its failure to state a cause of action against defendant.
The respondent judge, over petitioners opposition, issued a minute order
dismissing the complaint as follows:3
Acting upon the Motion to Dismiss filed by the defendant, through counsel, dated
June 7, 1973, as well as the opposition thereto filed by the plaintiff, through
counsel, dated June 14, 1973, for the reasons therein alleged, this Court hereby
grants said motion and, as prayed for, the complaint in the above-entitled case is
dismissed.
SO ORDERED.
Both parties are in accord with the view that when a motion to dismiss is based on
the ground of lack of cause of action, the sufficiency of the case of action can only
be determined on the basis of the facts alleged in the complaint 4; that the facts
alleged are deemed hypothetically admitted, including those which are fairly
deducible therefrom5; and that, admitting the facts as alleged, whether or not the
Court can render a valid judgment against the defendant upon said facts in
accordance with the prayer in the complaint6.
_______________
2 Annex B of the petition.
3 Annex D of the petition.
4 Mindanao Realty Corp. vs. Kintanar, 6 SCRA 894.
5 Mathay vs. Consolidated Bank & Trust Co., 58 SCRA 559.
6 La Suerte Cigar & Cigarette Factory vs. Central Azucarera de Danao, 23
SCRA 686.
424
424 SUPREME COURT REPORTS ANNOTATED
Magat vs. Medialdea
After a thorough examination of the complaint at bar, We find the test of legal
sufficiency of the cause of action adequately satisfied. In a methodical and logical
sequence, the complaint recites the circumstances that led to the perfection of the
contract entered into by the parties. It further avers that while petitioner had
fulfilled his part of the bargain [paragraph 8 of the Complaint], private respondent
failed to comply with his correlative obligation by refusing to open a letter of credit
to cover payment of the goods ordered by him [paragraphs 11 & 12 of the
Complaint], and that consequently, petitioner suffered not only loss of his expected
profits, but moral and exemplary damages as well. From these allegations, the
essential elements of a cause of action are present, to wit: [1] the existence of a legal
right to the plaintiff; [2] a correlative duty of the defendant and [3] an act or
omission of the defendant in violation of the plaintiffs right, with consequent injury
or damage to the latter for which he may maintain an action for recovery of
damages or other appropriate relief.7
Indisputably, the parties, both businessmen, entered into the aforesaid contract
with the evident intention of deriving some profits therefrom. Upon breach of the
contract by either of them, the other would necessarily suffer loss of his expected
profits. Since the loss comes into being at the very moment of breach, such loss is
real, fixed and vested and, therefore, recoverable under the law.
Article 1170 of the Civil Code provides:
Those who in the performance of their obligation are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof are liable for
damages.
The phrase in any manner contravene the tenor of the obligation includes any
illicit act or omission which impairs the strict and faithful fulfillment of the
obligation and every kind of defective performance.8
The damages which the obligor is liable for includes not only the value of the
loss suffered by the obligee [dao emergente]
_______________
7Mathay vs. Consolidated Bank & Trust Co., supra.
8Arrieta vs. National Rice & Corn Corp., 10 SCRA 79.
425
VOL. 121, APRIL 20, 1983 425
Magat vs. Medialdea
but also the profits which the latter failed to obtain [lucro cesante]9. If the obligor
acted in good faith, he shall be liable for those damages that are the natural and
probable consequences of the breach of the obligation and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was
constituted; and in case of fraud, bad faith, malice or wanton attitude, he shall be
liable for all damages which may be reasonably attributed to the nonperformance
of the obligation10.
 The same is true with respect to moral and exemplary damages. The applicable
legal provisions on the matter, Articles 2220 and 2232 of the Civil Code, allow the
award of such damages in breaches of contract where the defendant acted in bad
faith. To Our mind, the complaint sufficiently alleges bad faith on the part of the
defendant.
In fine, We hold that on the basis of the facts alleged in the complaint, the court
could render a valid judgment in accordance with the prayer thereof.
ACCORDINGLY, the questioned order of dismissal is hereby set aside and the
case ordered remanded to the court of origin for further proceedings. No costs.
SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Guerrero and Abad Santos,
JJ., concur.
Aquino, J., is on leave.
De Castro, J., took no part.
Order set aside and case remanded to the court of origin for further proceedings.
Notes.The remedy to set aside orders or decisions of the PHHC is certiorari
or prohibition, not a review or direct action for specific performance. (Raymundo
vs. Peoples Homesite and Housing Corporation, 114 SCRA 712.)
_______________

9Article 2200, Civil Code.

10Article 2201, Civil Code.
426
426 SUPREME COURT REPORTS ANNOTATED
People vs. Morales
The designation of the nature of the action, or the manner it is entitled can, by no
means be regarded as meaningless or of no effect at all in the determination of the
purpose and object of the action. (Alilaya vs. Espaola, 107 SCRA 564.)
The nature of an action filed in court is determined by the facts alleged in the
complaint as constituting the causes of action, and not those averred as defenses
by the defendant in his answer. (De Tavera vs. Philippine Tuberculosis Society,
Inc.,112 SCRA 243.)
A petition for clarification of title over registered property amounts to an action
for declaratory relief or quieting of title which is within the competence of an
ordinary civil court. (Santos vs. Aquino, 101 SCRA 377.)
In the interest of justice, a court may, on execution, order that the defendant
and his surety, pay the hospitals where the injured passengers were confined
though not made parties to the action instead of requiring the filing of separate
action to recover their hospital charges. (Vda. de Chi vs. Taada, 111 SCRA 190.)

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