Jam 1. Industrial Timber v Ababon 2. Victory Liner v Gammad 3.

Premiere Devt Bank v CA

Industrial Timber v Ababon

Before us are two petitions for review under Rule 45 of the Rules of Court. G.R. No. 164518 assails the October 21, 2002 Decision[1] of the Court of Appeals, in CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision[2] of the National Labor Relations Commission (NLRC), as well as the July 16, 2004 Resolution[3] denying its motion for reconsideration. G.R. No. 164965 assails only the July 16, 2004 Resolution of the Court of Appeals which denied their partial motion for reconsideration. These cases were consolidated because they arose out of the same facts set forth below. Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant located at Agusan, Pequeo, Butuan City, leased to Industrial Timber Corporation (ITC) on August 30, 1985 for a period of five years.[4] Thereafter, ITC commenced operation of the plywood plant and hired 387 workers. On March 16, 1990, ITC notified the Department of Labor and Employment (DOLE) and its workers that effective March 19, 1990 it will undergo a no plant operation due to lack of raw materials and will resume only after it can secure logs for milling.[5] Meanwhile, IPGC notified ITC of the expiration of the lease contract in August 1990 and its intention not to renew the same. On June 26, 1990, ITC notified the DOLE and its workers of the plants shutdown due to the nonrenewal of anti-pollution permit that expired in April 1990.[6] This fact and the alleged lack of logs for milling constrained ITC to lay off all its workers until further notice. This was followed by a final notice of closure or cessation of business operations on August 17, 1990 with an advice for all the workers to collect the benefits due them under the law and CBA.[7] On October 15, 1990, IPGC took over the plywood plant after it was issued a Wood Processing Plant Permit No. WPR-1004-081791-042,[8] which included the anti-pollution permit, by the Department of Environment and Natural Resources (DENR) coincidentally on the same day the ITC ceased operation of the plant. This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for illegal dismissal, unfair labor practice and damages. They alleged, among others, that the cessation of ITCs operation was intended to bust the union and that both corporations are one and the same entity being controlled by one owner.

On January 20, 1992, after requiring both parties to submit their respective position papers, Labor Arbiter Irving A. Petilla rendered a decision which refused to pierce the veil of corporate fiction for lack of evidence to prove that it was used to perpetuate fraud or illegal act; upheld the validity of the closure; and ordered ITC to pay separation pay of month for every year of service. The dispositive portion of the decision reads: PREMISES CONSIDERED, judgment is hereby rendered ordering respondent Industrial Timber Corporation (ITC) to pay herein ninety-seven individual complainants their separation pay at the rate of one-half (1/2) months pay for every year of service, a fraction of at least six (6) months to be considered as one whole year, reckoned until August 1990. All other claims of complainants are hereby ordered DISMISSED for want of merit. SO ORDERED.[9] Ababon, et al. appealed to the NLRC. On May 20, 1993, the NLRC set aside the decision of the Labor Arbiter and ordered the reinstatement of the employees to their former positions, and the payment of full back wages, damages and attorneys fees.[10] ITC and IPGC filed a Motion for Reconsideration through JRS, a private courier, on June 24, 1993. However, it was dismissed for being filed out of time having been filed only on the date of actual receipt by the NLRC on June 29, 1993, three days after the last day of the reglamentary period.[12] Thus, they filed a Petition for Relief from Resolution,[13] which was treated as a second motion for reconsideration by the NLRC and dismissed for lack of merit in a Resolution dated September 29, 1994.[14]
[11]

From said dismissal, petitioners filed a Notice of Appeal with the Supreme Court.[15] Subsequently, they filed a Motion for Reconsideration/Second Petition for Relief with the NLRC.[16] On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for being a wrong mode of appeal from the NLRC decision.[17] On the other hand, the NLRC granted the Second Petition for Relief and set aside all its prior decision and resolutions. The dispositive portion of the May 24, 1995 decision reads: WHEREFORE, the decision of this Commission dated May 10, 1993 and its subsequent resolutions dated June 22, 1994 and September 29, 1994 are Set Aside and Vacated. Accordingly, the appeal of complainants is Dismissed for lack of merit and the decision of the Labor Arbiter dated January 20, 1992 is Reinstated and hereby Affirmed. SO ORDERED.[18] On October 2, 1995, Virgilio Ababon, et al. filed a Petition for Certiorari with the Supreme Court, which was docketed as G.R. No. 121977.[19] However, pursuant to our ruling in St. Martins Funeral

Home v. NLRC, we referred the petition to the Court of Appeals for appropriate action and disposition.[20] On October 21, 2002, the Court of Appeals rendered a decision setting aside the May 24, 1995 decision of the NLRC and reinstated its May 20, 1993 decision and September 29, 1993 resolution, thus: WHEREFORE, the petition is GRANTED. The decision dated May 24, 1995 of the National Labor Relations Commission is ANNULLED and SET ASIDE, with the result that its decision dated May 20, 1993 and resolution dated September 29, 1994 are REINSTATED. SO ORDERED.[21] Both parties filed their respective motions for reconsideration which were denied, hence, the present consolidated petitions for review based on the following assigned errors: In G.R. No. 164518 THE COURT OF APPEALS ERRED IN LIBERALLY APPLYING THE RULES OF PROCEDURE WITH RESPECT TO RESPONDENTS BUT BEING RIGID IN ITS APPLICATION AS REGARDS PETITIONERS.[22] In G.R. No. 164965 WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT REFUSED TO APPLY SECTION 279 OF THE LABOR CODE AS AMENDED BY RA 6715 TO MODIFY THE DECISION OF 20 MAY 1993 WITH RESPECT TO BACKWAGES FOR PETITIONERS.[23] ITC and IPGC contend that the Court of Appeals erred in reversing the May 24, 1995 decision of the NLRC since its May 20, 1993 decision had become immutable for their failure to file motion for reconsideration within the reglementary period. While they admit filing their motion for reconsideration out of time due to excusable negligence of their counsels secretary, however, they advance that the Court of Appeals should have relaxed the rules of technicality in the paramount interest of justice, as it had done so in favor of the employees, and ruled on the merits of the case; after all, the delay was just three days. Ordinarily, once a judgment has become final and executory, it can no longer be disturbed, altered or modified. However, this rule admits of exceptions in cases of special and exceptional nature as we held in Industrial Timber Corporation v. National Labor Relations Commission:[24] It is true that after a judgment has become final and executory, it can no longer be modified or otherwise disturbed. However, this principle admits of exceptions, as where facts and circumstances transpire which render its execution impossible or unjust and it therefore becomes necessary, in the interest of justice, to direct its modification in order to harmonize the disposition with the prevailing circumstances.

A careful scrutiny of the facts and circumstances of these consolidated cases warrants liberality in the application of technical rules and procedure. We agree with the NLRC that substantial justice is best served by allowing the petition for relief despite procedural defect of filing the motion for reconsideration three days late, for to rule otherwise, a greater injustice would be done to ITC by ordering it to reinstate the employees to their former positions that no longer exist due to valid and legitimate cessation of business and pay huge judgment award.[25] Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the exercise of its appellate powers, correct, amend, or waive any error, defect or irregularity whether in substance or in form. Further, Article 221 of the same code provides that in any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process.[26] Also, the rule under Section 14 of Rule VII of the New Rules of Procedure of the NLRC that a motion for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within 10 calendar days from receipt of the order, resolution or decision should not be interpreted as to sacrifice substantial justice to technicality. It should be borne in mind that the real purpose behind the limitation of the period is to forestall or avoid an unreasonable delay in the administration of justice, from which the NLRC absolved ITC and IPGC because the filing of their motion for reconsideration three days later than the prescribed period was due to excusable negligence. Indeed, the Court has the power to except a particular case from the operation of the rule whenever the purposes of justice requires it because what should guide judicial action is that a party is given the fullest opportunity to establish the merits of his action or defense rather than for him to lose life, honor, or property on mere technicalities.[27] We now come to the main issues of whether Ababon, et al. were illegally dismissed due to the closure of ITCs business; and whether they are entitled to separation pay, backwages, and other monetary awards. Work is a necessity that has economic significance deserving legal protection. The social justice and protection to labor provisions in the Constitution dictate so. On the other hand, employers are also accorded rights and privileges to assure their self-determination and independence, and reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be broad and unlimited in scope, the State has the right to determine whether an employer's privilege is exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an employer is the right to close an establishment or undertaking.[28] The right to close the operation of an establishment or undertaking is one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for

the purpose of circumventing the provisions on termination of employment embodied in the Labor Code. Article 283 of the Labor Code provides: ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. A reading of the foregoing law shows that a partial or total closure or cessation of operations of establishment or undertaking may either be due to serious business losses or financial reverses or otherwise. Under the first kind, the employer must sufficiently and convincingly prove its allegation of substantial losses,[29] while under the second kind, the employer can lawfully close shop anytime[30] as long as cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees,[31] and as long as he pays his employees their termination pay in the amount corresponding to their length of service.[32] Just as no law forces anyone to go into business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes with management's prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment.[33] In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations: (a) service of a written notice to the employees and to the DOLE at least one month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the employees of termination pay amounting to one month pay or at least one-half month pay for every year of service, whichever is higher. In these consolidated cases, we find that ITCs closure or cessation of business was done in good faith and for valid reasons. The records reveal that the decision to permanently close business operations was arrived at after a suspension of operation for several months precipitated by lack of raw materials used for milling operations, the expiration of the anti-pollution permit in April 1990, and the termination of the lease

contract with IPGC in August 1990 over the plywood plant at Agusan, Pequeo, Butuan City. We quote with approval the observation of the Labor Arbiter: As borne out from the records, respondent ITC actually underwent no plant operation since 19 March 1990 due to lack of log supply. This fact is admitted by complainants (Minutes of hearing, 28 October 1991). Since then several subsequent incidents prevented respondent ITC to resume its business operations e.g. expiration and non-renewal of the wood processing plant permit, anti-pollution permit, and the lease contract on the plywood plant. Without the raw materials respondent ITC has nothing to produce. Without the permits it cannot lawfully operate the plant. And without the contract of lease respondent ITC has no option but to cease operation and turn over the plant to the lessor.[34] (Emphasis supplied) Moreover, the lack of raw materials used for milling operations was affirmed in Industrial Timber Corporation v. National Labor Relations Commission[35] as one of the reasons for the valid closure of ITCs Butuan Logs Plant in 1989. In said case, we upheld the management prerogative to close the plant as the only remedy available in order to prevent imminent heavy losses on account of high production costs, erratic supply of raw materials, depressed prices and poor market conditions for its wood products. In Shoppers Gain Supermarket v. National Labor Relations Commission,[36] we held that the nonrenewal of petitioner corporations lease contract and its consequent closure and cessation of operations may be considered an event beyond petitioners control, in the nature of a force majeure situation. As such, it amounts to an authorized cause for termination of the private respondents. Having established that ITCs closure of the plywood plant was done in good faith and that it was due to causes beyond its control, the conclusion is inevitable that said closure is valid. Consequently, Ababon, et al. could not have been illegally dismissed to be entitled to full backwages. Thus, we find it no longer necessary to discuss the issue regarding the computation of their backwages. However, they are entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher. Although the closure was done in good faith and for valid reasons, we find that ITC did not comply with the notice requirement. While an employer is under no obligation to conduct hearings before effecting termination of employment due to authorized cause,[37] however, the law requires that it must notify the DOLE and its employees at least one month before the intended date of closure. In the case at bar, ITC notified its employees and the DOLE of the no plant operation on March 16, 1990 due to lack of raw materials. This was followed by a shut down notice dated June 26, 1990 due to the expiration of the anti-pollution permit. However, this shutdown was only temporary as ITC assured its employees that they could return to work once the renewal is acted upon by the DENR. On August 17, 1990, the ITC sent its employees a final notice of closure or cessation of business operations to take effect on the same day it was released. We find that this falls short of the notice requirement for termination of employment due to authorized cause considering that the DOLE was not furnished

and the notice should have been furnished both the employees and the DOLE at least one month before the intended date of closure. In Ariola v. Philex Mining Corporation,[38] we held: In Agabon v. National Labor Relations Commission and Jaka Food Processing Corporation v. Pacot, the Court sustained the dismissals for just cause under Article 282 and for authorized cause under Article 283 of the Labor Code, respectively, despite noncompliance with the statutory requirement of notice and hearing. The grounds for the dismissals in those cases, namely, neglect of duty and retrenchment, remained valid because the non-compliance with the notice and hearing requirement in the Labor Code did not undermine the validity of the grounds for the dismissals. Indeed, to invalidate a dismissal merely because of a procedural defect creates absurdity and runs counter to public interest. We explained in Agabon: The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences. This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy. Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employers exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.[39] In light of the factual circumstances of the cases at bar, we deem it wise and reasonable to award P50,000.00 to each employee as nominal damages. WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution denying ITCs motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision of the Labor Arbiter finding the closure or cessation of ITCs business valid, is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay

equivalent to one month pay or to at least one-half month pay for every year of service, whichever is higher, and P50,000.00 as nominal damages to each employee. SO ORDERED.

CONSUELO YNARES-SANTIAGO Associate Justice

Victory v Gamad VICTORY LINER, INC., petitioner, vs. ROSALITO GAMMAD, APRIL ROSSAN P. GAMMAD, ROI ROZANO P. GAMMAD and DIANA FRANCES P. GAMMAD, respondents. DECISION YNARES-SANTIAGO, J.: Assailed in this petition for review on certiorari is the April 11, 2003 decision[1] of the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with modification the November 6, 1998 decision[2] of the Regional Trial Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of carriage in Civil Case No. 5023. The facts as testified by respondent Rosalito Gammad show that on March 14, 1996, his wife Marie Grace Pagulayan-Gammad,[3] was on board an air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries to other passengers.[4] On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for damages arising from culpa contractual against petitioner. In its answer,[6] the petitioner claimed that the incident was purely accidental and that it has always exercised extraordinary diligence in its 50 years of operation. After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For failure to appear on the said date, petitioner was declared as in default.[9] However, on petitioners motion[10] to lift the order of default, the same was granted by the trial court.[11] At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed stipulation that the deceased was a passenger of the Victory Liner Bus which fell on the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for their part, did not accept petitioners proposal to pay P50,000.00.[12] After respondent Rosalito Gammad completed his direct testimony, cross-examination was scheduled for November 17, 1997[13] but moved to December 8, 1997,[14] because the parties and the counsel failed to appear. On December 8, 1997, counsel of petitioner was absent despite due notice and was deemed to have waived right to cross-examine respondent Rosalito.[15] Petitioners motion to reset the presentation of its evidence to March 25, 1998 [16] was granted. However, on March 24, 1998, the counsel of petitioner sent the court a telegram [17] requesting postponement but the telegram was received by the trial court on March 25, 1998, after it had issued an order considering the case submitted for decision for failure of petitioner and counsel to appear.[18] On November 6, 1998, the trial court rendered its decision in favor of respondents, the dispositive portion of which reads: WHEREFORE, premises considered and in the interest of justice, judgment is hereby rendered in favor of the plaintiffs and against the defendant Victory Liner, Incorporated, ordering the latter to pay the following: 1. Actual Damages -------------------- P 122,000.00

6.

2. Death Indemnity --------------------50,000.00 3. Exemplary and Moral Damages----- 400,000.00 4. Compensatory Damages ---------- 1,500,000.00 5. Attorneys Fees ------------ 10% of the total amount granted Cost of the Suit.

SO ORDERED.[19] On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court with modification as follows: [T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the following are hereby adjudged in favor of plaintiffs-appellees: 1. 2. 3. Actual Damages in the amount of P88,270.00; Compensatory Damages in the amount of P1,135,536,10; Moral and Exemplary Damages in the amount of P400,000.00; and 4. Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral, and exemplary damages herein adjudged.

The court a quos judgment of the cost of the suit against defendant-appellant is hereby AFFIRMED. SO ORDERED.[20] Represented by a new counsel, petitioner on May 21, 2003 filed a motion for reconsideration praying that the case be remanded to the trial court for cross- examination of respondents witness and for the presentation of its evidence; or in the alternative, dismiss the respondents complaint.[21] Invoking APEX Mining, Inc. v. Court of Appeals,[22] petitioner argues, inter alia, that the decision of the trial court should be set aside because the negligence of its former counsel, Atty. Antonio B. Paguirigan, in failing to appear at the scheduled hearings and move for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents witness and right to present evidence, deprived petitioner of its day in court. On August 21, 2003, the Court of Appeals denied petitioners motion for reconsideration.[23] Hence, this petition for review principally based on the fact that the mistake or gross negligence of its counsel deprived petitioner of due process of law. Petitioner also argues that the trial courts award of damages were without basis and should be deleted. The issues for resolution are: (1) whether petitioners counsel was guilty of gross negligence; (2) whether petitioner should be held liable for breach of contract of carriage; and (3) whether the award of damages was proper. It is settled that the negligence of counsel binds the client. This is based on the rule that any act performed by a counsel within the scope of his general or implied authority is regarded as an act of his client. Consequently, the mistake or negligence of counsel may result in the rendition of an unfavorable

judgment against the client. However, the application of the general rule to a given case should be looked into and adopted according to the surrounding circumstances obtaining. Thus, exceptions to the foregoing have been recognized by the court in cases where reckless or gross negligence of counsel deprives the client of due process of law, or when its application will result in outright deprivation of the clients liberty or property or where the interests of justice so require, and accord relief to the client who suffered by reason of the lawyers gross or palpable mistake or negligence.[24] The exceptions, however, are not present in this case. The record shows that Atty. Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially declared as in default, Atty. Paguirigan successfully moved for the setting aside of the order of default. In fact, petitioner was represented by Atty. Paguirigan at the pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed to file motions for reconsideration of the orders declaring petitioner to have waived the right to cross-examine respondents witness and to present evidence, he nevertheless, filed a timely appeal with the Court of Appeals assailing the decision of the trial court. Hence, petitioners claim that it was denied due process lacks basis. Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it as in default for not appearing at the pre-trial, three notices (dated October 23, 1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring attendance at the pre-trial were sent and duly received by petitioner. However, it was only on April 27, 1997, after the issuance of the April 10, 1997 order of default for failure to appear at the pre-trial when petitioner, through its finance and administrative manager, executed a special power of attorney[28] authorizing Atty. Paguirigan or any member of his law firm to represent petitioner at the pre-trial. Petitioner is guilty, at the least, of contributory negligence and fault cannot be imputed solely on previous counsel. The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case at bar. In APEX, the negligent counsel not only allowed the adverse decision against his client to become final and executory, but deliberately misrepresented in the progress report that the case was still pending with the Court of Appeals when the same was dismissed 16 months ago.[29] These circumstances are absent in this case because Atty. Paguirigan timely filed an appeal from the decision of the trial court with the Court of Appeals. In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with the issue of whether or not the client should bear the adverse consequences of its counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer failed to appear at the pre-trial despite notice and was declared as in default. After the plaintiffs presentation of evidence ex parte, the trial court rendered decision ordering Gold Line to pay damages to the heirs of its deceased passenger. The decision became final and executory because counsel of Gold Line did not file any appeal. Finding that Goldline was not denied due process of law and is thus bound by the negligence of its lawyer, the Court held as follows This leads us to the question of whether the negligence of counsel was so gross and reckless that petitioner was deprived of its right to due process of law. We do not believe so. It cannot be denied that the requirements of due process were observed in the instant case. Petitioner was never deprived of its day in court, as in fact it was afforded every opportunity to be heard. Thus, it is of record that notices were sent to petitioner and that its counsel was able to file a motion to dismiss the complaint, an answer to the complaint, and even a pre-trial brief. What was irretrievably lost by petitioner was its opportunity to participate in the trial of the case and to adduce evidence in its behalf because of negligence.

In the application of the principle of due process, what is sought to be safeguarded against is not the lack of previous notice but the denial of the opportunity to be heard. The question is not whether petitioner succeeded in defending its rights and interests, but simply, whether it had the opportunity to present its side of the controversy. Verily, as petitioner retained the services of counsel of its choice, it should, as far as this suit is concerned, bear the consequences of its choice of a faulty option. Its plea that it was deprived of due process echoes on hollow ground and certainly cannot elicit approval nor sympathy. To cater to petitioners arguments and reinstate its petition for relief from judgment would put a premium on the negligence of its former counsel and encourage the non-termination of this case by reason thereof. This is one case where petitioner has to bear the adverse consequences of its counsels act, for a client is bound by the action of his counsel in the conduct of a case and he cannot thereafter be heard to complain that the result might have been different had his counsel proceeded differently. The rationale for the rule is easily discernible. If the negligence of counsel be admitted as a reason for opening cases, there would never be an end to a suit so long as a new counsel could be hired every time it is shown that the prior counsel had not been sufficiently diligent, experienced or learned.[31] Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation employee charged with dishonesty was not able to file an answer and position paper. He was found guilty solely on the basis of complainants evidence and was dismissed with forfeiture of all benefits and disqualification from government service. Challenging the decision of the Ombudsman, the employee contended that the gross negligence of his counsel deprived him of due process of law. In debunking his contention, the Court said Neither can he claim that he is not bound by his lawyers actions; it is only in case of gross or palpable negligence of counsel when the courts can step in and accord relief to a client who would have suffered thereby. If every perceived mistake, failure of diligence, lack of experience or insufficient legal knowledge of the lawyer would be admitted as a reason for the reopening of a case, there would be no end to controversy. Fundamental to our judicial system is the principle that every litigation must come to an end. It would be a clear mockery if it were otherwise. Access to the courts is guaranteed, but there must be a limit to it. Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it was denied due process of law due to negligence of its counsel would set a dangerous precedent. It would enable every party to render inutile any adverse order or decision through the simple expedient of alleging gross negligence on the part of its counsel. The Court will not countenance such a farce which contradicts long-settled doctrines of trial and procedure.[33] Anent the second issue, petitioner was correctly found liable for breach of contract of carriage. A common carrier is bound to carry its passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard to all the circumstances. In a contract of carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence.[34]

In the instant case, there is no evidence to rebut the statutory presumption that the proximate cause of Marie Graces death was the negligence of petitioner. Hence, the courts below correctly ruled that petitioner was guilty of breach of contract of carriage. Nevertheless, the award of damages should be modified. Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common carrier in breach of its contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity, and (3) moral damages. In the present case, respondent heirs of the deceased are entitled to indemnity for the death of Marie Grace which under current jurisprudence is fixed at P50,000.00.[37] The award of compensatory damages for the loss of the deceaseds earning capacity should be deleted for lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceaseds line of work no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.[38] In People v. Oco,[39] the evidence presented by the prosecution to recover damages for loss of earning capacity was the bare testimony of the deceaseds wife that her husband was earning P8,000.00 monthly as a legal researcher of a private corporation. Finding that the deceased was neither selfemployed nor employed as a daily-wage worker earning less than the minimum wage under the labor laws existing at the time of his death, the Court held that testimonial evidence alone is insufficient to justify an award for loss of earning capacity. Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not awarded because the circumstances of the 3 deceased did not fall within the recognized exceptions, and except for the testimony of their wives, no documentary proof about their income was presented by the prosecution. Thus The testimonial evidence shows that Placido Agustin, Roberto Raagas, and Melencio Castro Jr. were not self-employed or employed as daily-wage workers earning less than the minimum wage under the labor laws existing at the time of their death. Placido Agustin was a Social Security System employee who received a monthly salary of P5,000. Roberto Raagas was the President of Sinclair Security and Allied Services, a family owned corporation, with a monthly compensation of P30,000. Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily earning of P500 or a monthly earning of P7,500. Clearly, these cases do not fall under the exceptions where indemnity for loss of earning capacity can be given despite lack of documentary evidence. Therefore, for lack of documentary proof, no indemnity for loss of earning capacity can be given in these cases. (Emphasis supplied) Here, the trial court and the Court of Appeals computed the award of compensatory damages for loss of earning capacity only on the basis of the testimony of respondent Rosalito that the deceased was 39 years of age and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a salary of P83,088.00 per annum when she died.[41] No other evidence was presented. The award is clearly erroneous because the deceaseds earnings does not fall within the exceptions. However, the fact of loss having been established, temperate damages in the amount of P500,000.00 should be awarded to respondents. Under Article 2224 of the Civil Code, temperate or

moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty. In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of P200,000.00 as temperate damages in lieu of actual damages for loss of earning capacity because the income of the victim was not sufficiently proven, thus The trial court based the amounts of damages awarded to the petitioner on the following circumstances: As to the loss or impairment of earning capacity, there is no doubt that Pleno is an ent*re+preneur and the founder of his own corporation, the Mayon Ceramics Corporation. It appears also that he is an industrious and resourceful person with several projects in line, and were it not for the incident, might have pushed them through. On the day of the incident, Pleno was driving homeward with geologist Longley after an ocular inspection of the site of the Mayon Ceramics Corporation. His actual income however has not been sufficiently established so that this Court cannot award actual damages, but, an award of temperate or moderate damages may still be made on loss or impairment of earning capacity. That Pleno sustained a permanent deformity due to a shortened left leg and that he also suffers from double vision in his left eye is also established. Because of this, he suffers from some inferiority complex and is no longer active in business as well as in social life. In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et al., L-11394, Sept. 9, 1958, the proper award of damages were given. We rule that the lower courts awards of damages are more consonant with the factual circumstances of the instant case. The trial courts findings of facts are clear and well-developed. Each item of damages is adequately supported by evidence on record. Article 2224 of the Civil Code was likewise applied in the recent cases of People v. Singh[43] and People v. Almedilla,[44] to justify the award of temperate damages in lieu of damages for loss of earning capacity which was not substantiated by the required documentary proof. Anent the award of moral damages, the same cannot be lumped with exemplary damages because they are based on different jural foundations.[45] These damages are different in nature and require separate determination.[46] In culpa contractual or breach of contract, moral damages may be recovered when the defendant acted in bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton disregard of contractual obligations and, as in this case, when the act of breach of contract itself constitutes the tort that results in physical injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also be awarded in case the death of a passenger results from a breach of carriage.[47] On the other hand, exemplary damages, which are awarded by way of example or correction for the public good may be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner.[48] Respondents in the instant case should be awarded moral damages to compensate for the grief caused by the death of the deceased resulting from the petitioners breach of contract of

carriage. Furthermore, the petitioner failed to prove that it exercised the extraordinary diligence required for common carriers, it is presumed to have acted recklessly.[49] Thus, the award of exemplary damages is proper. Under the circumstances, we find it reasonable to award respondents the amount of P100,000.00 as moral damages and P100,000.00 as exemplary damages. These amounts are not excessive.[50] The actual damages awarded by the trial court reduced by the Court of Appeals should be further reduced. In People v. Duban,[51] it was held that only substantiated and proven expenses or those that appear to have been genuinely incurred in connection with the death, wake or burial of the victim will be recognized. A list of expenses (Exhibit J),[52] and the contract/receipt for the construction of the tomb (Exhibit F)[53] in this case, cannot be considered competent proof and cannot replace the official receipts necessary to justify the award. Hence, actual damages should be further reduced to P78,160.00,[54] which was the amount supported by official receipts. Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be recovered in the case at bar where exemplary damages are awarded. The Court finds the award of attorneys fees equivalent to 10% of the total amount adjudged against petitioner reasonable. Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (Emphasis supplied). In the instant case, petitioner should be held liable for payment of interest as damages for breach of contract of carriage. Considering that the amounts payable by petitioner has been determined with

certainty only in the instant petition, the interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction, per paragraph 3 of the aforecited rule.[57] WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The April 11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees; and the costs of suit. Furthermore, the total amount adjudged against petitioner shall earn interest at the rate of 12% per annum computed from the finality of this decision until fully paid. SO ORDERED. Quisumbing, Carpio, and Azcuna, JJ., concur. Davide, Jr., C.J., (Chairman), on official leave. PREMIERE DEVELOPMENT BANK, petitioner, vs. COURT OF APPEALS, PANACOR MARKETING CORPORATION and ARIZONA TRANSPORT CORPORATION, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review under Rule 45 of the 1997 Rules on Civil Procedure seeking the annulment of the Decision dated June 18, 2003of the Court of Appeals[1] which affirmed the Decision of the Regional Trial Court[2] in Civil Case No. 65577. The undisputed facts show that on or about October 1994, Panacor Marketing Corporation (Panacor for brevity), a newly formed corporation, acquired an exclusive distributorship of products manufactured by Colgate Palmolive Philippines, Inc. (Colgate for short). To meet the capital requirements of the exclusive distributorship, which required an initial inventory level of P7.5 million, Panacor applied for a loan of P4.1 million with Premiere Development Bank. After an extensive study of Panacors creditworthiness, Premiere Bank rejected the loan application and suggested that its affiliate company, Arizona Transport Corporation (Arizona for short),[3] should instead apply for the loan on condition that the proceeds thereof shall be made available to Panacor. Eventually, Panacor was granted a P4.1 million credit line as evidenced by a Credit Line Agreement.[4] As suggested, Arizona, which was an existing loan client, applied for and was granted a loan of P6.1 million, P3.4 million of which would be used to pay-off its existing loan accounts and the remaining P2.7 million as credit line of Panacor. As security for the P6.1 million loan,Arizona, represented by its Chief Executive Officer Pedro Panaligan and spouses Pedro and Marietta Panaligan in their personal capacities, executed a Real Estate Mortgage against a parcel of land covered by TCT No. T-3475 as per Entry No. 49507 dated October 2, 1995.[5] Since the P2.7 million released by Premiere Bank fell short of the P4.1 million credit line which was previously approved, Panacor negotiated for a take-out loan with Iba Finance Corporation (hereinafter referred to as Iba-Finance) in the sum of P10 million, P7.5 million of which will be released outright in order to take-out the loan from Premiere Bank and the balance of P2.5 million (to complete the needed capital of P4.1 million with Colgate) to be released after the cancellation by Premiere of the collateral

mortgage on the property covered by TCT No. T-3475. Pursuant to the said take-out agreement, IbaFinance was authorized to pay Premiere Bank the prior existing loan obligations of Arizonain an amount not to exceed P6 million. On October 5, 1995, Iba-Finance sent a letter to Ms. Arlene R. Martillano, officer-in-charge of Premiere Banks San Juan Branch, informing her of the approved loan in favor of Panacor and Arizona, and requesting for the release of TCT No. T-3475. Martillano, after reading the letter, affixed her signature of conformity thereto and sent the original copy to Premiere Banks legal office. The full text of the letter reads:[6] Please be informed that we have approved the loan application of ARIZONA TRANSPORT CORP. and PANACOR MARKETING CORPORATION. Both represented by MR. PEDRO P. PANALIGAN (hereinafter the BORROWERS) in the principal amount of PESOS: SEVEN MILLION FIVE HUNDRED THOUSAND ONLY (P7,500,000.00) Philippine Currency. The loan shall be secured by a Real Estate Mortgage over a parcel of land located at #777 Nueve de Pebrero St. Bo. Mauway, Mandaluyong City, Metro Manila covered by TCT No. 3475 and registered under the name of Arizona Haulers, Inc. which is presently mortgaged with your bank. The borrowers have authorized IBA FINANCE CORP. to pay Premiere Bank from the proceeds of their loan. The disbursement of the loan, however is subject to the annotation of our mortgage lien on the said property and final verification that said title is free from any other lien or encumbrance other than that of your company and IBA Finance Corporation. In order to register the mortgage, please entrust to us the owners duplicate copy of TCT No. 3475, current tax declaration, realty tax receipts for the current year and other documents necessary to affect annotation thereof. Upon registration of our mortgage, we undertake to remit directly to you or your authorized representative the amount equivalent to the Borrowers outstanding indebtedness to Premiere Bank as duly certified by your goodselves provided such an amount shall not exceed PESOS: SIX MILLION ONLY (P6,000,000.00) and any amount in excess of the aforestated shall be for the account of the borrowers. It is understood that upon receipt of payment, you will release to us the corresponding cancellation of your mortgage within five (5) banking days therefrom. If the foregoing terms and conditions are acceptable to you, please affix your signature provided below and furnish us a copy of the Statement of Account of said borrowers. On October 12, 1995, Premiere Bank sent a letter-reply[7] to Iba-Finance, informing the latter of its refusal to turn over the requested documents on the ground that Arizona had existing unpaid loan obligations and that it was the banks policy to require full payment of all outstanding loan obligations prior to the release of mortgage documents. Thereafter, Premiere Bank issued to Iba-Finance a Final Statement of Account[8] showing Arizonas total loan indebtedness. On October 19, 1995, Panacor and Arizona executed in favor of Iba-Finance a promissory note in the amount of 7.5 million. Thereafter, Iba-Finance paid to Premiere Bank the amount of P6,235,754.79 representing the full outstanding loan account of Arizona. Despite such payment, Premiere Bank still refused to release the requested mortgage documents specifically, the owners duplicate copy of TCT No. T-3475.[9]

On November 2, 1995, Panacor requested Iba-Finance for the immediate approval and release of the remaining P2.5 million loan to meet the required monthly purchases from Colgate. Iba-Finance explained however, that the processing of the P2.5 million loan application was conditioned, among others, on the submission of the owners duplicate copy of TCT No. 3475 and the cancellation by Premiere Bank of Arizonas mortgage. Occasioned by Premiere Banks adamant refusal to release the mortgage cancellation document, Panacor failed to generate the required capital to meet its distribution and sales targets. On December 7, 1995, Colgate informed Panacor of its decision to terminate their distribution agreement. On March 13, 1996, Panacor and Arizona filed a complaint for specific performance and damages against Premiere Bank before theRegional Trial Court of Pasig City, docketed as Civil Case No. 65577. On June 11, 1996, Iba-Finance filed a complaint-in-intervention praying that judgment be rendered ordering Premiere Bank to pay damages in its favor. On May 26, 1998, the trial court rendered a decision in favor of Panacor and Iba-Finance, the decretal portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff Panacor Marketing Corporation and against the defendant Premiere Bank, ordering the latter to pay the former the following sums, namely: 1) P4,520,000.00 in addition to legal interest from the time of filing of the complaint until full payment; P1,000,000.00 as and for exemplary damages; P100,000.00 as and for reasonable attorneys fees; and Costs of suit.

2) 3) 4)

Similarly, judgment is hereby rendered in favor of plaintiff-in-intervention IBA-Finance Corporation as against defendant Premiere bank, as follows, namely: 1) Ordering defendant Premiere Bank to release to plaintiff-intervenor IBA-Finance Corporation the owners duplicate copy of Transfer Certificate of Title No. 3475 registered in the name of Arizona Haulers, Inc. including the deed of cancellation of the mortgage constituted thereon; Ordering the defendant Premiere Bank to pay to Intervenor IBA-Finance, the following sums, to wit: P1,000,000.00 as and by way of exemplary damages; and P100,000.00 as and for reasonable attorneys fees; and Costs of suit.

2)

3) 4) 5)

For lack of sufficient legal and factual basis, the counterclaim of defendant Premiere Bank is DISMISSED.

SO ORDERED. Premiere Bank appealed to the Court of Appeals contending that the trial court erred in finding, inter alia, that it had maliciously downgraded the credit-line of Panacor from P4.1 million to P2.7 million. In the meantime, a compromise agreement was entered into between Iba-Finance and Premiere Bank whereby the latter agreed to return without interest the amount of P6,235,754.79 which IbaFinance earlier remitted to Premiere Bank to pay off the unpaid loans of Arizona. OnMarch 11, 1999, the compromise agreement was approved. On June 18, 2003, a decision was rendered by the Court of Appeals which affirmed with modification the decision of the trial court, the dispositive portion of which reads: WHEREFORE, premises considered, the present appeal is hereby DISMISSED, and the decision appealed from in Civil Case No. 65577 is hereby AFFIRMED with MODIFICATION in that the award of exemplary damages in favor of the appellees is hereby reduced to P500,000.00. Needless to add, in view of the Compromise Agreement plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE between plaintiff-intervenor IBA-Finance and defendant-appellant PREMIERE as approved by this Court per Resolution dated March 11, 1999, Our dispositive of the present appeal is only with respect to the liability of appellant PREMIERE to the plaintiff-appellees. With costs against the defendant-appellant. SO ORDERED.[10] Hence the present petition for review, which raises the following issues:[11] I WHETHER OR NOT THE DECISION OF HONORABLE COURT OF APPEALS EXCEEDED AND WENT BEYOND THE FACTS, THE ISSUES AND EVIDENCE PRESENTED IN THE APPEAL TAKING INTO CONSIDERATION THE ARGUMENT OF PETITIONER BANK AND ADVENT OF THE DULY APPROVED COMPROMISE AGREEMENT BETWEEN THE PETITIONER BANK AND IBA FINANCE CORPORATION. II WHETHER OR NOT THE ISSUES THAT SHOULD HAVE BEEN RESOLVED BY THE HONORABLE COURT OF APPEALS, BY REASON OF THE EXISTENCE OF THE COMPROMISE AGREEMENT, IS LIMITED TO THE ISSUE OF ALLEGED BAD FAITH OF PETITIONER BANK IN THE DOWNGRADING OF THE LOAN AND SHOULD NOT INCLUDE THE RENDITION OF AN ADVERSE PRONOUNCEMENT TO AN ALREADY FAIT ACCOMPLI- ISSUE ON THE REFUSAL OF THE BANK TO RECOGNIZE THE TAKE-OUT OF THE LOAN AND THE RELEASE OF TCT NO. 3475. III WHETHER OR NOT PETITIONER ACTED IN BAD FAITH IN THE DOWNGRADING OF THE LOAN OF RESPONDENTS TO SUPPORT AN AWARD OF ACTUAL AND EXEMPLARY DAMAGES NOW REDUCED TO P500,000.00.

IV WHETHER OR NOT THERE IS BASIS OR COMPETENT PIECE OF EVIDENCE PRESENTED DURING THE TRIAL TO SUPPORT AN AWARD OF ACTUAL DAMAGES OF P4,520,000.00. Firstly, Premiere Bank argues that considering the compromise agreement it entered with IbaFinance, the Court of Appeals should have ruled only on the issue of its alleged bad faith in downgrading Panacors credit line. It further contends that the Court of Appeals should have refrained from making any adverse pronouncement on the refusal of Premiere Bank to recognize the take-out and its subsequent failure to release the cancellation of the mortgage because they were rendered fait accompli by the compromise agreement. We are not persuaded. In a letter-agreement[12] dated October 5, 1995, Iba-Finance informed Premiere Bank of its approval of Panacors loan application in the amount of P10 million to be secured by a real estate mortgage over a parcel of land covered by TCT No. T-3475. It was agreed that Premiere Bank shall entrust to IbaFinance the owners duplicate copy of TCT No. T-3475 in order to register its mortgage, after which IbaFinance shall pay off Arizonas outstanding indebtedness. Accordingly, Iba-Finance remitted P6,235,754.79 to Premiere Bank on the understanding that said amount represented the full payment of Arizonas loan obligations. Despite performance by Iba-Finance of its end of the bargain, Premiere Bank refused to deliver the mortgage document. As a consequence, Iba-Finance failed to release the remaining P2.5 million loan it earlier pledged to Panacor, which finally led to the revocation of its distributorship agreement with Colgate. Undeniably, the not-so-forthright conduct of Premiere Bank in its dealings with respondent corporations caused damage to Panacor and Iba-Finance. It is error for Premiere Bank to assume that the compromise agreement it entered with Iba-Finance extinguished all direct and collateral incidents to the aborted take-out such that it also cancelled its obligations to Panacor. The unjustified refusal by Premiere Bank to release the mortgage document prompted Iba-Finance to withhold the release of the P2.5 million earmarked for Panacor which eventually terminated the distributorship agreement. Both Iba-Finance and Panacor, which are two separate and distinct juridical entities, suffered damages due to the fault of Premiere Bank. Hence, it should be held liable to each of them. While the compromise agreement may have resulted in the satisfaction of Iba-Finances legal claims, Premiere Banks liability to Panacor remains. We agree with the Court of Appeals that the present appeal is only with respect to the liability of appellant Premiere Bank to the plaintiffs-appellees (Panacor and Arizona)[13] taking into account the compromise agreement. For the foregoing reasons, we find that the Court of Appeals did not err in discussing in the assailed decision the abortive take-out and the refusal by Premiere Bank to release the cancellation of the mortgage document. Secondly, Premiere Bank asserts that it acted in good faith when it downgraded the credit line of Panacor from P4.1 million to P2.7 million. It cites the decision of the trial court which, albeit inconsistent with its final disposition, expressly recognized that the downgrading of the loan was not the proximate cause of the damages suffered by respondents. Under the Credit Line Agreement[14] dated September 1995, Premiere Bank agreed to extend a loan of P4.1 million to Arizona to be used by its affiliate, Panacor, in its operations. Eventually, Premiere approved in favor of Arizona a loan equivalent to P6.1 million, P3.4 million of which was allotted for the

payment of Arizonas existing loan obligations and P2.7 million as credit line of Panacor. Since only P2.7 million was made available to Panacor, instead of P4.1 million as previously approved, Panacor applied for a P2.5 loan from Iba-Finance, which, as earlier mentioned, was not released because of Premiere Banks refusal to issue the mortgage cancellation. It is clear that Premiere Bank deviated from the terms of the credit line agreement when it unilaterally and arbitrarily downgraded the credit line of Panacor from P4.1 million to P2.7 million. Having entered into a well-defined contractual relationship, it is imperative that the parties should honor and adhere to their respective rights and obligations thereunder. Law and jurisprudence dictate that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.[15] The appellate court correctly observed, and we agree, that: Appellants actuations, considering the actual knowledge of its officers of the tight financial situation of appellee PANACOR brought about primarily by the appellant banks considerable reduction of the credit line portion of the loan, in relation to the bail-out efforts of IBA Finance, whose payment of the outstanding loan account of appellee ARIZONA with appellant was readily accepted by the appellant, were truly marked by bad faith and lack of due regard to the urgency of its compliance by immediately releasing the mortgage cancellation document and delivery of the title to IBA Finance. That time is of the essence in the requested release of the mortgage cancellation and delivery of the subject title was only too well-known to appellant, having only belatedly invoked the cross-default provision in the Real Estate Mortgage executed in its favor by appellee ARIZONA to resist the plain valid and just demand of IBA Finance for such compliance by appellant bank.[16] Premiere Bank cannot justify its arbitrary act of downgrading the credit line on the alleged finding by its project analyst that the distributorship was not financially feasible. Notwithstanding the alleged forewarning, Premiere Bank still extended Arizona the loan of P6.1 million, albeit in contravention of the credit line agreement. This indubitably indicates that Premiere Bank had deliberately and voluntarily granted the said loan despite its claim that the distributorship contract was not viable. Neither can Premiere Bank rely on the puerile excuse that it was the banks policy not to release the mortgage cancellation prior to the settlement of outstanding loan obligations. Needless to say, the Final Statement of Account dated October 17, 1995 showing in no uncertain terms Arizonas outstanding indebtedness, which was subsequently paid by Iba-Finance, was the full payment of Arizonas loan obligations. Equity demands that a party cannot disown it previous declaration to the prejudice of the other party who relied reasonably and justifiably on such declaration. Thirdly, Premiere Bank avers that the appellate courts reliance on the credit line agreement as the basis of bad faith on its part was inadmissible or self-serving for not being duly notarized, being unsigned in all of its left margins, and undated. According to Premiere Bank, the irregularities in the execution of the credit line agreement bolsters the theory that the same was the product of manipulation orchestrated by respondent corporations through undue influence and pressure exerted by its officers on Martillano. Premiere Banks posture deserves scant consideration. As found by the lower court, there are sufficient indicia that demonstrate that the alleged unjust pressure exerted on Martillano was more imagined than real. In her testimony, Martillano claims that she was persuaded and coaxed by Caday of Iba-Finance and Panaligan of Panacor to sign the letter. It was she who provided Iba-Finance with the Final Statement of Account and accepted its payment without objection or qualification. These acts show that she was vested by Premiere Bank with sufficient authority to enter into the said transactions.

If a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that the apparent authority is real as to innocent third persons dealing in good faith with such officers or agents.[17] As testified to by Martillano, after she received a copy of the credit line agreement and affixed her signature in conformity thereto, she forwarded the same to the legal department of the Bank at its Head Office. Despite its knowledge, Premiere Bank failed to disaffirm the contract. When the officers or agents of a corporation exceed their powers in entering into contracts or doing other acts, the corporation, when it has knowledge thereof, must promptly disaffirm the contract or act and allow the other party or third persons to act in the belief that it was authorized or has been ratified. If it acquiesces, with knowledge of the facts, or fails to disaffirm, ratification will be implied or else it will be estopped to deny ratification.[18] Finally, Premiere Bank argues that the finding by the appellate court that it was liable for actual damages in the amount of P4,520,000.00 is without basis. It contends that the evidence presented by Panacor in support of its claim for actual damages are not official receipts but self-serving declarations. To justify an award for actual damages, there must be competent proof of the actual amount of loss. Credence can be given only to claims, which are duly supported by receipts.[19] The burden of proof is on the party who will be defeated if no evidence is presented on either side. He must establish his case by a preponderance of evidence which means that the evidence, as a whole, adduced by one side is superior to that of the other. In other words, damages cannot be presumed and courts, in making an award, must point out specific facts that can afford a basis for measuring whatever compensatory or actual damages are borne. Under Article 2199 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of, or in recompense for, loss or injury sustained. They proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted and not to impose a penalty. In the instant case, the actual damages were proven through the sole testimony of Themistocles Ruguero, the vice president for administration of Panacor. In his testimony, the witness affirmed that Panacor incurred losses, specifically, in terms of training and seminars, leasehold acquisition, procurement of vehicles and office equipment without, however, adducing receipts to substantiate the same. The documentary evidence marked as exhibit W, which was an ordinary private writing allegedly itemizing the capital expenditures and losses from the failed operation of Panacor, was not testified to by any witness to ascertain the veracity of its contents. Although the lower court fixed the sum of P4,520,000.00 as the total expenditures incurred by Panacor, it failed to show how and in what manner the same were substantiated by the claimant with reasonable certainty. Hence, the claim for actual damages should be admitted with extreme caution since it is only based on bare assertion without support from independent evidence. Premieres failure to prove actual expenditure consequently conduces to a failure of its claim. In determining actual damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but must depend on competent proof and on the best evidence obtainable regarding the actual amount of loss.[20] Even if not recoverable as compensatory damages, Panacor may still be awarded damages in the concept of temperate or moderate damages. When the court finds that some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proved with certainty, temperate damages may be recovered. Temperate damages may be allowed in cases where from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is convinced that the aggrieved party suffered some pecuniary loss.

The Code Commission, in explaining the concept of temperate damages under Article 2224, makes the following comment:[21] In some States of the American Union, temperate damages are allowed. There are cases where from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. For instance, injury to ones commercial credit or to the goodwill of a business firm is often hard to show with certainty in terms of money. Should damages be denied for that reason? The judge should be empowered to calculate moderate damages in such cases, rather than that the plaintiff should suffer, without redress from the defendant's wrongful act. It is obvious that the wrongful acts of Premiere Bank adversely affected, in one way or another, the commercial credit[22] of Panacor, greatly contributed to, if not, decisively caused the premature stoppage of its business operations and the consequent loss of business opportunity. Since these losses are not susceptible to pecuniary estimation, temperate damages may be awarded. Article 2216 of the Civil Code: No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the Court, according to the circumstances of each case. Under the circumstances, the sum of P200,000.00 as temperate damages is reasonable. WHEREFORE, the petition is DENIED. The Decision dated June 18, 2003 of the Court of Appeals in CA-G.R. CV No. 60750, ordering Premiere Bank to pay Panacor Marketing Corporation P500,000.00 as exemplary damages, P100,000.00 as attorneys fees, and costs, is AFFIRMED, with the MODIFICATION that the award of P4,520,000.00 as actual damages is DELETED for lack of factual basis. In lieu thereof, Premiere Bank is ordered to pay Panacor P200,000.00 as temperate damages. SO ORDERED. Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.