J.A.B. Bulao & Associates

CASE 2012-0062: ISABELO ESPERIDA, LORENZO HIPOLITO, and ROMEO DE BELEN VS. FRANCO K. JURADO, JR. (G.R. No. 172538, 25 APRIL 2012, PERALTA, J.) SUBJECTS: INDIRECT CONTEMPT; PROCEDURES IN INDIRECT CONTEMPT; MEANING OF HEARING; LIBERALITY GRANTED TO SUBSEQUENT COMPLIANCE; THERE MUST BE HEARING IN CONTEMPT PROCEEDINGS EVEN IF ANSWER IS NOT ACCEPTED BY COURT (BRIEF TITLE: ESPERIDA VS. JURADO)

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DISPOSITIVE:

WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated March 2, 2006 and April 19, 2006 of the Court of Appeals are REVERSED and SET ASIDE.  The Court of Appeals is ORDERED to admit petitioners’ Answer.

The case shall not be deemed submitted for resolution until a hearing is conducted in accordance with the Rules.  The Court of Appeals is DIRECTED to resume the proceedings below with dispatch.

SO ORDERED.

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SUBJECTS/DOCTRINES/DIGEST:

WHAT ARE THE PROCEDURAL REQUISITES BEFORE THE A PERSON  MAY BE PUNISHED FOR INDIRECT CONTEMPT?

THERE ARE FOUR:

FIRST, THERE MUST BE AN ORDER REQUIRING THE RESPONDENT TO SHOW CAUSE WHY HE SHOULD NOT BE CITED FOR CONTEMPT.

SECOND, THE RESPONDENT MUST BE GIVEN THE OPPORTUNITY TO COMMENT ON THE CHARGE AGAINST HIM.

THIRD, THERE MUST BE A HEARING AND THE COURT MUST INVESTIGATE THE CHARGE AND CONSIDER RESPONDENT’S ANSWER.

FINALLY, ONLY IF FOUND GUILTY WILL RESPONDENT BE PUNISHED ACCORDINGLY.^[1][18]

Sections 3^[2][16] and 4,^[3][17] Rule 71 of the Rules of Court, specifically outlines the procedural requisites before the accused may be punished for indirect contempt. First, there must be an order requiring the respondent to show cause why he should not be cited for contempt. Second, the respondent must be given the opportunity to comment on the charge against him. Third, there must be a hearing and the court must investigate the charge and consider respondent’s answer. Finally, only if found guilty will respondent be punished accordingly.^[4][18]  The law requires that there be a charge in writing, duly filed in court, and an opportunity given to the person charged to be heard by himself or counsel.  What is most essential is that the alleged contemner be granted an opportunity to meet the charges against him and to be heard in his defenses.  This is due process, which must be observed at all times.^[5][19]

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WHAT IS MEANT BY “HEARING” IN CONTEMPT PROCEEDINGS?

IT MEANS EITHER ACTUAL HEARING  OR BY PLEADING.   “TO BE HEARD” DOES NOT ONLY MEAN VERBAL ARGUMENTS IN COURT; ONE MAY BE HEARD ALSO THROUGH PLEADINGS. WHERE OPPORTUNITY TO BE HEARD, EITHER THROUGH ORAL ARGUMENTS OR PLEADINGS, IS ACCORDED, THERE IS NO DENIAL OF PROCEDURAL DUE PROCESS.^[6][21]

The case of Mutuc v. Court of Appeals^[7][20] is instructive as to what due process means in contempt proceedings.  This Court stated:

There is no question that the “essence of due process is a hearing before conviction and before an impartial and disinterested tribunal” x x x but due process as a constitutional precept does not always, and in all situations, require a trial-type proceeding x x x. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of one’s defense. x x x  “To be heard” does not only mean verbal arguments in court; one may be heard also through pleadings. Where opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due process.^[8][21]

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PETITIONERS’ COUNSEL REASONED OUT THAT THE FAILURE OF FILING THE MOTION FOR EXTENSION ON TIME WAS DUE TO THE FACT THAT COUNSEL’S LIAISON OFFICER FAILED TO FOLLOW HIS INSTRUCTIONS. IS THIS EXCUSSABLE?

YES.  INDIRECT CONTEMPT PROCEEDINGS PARTAKE OF THE NATURE OF A CRIMINAL PROSECUTION; HENCE, GOVERNING THEM ARE TO BE STRICTLY CONSTRUED.^[9][23]STRICT RULES THAT GOVERN CRIMINAL PROSECUTIONS ALSO APPLY TO A PROSECUTION FOR CRIMINAL CONTEMPT; THE ACCUSED IS TO BE AFFORDED MANY OF THE PROTECTIONS PROVIDED IN REGULAR CRIMINAL CASES; AND PROCEEDINGS UNDER STATUTES

In the case at bar, petitioners were indeed given ample opportunity to file their Answer.  In denying petitioners’ Omnibus Motion and Second Motion for Extension, the CA ratiocinated that the justifications advanced by petitioners do not warrant the grant of liberality in the application of the Rules and their omissions are unpardonable and should not be tolerated.^[10][22]

It must be stressed, however, that indirect contempt proceedings partake of the nature of a criminal prosecution; hence, strict rules that govern criminal prosecutions also apply to a prosecution for criminal contempt; the accused is to be afforded many of the protections provided in regular criminal cases; and proceedings under statutes governing them are to be strictly construed.^[11][23]  Moreover, in contempt proceedings, if the answer to the contempt charge is satisfactory, the contempt proceedings end.^[12][24]

In the present recourse, petitioners plead for the liberal application of the Rules. Admittedly, in their Omnibus Motion before the appellate court, petitioners’ counsel acknowledged his shortcomings in complying with the resolution of the court and took full responsibility for such oversight and omission.  Petitioners’ counsel also reasoned that the lack of personal service of the motion for extension was due to the considerable distance between the parties’ respective offices and that the failure of filing the motion for extension on time was due to the fact that counsel’s liaison officer failed to follow his instructions.  Indeed, counsel’s liaison officer attested such facts in his Explanation/Affidavit,^[13][25] which was attached to the Omnibus Motion.  More importantly, also attached to the Omnibus Motion was petitioners’ Answer to the petition to cite them in contempt.

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PETITIONERS  FILED THEIR ANSWER BUT LATE. IS THIS EXCUSSABLE?

YES. “SUBSEQUENT AND SUBSTANTIAL COMPLIANCE MAY CALL FOR THE RELAXATION OF THE RULES OF PROCEDURE.”^[14][26]

It is settled that “subsequent and substantial compliance may call for the relaxation of the rules of procedure.”^[15][26]  Time and again, this Court has held that a strict and rigid application of technicalities must be avoided if it tends to frustrate rather than promote substantial justice.^[16][27]  Considering the nature of contempt proceedings and the fact that petitioners actually filed their Answer, albeit belatedly, the CA should have been more liberal in the application of the Rules and admitted the Answer.

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THE CA DENIED PETITIONER’S MOTION FOR EXTENSION TO FILE AN ANSWER AND IMMEDIATELY ORDERED THAT THE CASE BE DEEMED SUBMITTED FOR RESOLUTION. WAS THE CA CORRECT?

NO. THE CA SHOULD SET AND CONDUCT A HEARING ON A FIXED DATE AND TIME. IN CONTEMPT PROCEEDINGS, THE PROCEDURES SET MUST BE FOLLOWED.

Moreover, this Court finds that the CA also erred in considering the case deemed submitted for resolution sans the answer^[17][28] of petitioners without setting and conducting a hearing on a fixed date and time on which petitioners may personally, or through counsel, answer the charges against them.

In contempt proceedings, the prescribed procedure must be followed.^[18][29]  To be sure, since an indirect contempt charge partakes the nature of a criminal charge, conviction cannot be had merely on the basis of written pleadings.^[19][30]  A respondent in a contempt charge must be served with a copy of the motion/petition. Unlike in civil actions, the Court does not issue summons on the respondent. While the respondent is not required to file a formal answer similar to that in ordinary civil actions, the court must set the contempt charge for hearing on a fixed date and time on which the respondent must make his appearance to answer the charge.  On the date and time of the hearing, the court shall proceed to investigate the charges and consider such answer or testimony as the respondent may make or offer. The mode of procedure and rules of evidence therein are assimilated to criminal prosecutions. If he fails to appear on that date after due notice without justifiable reason, the court may order his arrest, just like the accused in a criminal case who fails to appear when so required. The court does not declare the respondent in a contempt charge in default.^[20][31]

Clearly, the contempt case against petitioners is still in the early stage of the proceedings.  The proceedings have not reached that stage wherein the court below has set a hearing to provide petitioners with the opportunity to state their defenses.  Verily, a hearing affords the contemner the opportunity to adduce before the court documentary or testimonial evidence in his behalf. The hearing will also allow the court a more thorough evaluation of the defense of the contemner, including the chance to observe the accused present his side in open court and subject his defense to interrogation from the complainants or the court itself.^[21][32] In fine, the proper procedure must be observed and petitioners must be afforded full and real opportunity to be heard.

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Republic of thePhilippines

Supreme Court

BaguioCity

THIRD DIVISION

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Resolution^[22][1] dated March 2, 2006 denying the Motion for Extension of Time to File Answer filed by petitioners Isabelo Esperida, Lorenzo Hipolito, and Romeo de Belen, and the Resolution^[23][2] dated April 19, 2006 denying petitioners’ Omnibus Motion and Second Motion for Extension, of the Court of Appeals in CA-G.R. SP No. 90525.

The factual and procedural antecedents are as follows:

On February 5, 2001, petitioners Isabelo Esperida, Lorenzo Hipolito, and Romeo de Belen filed a Complaint for illegal dismissal against respondent Franco K. Jurado, Jr. before the Labor Arbiter. 

On March 14, 2002, the Labor Arbiter rendered a Decision^[24][3] in favor of petitioners, declaring that they have been illegally dismissed and awarding them their corresponding backwages and separation pay.  Respondent appealed the decision before the National Labor Relations Commission (NLRC), but the latter issued a Resolution^[25][4] dismissing the appeal and affirming the decision of the Labor Arbiter in toto.

Aggrieved, respondent sought recourse before the Court of Appeals (CA) docketed as CA-G.R. SP No. 81118.  On December 13, 2004, the CA rendered a Decision^[26][5] dismissing the petition and affirming the assailed Resolution of the NLRC.  Respondent then filed a motion for reconsideration of the decision, which was eventually denied in the Resolution^[27][6] dated September 27, 2005.

However, during the pendency of the motion for reconsideration, or on July 21, 2005, respondent filed before the CA a Petition to Declare Petitioners in Contempt of Court^[28][7] against the petitioners.  In the said petition, respondent sought to declare herein petitioners guilty of indirect contempt of court on the basis of their alleged acts of dishonesty, fraud, and falsification of documents to mislead the CA to rule in their favor in CA-G.R. SP No. 81118.

Finding the petition to be sufficient in form and substance, the CA issued a Resolution^[29][8] ordering herein petitioners to file their Answer within 15 days from notice, showing cause why they should not be adjudged guilty of indirect contempt of court.

On February 8, 2006, counsel for petitioners filed his entry of appearance, together with a motion for extension of time, seeking that petitioners be granted 15 days from February 3, 2006, or up to February 18, 2006, within which to submit their Answer to the petition.

On March 2, 2006, the CA issued one of the assailed Resolutions^[30][9] denying the motion for extension, to wit:

The entry of appearance filed by mail by Atty. Daniel F. Furaque is NOTED.

The motion for extension filed together with the entry of appearance, seeking for the respondents fifteen (15) days from February 3, 2006 within which to submit their answer to the petition, is DENIED, considering that it was mailed only on February 8, 2006 despite the last day to file being on February 3, 2006, and considering that it did not contain any explanation why it was not served and filed personally.

The case is now deemed submitted for resolution sans the answer of respondents Isabelo E. Esperida, Lorenzo Hipolito, and Romeo de Belen.

SO ORDERED.^[31][10]

On February 21, 2006, petitioners filed a Second Motion for Extension,^[32][11] alleging that the Answer to the petition is due on February 18, 2006, but due to counsel’s work load, they are praying that they be allowed to submit their Answer until February 28, 2006.

On March 20, 2006, petitioners’ counsel also filed an Omnibus Motion (For Reconsideration of the March 02, 2006 Resolution; and For Admission of Respondent’s Answer),^[33][12] reasoning that the late filing of the motion for extension was because counsel was so tied up with the preparations of equally important paper works and pleadings for the other cases which he is also handling.  Counsel explained that he failed to give instructions to his liaison officer to mail the motion on the same day.  Also, personal service was not possible due to the considerable distance between the parties’ respective offices.  Ultimately, petitioners, through counsel, prayed that the Resolution be set aside and their Answer,^[34][13] which is attached to said Omnibus Motion, be admitted.

On April 19, 2006, the CA issued the other assailed Resolution,^[35][14] denying both the Omnibus Motion and Second Motion for Extension for lack of merit.

In denying the motions, the CA ratiocinated that petitioners did not file their Answer within the reglementary period and clearly disregarded the rules of procedure. Petitioners’ plea for liberality is, therefore, undeserving of any sympathy.

Hence, the petition assigning the following errors: 

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DENYING PETITIONERS’ MOTIONS FOR EXTENSION;

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN CONSIDERING THE CASE SUBMITTED FOR DECISION WITHOUT GIVING PETITIONERS THEIR INHERENT AND INALIENABLE RIGHT TO DUE PROCESS OF LAW; and

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DENYING BOTH THE MOTION FOR RECONSIDERATION AND MOTION FOR ADMISSION OF PETITIONERS’ ANSWER.^[36][15]

Petitioners argue that the reasoning advanced by its counsel in failing to submit their Answer on time, and their failure to submit the Explanation why their answer was not served personally, erases any legal defect or impediment for the admission of their Answer by the CA.  Petitioners maintain that the CA should have practiced liberality in interpreting and applying the rules in the interest of justice, fair play and equity. 

Petitioners contend that if their Answer would not be considered and appreciated in the disposition of the case, they will be adjudged guilty of falsification and misrepresentation without being afforded an opportunity to explain their side of the controversy, in gross violation of their constitutional right to due process of law.

On his part, respondent maintains that the CA did not err in denying petitioners’ motions and that they were not denied due process of law.  Moreover, respondent avers that even if petitioners’ Answer was not admitted, it does not mean that they will unceremoniously be adjudged in contempt of court.  It only means that the contempt proceedings will commence without petitioners’ Answer, in accordance with the Rules.

The petition is meritorious.

Sections 3^[37][16] and 4,^[38][17] Rule 71 of the Rules of Court, specifically outlines the procedural requisites before the accused may be punished for indirect contempt. First, there must be an order requiring the respondent to show cause why he should not be cited for contempt. Second, the respondent must be given the opportunity to comment on the charge against him. Third, there must be a hearing and the court must investigate the charge and consider respondent’s answer. Finally, only if found guilty will respondent be punished accordingly.^[39][18]  The law requires that there be a charge in writing, duly filed in court, and an opportunity given to the person charged to be heard by himself or counsel.  What is most essential is that the alleged contemner be granted an opportunity to meet the charges against him and to be heard in his defenses.  This is due process, which must be observed at all times.^[40][19]

The case of Mutuc v. Court of Appeals^[41][20] is instructive as to what due process means in contempt proceedings.  This Court stated:

There is no question that the “essence of due process is a hearing before conviction and before an impartial and disinterested tribunal” x x x but due process as a constitutional precept does not always, and in all situations, require a trial-type proceeding x x x. The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of one’s defense. x x x  “To be heard” does not only mean verbal arguments in court; one may be heard also through pleadings. Where opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due process.^[42][21]

In the case at bar, petitioners were indeed given ample opportunity to file their Answer.  In denying petitioners’ Omnibus Motion and Second Motion for Extension, the CA ratiocinated that the justifications advanced by petitioners do not warrant the grant of liberality in the application of the Rules and their omissions are unpardonable and should not be tolerated.^[43][22]

It must be stressed, however, that indirect contempt proceedings partake of the nature of a criminal prosecution; hence, strict rules that govern criminal prosecutions also apply to a prosecution for criminal contempt; the accused is to be afforded many of the protections provided in regular criminal cases; and proceedings under statutes governing them are to be strictly construed.^[44][23]  Moreover, in contempt proceedings, if the answer to the contempt charge is satisfactory, the contempt proceedings end.^[45][24]

In the present recourse, petitioners plead for the liberal application of the Rules. Admittedly, in their Omnibus Motion before the appellate court, petitioners’ counsel acknowledged his shortcomings in complying with the resolution of the court and took full responsibility for such oversight and omission.  Petitioners’ counsel also reasoned that the lack of personal service of the motion for extension was due to the considerable distance between the parties’ respective offices and that the failure of filing the motion for extension on time was due to the fact that counsel’s liaison officer failed to follow his instructions.  Indeed, counsel’s liaison officer attested such facts in his Explanation/Affidavit,^[46][25] which was attached to the Omnibus Motion.  More importantly, also attached to the Omnibus Motion was petitioners’ Answer to the petition to cite them in contempt.

It is settled that “subsequent and substantial compliance may call for the relaxation of the rules of procedure.”^[47][26]  Time and again, this Court has held that a strict and rigid application of technicalities must be avoided if it tends to frustrate rather than promote substantial justice.^[48][27]  Considering the nature of contempt proceedings and the fact that petitioners actually filed their Answer, albeit belatedly, the CA should have been more liberal in the application of the Rules and admitted the Answer.

Moreover, this Court finds that the CA also erred in considering the case deemed submitted for resolution sans the answer^[49][28] of petitioners without setting and conducting a hearing on a fixed date and time on which petitioners may personally, or through counsel, answer the charges against them.

In contempt proceedings, the prescribed procedure must be followed.^[50][29]  To be sure, since an indirect contempt charge partakes the nature of a criminal charge, conviction cannot be had merely on the basis of written pleadings.^[51][30]  A respondent in a contempt charge must be served with a copy of the motion/petition. Unlike in civil actions, the Court does not issue summons on the respondent. While the respondent is not required to file a formal answer similar to that in ordinary civil actions, the court must set the contempt charge for hearing on a fixed date and time on which the respondent must make his appearance to answer the charge.  On the date and time of the hearing, the court shall proceed to investigate the charges and consider such answer or testimony as the respondent may make or offer. The mode of procedure and rules of evidence therein are assimilated to criminal prosecutions. If he fails to appear on that date after due notice without justifiable reason, the court may order his arrest, just like the accused in a criminal case who fails to appear when so required. The court does not declare the respondent in a contempt charge in default.^[52][31]

Clearly, the contempt case against petitioners is still in the early stage of the proceedings.  The proceedings have not reached that stage wherein the court below has set a hearing to provide petitioners with the opportunity to state their defenses.  Verily, a hearing affords the contemner the opportunity to adduce before the court documentary or testimonial evidence in his behalf. The hearing will also allow the court a more thorough evaluation of the defense of the contemner, including the chance to observe the accused present his side in open court and subject his defense to interrogation from the complainants or the court itself.^[53][32] In fine, the proper procedure must be observed and petitioners must be afforded full and real opportunity to be heard.

WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated March 2, 2006 and April 19, 2006 of the Court of Appeals are REVERSED and SET ASIDE.  The Court of Appeals is ORDERED to admit petitioners’ Answer.

The case shall not be deemed submitted for resolution until a hearing is conducted in accordance with the Rules.  The Court of Appeals is DIRECTED to resume the proceedings below with dispatch.

SO ORDERED.

DIOSDADO M. PERALTA

                                        Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson

        ROBERTO A. ABAD                        JOSE CATRAL MENDOZA

            Associate Justice                                         Associate Justice

      ESTELA M. PERLAS-BERNABE

                                          Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                PRESBITERO J. VELASCO, JR.

             Associate Justice

  Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                               RENATO C. CORONA

                                                                                          Chief Justice

CASE 2012-0061:  KAKAMPI AND ITS MEMBERS, VICTOR PANUELOS, ET AL., REPRESENTED BY DAVID DAYALO, KAKAMPI VICE PRESIDENT AND ATTORNEY-IN-FACT VS.  KINGSPOINT EXPRESS AND LOGISTIC AND/OR MARY ANN CO (G.R. NO. 194813, 25 APRIL 2012, REYES, J.) SUBJECTS: LEGAL DISMISSAL BUT DUE PROCESS WAS NOT OBSERVED; WILLFUL DISOBEDIENCE; REASONABLE OPPORTUNITY TO EXPLAIN MEANS AT LEAST FIVE DAYS NOTICE; NOMINAL DAMAGE OF P30,000.00 IMPOSED FOR VIOLATION OF DUE PROCESS. (BRIEF TITLE: KAKAMPI VS. KINGSPOINT EXPRESS)

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DISPOSITIVE:

WHEREFORE, premises considered, the Decision dated March 16, 2010 and Resolution dated December 16, 2010 of the Court of Appeals are AFFIRMED with MODIFICATION in that respondent Kingspoint Express and Logistic is hereby held liable for the payment of nominal damage, in the amount of P30,000.00 each to petitioners Bobby Dacara, Fernando Lupangco, Jr., Sandy Pazi, Camilo Tabarangao, Jr., Eduardo Hizole and Reginaldo Carillo, for non-observance of procedural due process required in terminating employment.

        SO ORDERED.

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SUBJECTS/DOCTRINES/DIGESTS

WHAT IS FUNDAMENTAL IN VALIDLY DISMISSING AN EMPLOYEE?

THE EMPLOYER MUST OBSERVE BOTH SUBSTANTIVE AND PROCEDURAL PROCESS.

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WHAT IS SUBSTANTIVE PROCESS?

THE TERMINATION MUST BE BASED ON A JUST OR AUTHORIZED CAUSE.

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WHAT IS PROCEDURAL PROCESS?

THE DISMISSAL MUST BE EFFECTED AFTER DUE NOTICE AND HEARING.

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        It is fundamental that in order to validly dismiss an employee, the employer is required to observe both substantive and procedural due process – the termination of employment must be based on a just or authorized cause and the dismissal must be effected after due notice and hearing.^[1][20]

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THE CONCERNED EMPLOYEES REFUSED TO SUBMIT THEMSELVES TO DRUG TEST. KINGSPOINT EXPRESS DISMISSED THEM. WAS THERE JUST CAUSE?

YES. THERE WAS WILLFUL DISOBEDIENCE  BY THE EMPLOYEES OF THE LAWFUL ORDER OF THEIR EMPLOYER.

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WHEN IS THERE WILLFUL DISOBEDIENCE?

TWO ELEMENTS MUST CONCUR.

FIRST, THE  EMPLOYEE’S ASSAILED CONDUCT MUST HAVE BEEN WILLFUL, THAT IS, CHARACTERIZED BY A WRONGFUL AND PERVERSE ATTITUDE; AND

SECOND  THE ORDER VIOLATED MUST HAVE BEEN REASONABLE, LAWFUL, MADE KNOWN TO THE EMPLOYEE, AND MUST PERTAIN TO THE DUTIES WHICH HE HAD BEEN ENGAGED TO DISCHARGE.

        As to whether Kingspoint Express complied with the substantive requirements of due process, this Court agrees with the CA that the concerned employees’ refusal to submit themselves to drug test is a just cause for their dismissal.

An employer may terminate an employment on the ground of serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work.  Willful disobedience requires the concurrence of two elements: (1) the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge. Both elements are present in this case.

As to the first element, that at no point did the dismissed employees deny Kingspoint Express’ claim that they refused to comply with the directive for them to submit to a drug test or, at the very least, explain their refusal gives rise to the impression that their non-compliance is deliberate. The utter lack of reason or justification for their insubordination indicates that it was prompted by mere obstinacy, hence, willful and warranting of dismissal.

It involves little difficulty to accuse Kingspoint Express of anti-unionism and allege that this was what motivated the dismissal of the petitioners, but the duty to prove such an accusation is altogether different. That the petitioners failed at the level of substantiation only goes to show that their claim of unfair labor practice is a mere subterfuge for their willful disobedience.

        As to the second element, no belabored and extensive discussion is necessary to recognize the relevance of the subject order in the performance of their functions as drivers of Kingspoint Express. As the NLRC correctly pointed out, drivers are indispensable to Kingspoint Express’ primary business of rendering door-to-door delivery services. It is common knowledge that the use of dangerous drugs has adverse effects on driving abilities that may render the dismissed employees incapable of performing their duties to Kingspoint Express and acting against its interests, in addition to the threat they pose to the public.

        The existence of a single just cause is enough to order their dismissal and it is now inconsequential if the other charges against them do not merit their dismissal from service. It is therefore unnecessary to discuss whether the other acts enumerated in the notices of termination issued by Kingspoint Express may be considered as any of the just causes.

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KINGSPOINT EXPRESS REQUIRED THE EMPLOYEES TO ANSWER WITHIN TWO DAYS THEIR REFUSAL TO SUBMIT TO A DRUG TEST. WAS DUE PROCESS OBSERVED?

NO. THE SUPREME COURT  CONSTRUED IN KING OF KINGS TRANSPORT, INC. V. MAMAC^[2][21] “REASONABLE OPPORTUNITY” AS A PERIOD OF AT LEAST FIVE (5) CALENDAR DAYS FROM RECEIPT OF THE NOTICE.

        Nonetheless, while Kingspoint Express had reason to sever their employment relations, this Court finds its supposed observance of the requirements of procedural due process pretentious. While Kingspoint Express required the dismissed employees to explain their refusal to submit to a drug test, the two (2) days afforded to them to do so cannot qualify as “reasonable opportunity”, which the Court construed in King of Kings Transport, Inc. v. Mamac^[3][21] as a period of at least five (5) calendar days from receipt of the notice.

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SINCE KINGSPOINT EXPRESS DID NOT FOLLOW DUE PROCESS WHAT IS ITS LIABILITY?

TO PAY NOMINAL DAMAGES OF P30,000.00 PER EMPLOYEE EXCEPT THOSE WHO DID NOT APPEAL.

        Thus, even if Kingspoint Express’ defective attempt to comply with procedural due process does not negate the existence of a just cause for their dismissal, Kingspoint Express is still liable to indemnify the dismissed employees, with the exception of Panuelos, Dizon and Dimabayao, who did not appeal the dismissal of their complaints, with nominal damages in the amount of P30,000.00.

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Republic of thePhilippines

Supreme Court

BaguioCity

SECOND DIVISION

x—————————————————————————————–x

DECISION

REYES, J.:

        This is a petition for review under Rule 45 of the Rules of Court of the Amended Decision^[4][1] dated March 16, 2010 and Resolution^[5][2] dated December 16, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 106591.

        Victor Pañuelos (Pañuelos), Bobby Dacara (Dacara), Alson Dizon (Dizon), Saldy Dimabayao (Dimabayao), Fernando Lupangco, Jr. (Lupangco), Sandy Pazi (Pazi), Camilo Tabarangao, Jr. (Tabarangao), Eduardo Hizole (Hizole) and Reginald Carillo (Carillo) were the former drivers of Kingspoint Express and Logistic (Kingspoint Express), a sole proprietorship registered in the name of Mary Ann Co (Co) and engaged in the business of transport of goods. They were dismissed from service on January 20, 2006 on the grounds of serious misconduct, dishonesty, loss of trust and confidence and commission of acts inimical to the interest of Kingspoint Express.

        Prior thereto, Kingspoint Express issued separate notices to explain to the individual petitioners on January 16, 2006, uniformly stating that:

RE:    CHARGES OF DISHONESTY

          SERIOUS MISCONDUCT &

          LOSS OF CONFIDENCE

Dear Mr. Dacara:

You are hereby formally charged with DISHONESTY, SERIOUS MISCONDUCT, LOSS OF CONFIDENCE, and acts inimical to the company, by filing with the National Labor Relations Commission (NLRC) false, malicious, and fabricated cases against the company. Further, your refusal to undergo drug testing is unwarranted and against company policy.

          Please submit your answer or explanation to the foregoing charges within forty-eight (48) hours [from] receipt hereof. Your failure to do so would mean that you waive your right to submit your answer.

          You may likewise opt for a formal investigation with the assistance of counsel, or proceed with the investigation as you may choose.

          In the meantime, you are place[d] under preventive suspension for thirty (30) days effective on January 16, 2006. You are physically barred from company premises while the preventive suspension exists[.]^[6][3]

        The individual petitioners failed to submit their written explanation within the stated period. Subsequently, Kingspoint Express issued to them separate yet uniformly worded notices on January 20, 2006, informing them of their dismissal. Kingspoint Express expressed its decision in this wise:

        On January 16, 2006, you were formally charged with DISHONESTY, SERIOUS MISCONDUCT and LOSS OF CONFIDENCE and ACTS INIMICAL TO THE COMPANY based on the following acts:

1.       FABRICATION OF BASELESS MONEY CLAIMS against the company;

2.       MISLEADING FELLOW CO-WORKERS to sign the MALICIOUS COMPLAINT FOR MONEY CLAIMS against the company;

3.       REFUSAL TO UNDERGO THE COMPANY’S GENERAL DRUG TEST[;]

4.       EXTORTING MONEY FROM CO-WORKERS TO FUND ACTIVITIES THAT THEY WERE NEVER FULLY INFORMED OF;

          You were given two (2) days to respond to these charges, but you failed to do [so].^[7][4]

        In addition to the foregoing, Dacara was dismissed for consummating his sexual relations with one of Co’s household helpers inside Co’s residence thus impregnating her.^[8][5]

        A complaint for illegal dismissal was subsequently filed, alleging that the charges against them were fabricated and that their dismissal was prompted by Kingspoint Express’ aversion to their union activities.

        In a Decision^[9][6] dated April 23, 2007, Labor Arbiter Cresencio G. Ramos, Jr. (LA Ramos) found Dacara, Lupangco, Pazi, Tabarangao, Hizole and Carillo illegally dismissed. On the other hand, the complaint was dismissed insofar as Panuelos, Dizon and Dimabayao are concerned as they were deemed not to have filed their position papers. While the allegation of anti-unionism as the primordial motivation for the dismissal is considered unfounded, the respondents failed to prove that the dismissal was for a just cause.  The pertinent portion of the decision reads:

        From a perusal and examination of the pieces of evidence adduced by the respondents in support of their defense, this Office finds the same as not being sufficient and substantial to establish the charges of serious misconduct and breach of trust. Consider the following:

          On the complainants’ alleged refusal to undergo the company’s general drug testing, the same is explicitly nothing but an unsubstantiated allegation, therefore, undeserving of judicial and quasi-judicial cognizance.

          On the alleged act of the complainants in extorting money from co-workers to fund activities that they were not fully informed of as well as the alleged misleading of co-workers to sign “malicious money claims” against the company, it is to be noticed that respondents’ support or evidence thereto are the joint affidavit of drivers and helpers as well as that of one Ronie Dizon. On said pieces of evidence, this Office could not give much probative or evidentiary value and weight thereto as said sworn statements may definitely not be said to have genuinely emanated from the affiants (sic) drivers and helpers. To be precise, the joint-affidavit of the drivers and helpers (annex “B”, respondents’ position paper) obviously was “tailor-made”, so to speak, to conform with the respondents’ position or defense in the instant case. Said joint-affidavit in fact is couched in english, thus, tremendously lowering the probability that the statements therein really came from the “hearts and souls” of the lowly-educated drivers and helpers.

          On the breach of trust allegedly committed by Bobby Dacara with respect to the alleged act of repeatedly sneaking in the household of respondent Mary Ann Co and thereafter impregnating one of the latter’s househelps, the same is nothing but an unsubstantiated allegation and therefore, undeserving of judicial and quasi-judicial cognizance. Jurisprudence definitely is explicit on this point that an affirmative allegation made by a party must duly be proven to merit acceptance (People vs. Calayca, 301 SCRA 192).^[10][7]

        On appeal, the National Labor Relations Commission (NLRC) affirmed LA Ramos’ Decision dated April 23, 2007 in its Resolution^[11][8] dated April 30, 2008, thus:

        In the case at bar, We are persuaded to agree with the findings of the Labor Arbiter that “the pieces of evidence adduced by the respondents in support of their defense x x x not being sufficient and substantial to establish the charges of serious misconduct and breach of trust” (Records, p. 96).^[12][9]

        In addition, the NLRC ruled that the respondents failed to comply with the procedural requirements of due process.  Specifically:

          It is also observed that much is to be desired insofar as the observance of the procedural due process aspect is concerned. Firstly, there was no compliance with the due process requirement of the law considering that the uniformly worded first notice, all dated January 16, 2006, sent by respondents-appellants to the complainants-appellees, did not apprise them of the particular acts or omission for which their dismissal were sought. As clearly shown by the said individual notices, each of the complainants-appellees was merely informed that he or she is “formally charged with DISHONESTY, SERIOUS MISCONDUCT, LOSS OF CONFIDENCE and acts inimical to the Company” x x x without specifying the particular or specific acts or omissions constituting the grounds for their dismissal.

The purpose of the first notice is to sufficiently apprise the employee of the acts complained of and to enable the employee to prepare his defense. In this case, though, the said first notice did not identify the particular acts or omissions committed by each of the complainants-appellees. The extent of their knowledge and participation in the generally described charges were not specified in the said first notice, hence, the complainants-appellee could not be expected to intelligently and adequately prepare their defense. The first notice should neither be pro-forma nor vague; that it should set out clearly what each of the employees is being held liable for. They should be given ample opportunity to be heard and not mere opportunity. Ample opportunity means that each of the complainants-appellees should be specifically informed of the charges in order to give each of them, an opportunity to refute such accusations. Since, the said first notices are inadequate, their dismissal could not be in accordance with due process x x x.

          Secondly, there was no just or authorized cause for the respondents-appellants to terminate the complainants-appellees’ services. It is observed that the Notices of Termination, all dated January 20, 2006, merely mentioned the ground relied upon, to wit:

x x x x

          Placing side by side the first (1^st) notices and the Notice of Termination, We can easily notice the wide disparity between them.  In the first (1^st) notices, the alleged charges leveled against each of complainants-appellees were couched in general terms, such as: DISHONESTY, SERIOUS MISCONDUCT, LOSS OF CONFIDENCE and ACTS INIMICAL TO THE COMPANY, such that the complainants-appellees could not be expected to prepare their responsive pleadings; while the uniformly worded Notices of Termination, as earlier quoted, the charges leveled against of (sic) them are more specific.^[13][10]

        Respondents moved for reconsideration and in a Decision^[14][11] dated July 17, 2008, the NLRC reversed itself and declared the individual petitioners legally dismissed:

        Respondent company is an entity engaged in the delivery of goods called “door-to-door” business. As such, respondents are in custody of goods and moneys belonging to customers. Thus, respondents want to ensure that their drivers are drug-free and honest. It is undeniable that persons taking prohibited drugs tend to commit criminal activities when they are “high”, as most of them are out of their minds. Complainants are drivers and are on the road most of the time. Thus, they must see to it that they do not cause damage to other motor vehicles and pedestrians.

          Likewise, when delivering goods and money, it is not impossible that they could commit acts inimical to the respondents’ interest, like failure to deliver the money or goods to the right person or do a “hold-up me” scenario.

          Thus, to guarantee complainants-drivers’ safety and effective performance of their assigned tasks, respondents ordered complainants to undergo drug testing. However, they refused to follow the directive. Neither did they give a clear explanation for their refusal to the respondents. This shows complainants’ wrongful attitude to defy the reasonable orders which undoubtedly pertain to their duties as drivers of the respondents.  Such act is tantamount to willful disobedience of a lawful order, a valid ground for dismissal under the Labor Code, as amended.

          Furthermore, employees who are not complainants in this case, in a sworn statement attested to the fact that complainants tricked them to sign papers which turned out to be a complaint for money claims. They also accused them of abusing their trust in order to achieve their selfish motives. Complainants even convinced them to shell out part of their salaries without authorization and consent, as “panggatos para sa papeles, transportasyon ng abugado” but said money was used for theUnion’s purposes. Worse, complainants even threatened them to file criminal charges against them if they did not follow the complainants’ evil plans.   x x x

          In their Rejoinder, respondents also mentioned about the loss of cargoes to be delivered to Pampanga and Nueva Ecija. Complainants failed to refute the allegations nor comment on the matter. This led to respondents’ loss of trust and confidence reposed in them. Considering that the drivers have in their possession money and goods to be delivered, the continuance of their employment depends on the trust and confidence in them. Undeniably, trust, once lost is hard to regain.

x x x x

          We disagree.

          On January 16, 2006, respondents sent each of the complainants a letter stating the infractions committed by them. They directed them to explain the said infractions with a warning that failure to do so would mean waiver of their right to submit their answer. They further advised them to “opt for a formal investigation with assistance of the counsel, or proceed with the investigation you may choose”.

          However, complainants failed to answer. Neither did they do any act to dispute the charges. They remained silent on the infractions which a person would not normally do if he is not guilty of the said charges.  If they were really innocent, immediately, even without any notice, they should have reacted and did everything to dispute the charges. But they failed, despite the notice to explain.  This would lead to the conclusion that they were guilty of the charges imputed against them. As a consequence thereof, the complainants are considered to have waived their right to defend themselves.^[15][12]

        Petitioners moved for reconsideration but the same was denied in a Resolution^[16][13] dated September 30, 2008.

        Subsequently, the petitioners filed a petition for certiorari with the CA. In a Decision^[17][14] dated July 17, 2009, the CA reversed and set aside the NLRC Decision dated July 17, 2008 and Resolution dated September 30, 2008. Thus:

          Initially, this Court must determine whether the petitioners violated the Company Policies as would warrant their dismissal from the service. However, a painstaking review of the records of this case negate[s] a finding of such culpability on the part of the petitioners.

          The charges of dishonesty, serious misconduct and loss of confidence against the petitioners are nothing more than bare allegations as neither the show cause orders nor the termination letters specify in clear and unmistakable manner, the specific acts committed by the petitioners as would amount to dishonesty, serious misconduct or loss of confidence. Neither of these notices even contain any averments as to how and when the alleged infractions were committed by the petitioners.

          x x x

          In this case, respondent company had not been able to identify an act of dishonesty, serious misconduct or any illicit act, which the petitioners may have committed in connection with their work, except the allegation that petitioners filed false, malicious, and fabricated cases against the company which, under the Labor Code, is not a valid ground for termination of employment. There is even no mention of any company policy or rule violated by any of the petitioners to warrant their dismissal. The charges are clearly unfounded.

x x x x

          The superficial compliance with two notices and a hearing in this case cannot be considered valid where the notices to explain where issued four (4) days before the petitioners were terminated. The termination was obviously hurriedly effected, as the respondent failed to give the petitioners the avenue to contradict the charges against them either by submission of their answer or by the conduct of an actual investigation in order to give spirit to the requirement of due process.  Petitioners were thus robbed of their rights to explain their side, to present evidence and rebut what was presented against them, rights ensured by the proper observance of procedural due process.^[18][15]

Respondents promptly filed a motion for reconsideration. Similar to the NLRC, the CA reversed itself and retracted its earlier finding that the individual petitioners were illegally dismissed. In its Amended Decision^[19][16] dated March 16, 2010, the CA concluded that the two (2) notices issued by Kingspoint Express complied with the requirements of the law:

          In the assailed Decision, We conceded that all the petitioners were actually furnished with a letter dated 16 January 2006. In each letter, petitioners were individually charged with “dishonesty, serious misconduct, loss of confidence for performing acts inimical to the company by filing with the NLRC false, malicious and fabricated cases against the company and their refusal to undergo drug testing.” They were directed to submit an answer or explanation within forty-eight (48) hours and were even given the option to avail of a formal investigation with the assistance of counsel. They were further advised that failure to submit said answer/explanation would mean waiver on their part. Thus, when they failed to submit an explanation/Answer, and failed to inform their employer that they wanted a formal investigation on the matter, their employer was constrained to serve upon them on 20 January 2006, or four (4) days later, separate notices of termination stating the offenses they committed, viz.:

          x x x x

          Show-cause letters/memoranda create a burden on the employees to explain their innocence. In turn, it is from such explanation that the employer will be obliged to prove his case in an investigation. Since the petitioners did not explain, much less invoke their right to investigation, it follows that they are deemed to have waived their rights under Art. 277(b) of the Labor Code. Technically, the law on evidence considers them to have admitted the charges against them. With such admission, the employer is discharged from the need to prove the offenses charged. It is well-settled that in any forum, whether judicial or administrative, a party need not prove what is admitted.^[20][17] (Citations omitted)

        The CA also held that the individual petitioners performed acts, which constitute serious misconduct:

The assailed Decision admits what constitutes serious misconduct.

          Here, except for Bobby Dacara, each of the three petitioners conceded the existence of the following bases for their dismissal: (1) complainants’ refusal to undergo mandatory drug-testing; (2) creating disharmony and distrust among the workers and misleading them to go against the employer; and (3) losing cargo with a value of P250,000.00 entrusted to respondent company for door-to-door delivery.

          Verily, each of the aforestated grounds independently constitute[s] serious misconduct. Each of them were (sic) committed in relation to petitioners’ work. And again, the commission of said infractions constitutes a ground to dismiss under Art. 282(a) of the Code. The Court, therefore, gravely erred when it held that no serious misconduct was committed by petitioners in this case.

          On the other hand, in the case of Bobby Dacara, records show that he committed breach of trust and confidence by sneaking into the house of private respondent Co and engaging one of Co’s helpers in repeated sexual congress leading to her pregnancy. As held in Santos, Jr. vs. NLRC, such behavior amounts to immorality which is a case of serious misconduct; a just cause to dismiss an employee.^[21][18] (Citation omitted)

Petitioners moved for reconsideration but this was denied by the CA in its Resolution^[22][19] dated December 16, 2010.

        The lone issue for the disposition of this Court is the validity of the individual petitioners’ dismissal.

        It is fundamental that in order to validly dismiss an employee, the employer is required to observe both substantive and procedural due process – the termination of employment must be based on a just or authorized cause and the dismissal must be effected after due notice and hearing.^[23][20]

        As to whether Kingspoint Express complied with the substantive requirements of due process, this Court agrees with the CA that the concerned employees’ refusal to submit themselves to drug test is a just cause for their dismissal.

An employer may terminate an employment on the ground of serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work.  Willful disobedience requires the concurrence of two elements: (1) the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge. Both elements are present in this case.

As to the first element, that at no point did the dismissed employees deny Kingspoint Express’ claim that they refused to comply with the directive for them to submit to a drug test or, at the very least, explain their refusal gives rise to the impression that their non-compliance is deliberate. The utter lack of reason or justification for their insubordination indicates that it was prompted by mere obstinacy, hence, willful and warranting of dismissal.

It involves little difficulty to accuse Kingspoint Express of anti-unionism and allege that this was what motivated the dismissal of the petitioners, but the duty to prove such an accusation is altogether different. That the petitioners failed at the level of substantiation only goes to show that their claim of unfair labor practice is a mere subterfuge for their willful disobedience.

        As to the second element, no belabored and extensive discussion is necessary to recognize the relevance of the subject order in the performance of their functions as drivers of Kingspoint Express. As the NLRC correctly pointed out, drivers are indispensable to Kingspoint Express’ primary business of rendering door-to-door delivery services. It is common knowledge that the use of dangerous drugs has adverse effects on driving abilities that may render the dismissed employees incapable of performing their duties to Kingspoint Express and acting against its interests, in addition to the threat they pose to the public.

        The existence of a single just cause is enough to order their dismissal and it is now inconsequential if the other charges against them do not merit their dismissal from service. It is therefore unnecessary to discuss whether the other acts enumerated in the notices of termination issued by Kingspoint Express may be considered as any of the just causes.

        Nonetheless, while Kingspoint Express had reason to sever their employment relations, this Court finds its supposed observance of the requirements of procedural due process pretentious. While Kingspoint Express required the dismissed employees to explain their refusal to submit to a drug test, the two (2) days afforded to them to do so cannot qualify as “reasonable opportunity”, which the Court construed in King of Kings Transport, Inc. v. Mamac^[24][21] as a period of at least five (5) calendar days from receipt of the notice.

        Thus, even if Kingspoint Express’ defective attempt to comply with procedural due process does not negate the existence of a just cause for their dismissal, Kingspoint Express is still liable to indemnify the dismissed employees, with the exception of Panuelos, Dizon and Dimabayao, who did not appeal the dismissal of their complaints, with nominal damages in the amount of P30,000.00.

        WHEREFORE, premises considered, the Decision dated March 16, 2010 and Resolution dated December 16, 2010 of the Court of Appeals are AFFIRMED with MODIFICATION in that respondent Kingspoint Express and Logistic is hereby held liable for the payment of nominal damage, in the amount of P30,000.00 each to petitioners Bobby Dacara, Fernando Lupangco, Jr., Sandy Pazi, Camilo Tabarangao, Jr., Eduardo Hizole and Reginaldo Carillo, for non-observance of procedural due process required in terminating employment.

        SO ORDERED.

                                        BIENVENIDO L. REYES

                                                 Associate Justice   

WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

MARIA LOURDES P. A. SERENO

Associate Justice

A T T E S T A T I O N

        I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                ANTONIO T. CARPIO

                                Associate Justice

                                Chairperson, Second Division

C E R T I F I C A T I O N

        Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                RENATO C. CORONA

                                Chief Justice

CASE 2012-0060: PHILTRANCO SERVICE ENTERPRISES, INC. VS.      FELIX PARAS AND  INLAND TRAILWAYS, INC., AND HON. COURT OF APPEALS (G.R. No. 161909, 25 APRIL 2012, BERSAMIN, J.) SUBJECTS: MORAL DAMAGES; QUASI DELICT; THIRD PARTY COMPLAINT; TEMPERATE DAMAGES; ATTORNEY’S FEES;

=========================

DISPOSITIVE:

WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of the Court of Appeals promulgated on September 25, 2002, by ordering PHILTRANCO SERVICE ENTERPRISES, INC. and APOLINAR MIRALLES to pay, jointly and severally, as follows:

1. To Felix Paras:

(a) P1,397.95, as reimbursement for the costs of medicines purchased between February 1987 and July 1989;

(b) P50,000.00 as temperate damages;

(c) P50,000.00 as moral damages;

(d) P36,000.00 for lost earnings;

(e) 10% of the total of items (a) to (d) hereof as attorney’s fees; and

(f) Interest of 6% per annum from July 18, 1997 on the total of items (a) to (d) hereof until finality of this decision, and 12% per annum thereafter until full payment.

2. To Inland Trailways, Inc.:

(a)  P250,000.00 as temperate damages;

(b)    10% of item (a) hereof; and

(c)    Interest of 6% per annum on item (a) hereof from July 18, 1997 until finality of this decision, and 12% per annum thereafter until full payment.

3. The petitioner shall pay the costs of suit.

SO ORDERED.

=========================

Republic of thePhilippines

Supreme Court

BaguioCity

FIRST DIVISION

x—————————————————————————————–x

DECISION

BERSAMIN, J.:

In an action for breach of contract of carriage commenced by a passenger against his common carrier, the plaintiff can recover damages from a third-party defendant brought into the suit by the common carrier upon a claim based on tort or quasi-delict. The liability of the third-party defendant is independent from the liability of the common carrier to the passenger.

Philtranco Service Enterprises, Inc. (Philtranco) appeals the affirmance with modifications by the Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) awarding moral, actual and temperate damages, as well as attorney’s fees and costs of suit, to respondent Felix Paras (Paras), and temperate damages to respondent Inland Trailways, Inc. (Inland), respectively the plaintiff and the defendant/third-party plaintiff in this action for breach of contract of carriage, upon a finding that the negligence of the petitioner and its driver had caused the serious physical injuries Paras sustained and the material damage Inland’s bus suffered in a vehicular accident.

Antecedents

The antecedent facts, as summarized by the CA, are as follows:

Plaintiff-appellant [respondent] Felix Paras (Paras for brevity), who hails from Cainta, Rizal is engaged in the buy and sell of fish products.  Sometime on 08 February 1987, on his way home toManilafrom Bicol Region, he boarded a bus with Body No. 101 and Plate No. EVE 508, owned and operated by Inland Trailways, Inc. (Inland for brevity) and driven by its driver Calvin Coner (Coner for brevity).

At approximately 3:50 o’clock in the morning of 09 February 1987, while the said bus was travelling alongMaharlika Highway, Tiaong, Quezon, it was bumped at the rear by another bus with Plate No. EVB 259, owned and operated by Philtranco Service Enterprises, Inc. (Philtranco for brevity).  As a result of the strong and violent impact, the Inland bus was pushed forward and smashed into a cargo truck parked along the outer right portion of the highway and the shoulder thereof.  Consequently, the said accident bought considerable damage to the vehicles involved and caused physical injuries to the passengers and crew of the two buses, including the death of Coner who was the driver of the Inland Bus at the time of the incident.

Paras was not spared from the pernicious effects of the accident.  After an emergency treatment at theSan PabloMedicalCenter,San PabloCity, Laguna, Paras was taken to theNationalOrthopedicHospital.  At the latter hospital, he was found and diagnosed by Dr. Antonio Tanchuling, Jr. to be affected with the following injuries: a) contusion/hematoma; b) dislocation of hip upon fracture of the fibula on the right leg; c) fractured small bone on the right leg; and d) close fracture on the tibial plateau of the left leg. (Exh. “A”, p. 157, record)

On 04 March 1987 and 15 April 1987, Paras underwent two (2) operations affecting the fractured portions of his body. (Exhs. “A-2” and “A-3”, pp. 159 and 160 respectively, record)

Unable to obtain sufficient financial assistance from Inland for the costs of his operations, hospitalization, doctors’ fees and other miscellaneous expenses, on 31 July 1989, Paras filed a complaint for damages based on breach of contract of carriage against Inland.

In its answer, defendant Inland denied responsibility, by alleging, among others, that its driver Coner had observed an utmost and extraordinary care and diligence to ensure the safety of its passengers.  In support of its disclaimer of responsibility, Inland invoked the Police Investigation Report which established the fact that the Philtranco bus driver of [sic] Apolinar Miralles was the one which violently bumped the rear portion of the Inland bus, and therefore, the direct and proximate cause of Paras’ injuries.

On 02 March 1990, upon leave of court, Inland filed a third-party complaint against Philtranco and Apolinar Miralles (Third Party defendants).  In this third-party complaint, Inland, sought for exoneration of its liabilities to Paras, asserting that the latter’s cause of action should be directed against Philtranco considering that the accident was caused by Miralles’ lack of care, negligence and reckless imprudence. (pp. 50 to 56, records).

After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its judgment on July 18, 1997,^[1][1] viz:

WHEREFORE, third-party defendant Philtranco and Apolinar Miralles are hereby ordered to pay plaintiff jointly and severally, the following amounts:

1. P54,000.00 as actual damages;

1. P50,000.00 as moral damages;

1. P20,000.00 as attorney’s fees and costs.

SO ORDERED.

All the parties appealed to the CA on different grounds.

On his part, Paras ascribed the following errors to the RTC, to wit:

        1.  THE TRIAL COURT ERRED IN HOLDING THAT ONLY THIRD-PARTY DEFENDANT-APPELLANT PHILTRANCO IS LIABLE FOR THE DAMAGES SUFFERED BY APPELLANT PARAS.

          II. THE TRIAL COURT ERRED IN NOT HOLDING APPELLANT INLAND TRAILWAYS INC. TO BE JOINTLY AND SEVERALLY LIABLE FOR THE DAMAGES SUFFERED BY PARAS.

          III. THE TRIAL COURT ERRED IN NOT AWARDING UNEARNED INCOME AS ADDITIONAL ACTUAL DAMAGES SUFFERED BY APPELLANT PARAS AS HIS PHYSICAL DISABILITY IS PERMANENT IN NATURE.

          IV. THE TRIAL COURT ERRED IN NOT AWARDING EXEMPLARY DAMAGES IN FAVOR OF APPELLANT PARAS.

On the other hand, Inland assigned the following errors to the RTC, namely:

THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD DAMAGES UNTO THE THIRD PARTY PLAINTIFF NOTWITHSTANDING CLEAR FINDING THAT:

          ‘It is clear from the evidence that the plaintiff sustained injuries because of the reckless, negligence, and lack of precaution of third party defendant Apolinar Miralles, an employee of Philtranco.’

AND, COMPLETELY DISREGARDED THE UNCONTROVERTED ORAL  AND DOCUMENTARY EVIDENCES ESTABLISHING THE EXTENT AND DEGREE OF DAMAGES SUSTAINED BY THE THIRD PARTY PLAINTIFF.

Lastly, Philtranco stated that the RTC erred thuswise:

I

THE COURT A QUO MISERABLY ERRED IN AWARDING ACTUAL DAMAGES GREATER THAN WHAT WAS ALLEGED IN THE COMPLAINT ITSELF, AND EVEN MUCH MORE GREATER THAN WHAT WERE PROVED DURING THE TRIAL, HENCE, PERPETUATING UNJUST ENRICHMENT.

II

THE COURT A QUO SERIOUSLY ERRED IN AWARDING MORAL DAMAGES TO A CAUSE OF ACTION OF CULPA-CONTRACTUAL EVEN WITHOUT ANY EVIDENCE OF GROSS BAD FAITH; HENCE, CONTRARY TO THE ESTABLISHED DOCTRINE IN THE CASES OF PHIL. RABBIT BUS LINES VS. ESGUERRA; SOBERANO VS. BENGUET AUTO LINE ANDFLORESVS. MIRANDA.

III

THE COURT A QUO MISERABLY ERRED IN HOLDING THAT MIRALLES WAS THE ONE AT FAULT MERELY ON THE STRENGHT OF THE TESTIMONY OF THE POLICE INVESTIGATOR WHICH IS IN TURN BASED ON THE STATEMENTS OF ALLEGED WITNESSES WHO WERE NEVER PRESENTED ON THE WITNESS STAND.

IV

THE COURT A QUO COMMITTED A GRIEVOUS ERROR IN DISREGARDING THE TESTIMONY OF APPELLANTS’ WITNESSES WHO TESTIFIED AS TO THE DEFENSE OF EXERCISE OF DUE DILIGENCE IN THE SELECTION AND SUPERVISION OF EMPLOYEES PURSUANT TO ART. 2180, LAST PARAGRAPH, NEW CIVIL CODE.

On September 25, 2002, the CA promulgated its decision,^[2][2] disposing:

WHEREFORE, in consideration of the foregoing premises, the assailed decision dated 18 July 19(9)7 is perforce affirmed with the following modifications:

1. Third party defendants-appellants Philtranco and Apolinar Miralles are ordered to pay plaintiff-appellant Felix Paras jointly and severally the following amounts:

a)           P1,397.95 as actual damages;

b)           P50,000.00 as temperate damages;

c)            P50,000.00 as moral damages; and

d)           P20,000.00 as attorney’s fees and costs of suit.

2. On the third party plaintiff-appellant Inland’s claims, the third party defendant-appellants Philtranco and Apolinar Miralles are hereby ordered to pay the former (Inland) jointly and severally the amount of P250,000.00 as and by way of temperate damages.

SO ORDERED.

The CA agreed with the RTC’s finding that no trace of negligence at the time of the accident was attributable to Inland’s driver, rendering Inland not guilty of breach of contract of carriage; that faulty brakes had caused Philtranco’s bus to forcefully bump Inland’s bus from behind, making it hit the rear portion of a parked cargo truck; that the impact had resulted in considerable material damage to the three vehicles; and that Paras and others had sustained various physical injuries.

Accordingly, the CA:– (a) sustained the award of moral damages of P50,000.00 in favor of Paras pursuant to Article 2219 of the Civil Code based on quasi-delict committed by Philtranco and its driver; (b) reduced the actual damages to be paid by Philtranco to Paras from P54,000.00 to P1,397.95 because only the latter amount had been duly supported by receipts; (c) granted temperate damages of P50,000.00 (in lieu of actual damages in view of the absence of competent proof of actual damages for his hospitalization and therapy) to be paid by Philtranco to Paras; and (d) awarded temperate damages of P250,000.00 under the same premise to be paid by Philtranco to Inland for the material damage caused to Inland’s bus. 

Philtranco moved for reconsideration,^[3][3] but the CA denied its motion for reconsideration on January 21, 2004.^[4][4]

Issues

Hence, this appeal, in which the petitioner submits that the CA committed grave abuse of discretion amounting to lack of jurisdiction in awarding moral damages to Paras despite the fact that the complaint had been anchored on breach of contract of carriage; and that the CA committed a reversible error in substituting its own judgment by motu proprio awarding temperate damages of P250,000.00 to Inland and P50,000.00 to Paras despite the clear fact that temperate damages were not raised on appeal by Paras and Inland.

Ruling

The appeal lacks merit.

        The Court does not disturb the unanimous findings by the CA and the RTC on the negligence of Philtranco and its driver being the direct cause of the physical injuries of Paras and the material damage of Inland.

Nonetheless, we feel bound to pass upon the disparate results the CA and the RTC reached on the liabilities of Philtranco and its driver.

1.

Paras can recover moral damages

in this suit based on quasi-delict

Philtranco contends that Paras could not recover moral damages because his suit was based on breach of contract of carriage, pursuant to  which moral damages could be recovered only if he had died, or if the common carrier had been guilty of fraud or bad faith. It argues that Paras had suffered only physical injuries; that he had not adduced evidence of fraud or bad faith on the part of the common carrier; and that, consequently, Paras could not recover moral damages directly from it (Philtranco), considering that it was only being subrogated for Inland.

The Court cannot uphold the petitioner’s contention.

As a general rule, indeed, moral damages are not recoverable in an action predicated on a breach of contract. This is because such action is not included in Article 2219 of the Civil Code^[5][5] as one of the actions in which moral damages may be recovered. By way of exception, moral damages are recoverable in an action predicated on a breach of contract: (a) where the mishap results in the death of a passenger, as provided in Article 1764,^[6][6] in relation to Article 2206, (3),^[7][7] of the Civil Code; and (b) where the common carrier has been guilty of fraud or bad faith,^[8][8] as provided in Article 2220^[9][9] of the Civil Code.

Although this action does not fall under either of the exceptions, the award of moral damages to Paras was nonetheless proper and valid. There is no question that Inland filed its third-party complaint against Philtranco and its driver in order to establish in this action that they, instead of Inland, should be directly liable to Paras for the physical injuries he had sustained because of their negligence. To be precise, Philtranco and its driver were brought into the action on the theory of liability that the proximate cause of the collision between Inland’s bus and Philtranco’s bus had been “the negligent, reckless and imprudent manner defendant Apolinar Miralles drove and operated his driven unit, the Philtranco Bus with Plate No. 259, owned and operated by third-party defendant Philtranco Service Enterprises, Inc.”^[10][10]  The apparent objective of Inland was not to merely subrogate the third-party defendants for itself, as Philtranco appears to suggest,^[11][11] but, rather, to obtain a different relief whereby the third-party defendants would be held directly, fully and solely liable to Paras and Inland for whatever damages each had suffered from the negligence committed by Philtranco and its driver. In other words, Philtranco and its driver were charged here as joint tortfeasors who would be jointly and severally be liable to Paras and Inland.

        Impleading Philtranco and its driver through the third-party complaint filed on March 2, 1990 was correct. The device of the third-party action, also known as impleader, was in accord with Section 12, Rule 6 of the Revised Rules of Court, the rule then applicable, viz:

Section 12. Third-party complaint. – A third-party complaint is a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponent’s claim.^[12][12]

Explaining the application of Section 12, Rule 6, supra, the Court said in Balbastro v. Court of Appeals,^[13][13] to wit:

Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to bring into a lawsuit any person “not a party to the action . . . for contribution, indemnity, subrogation or any other relief in respect of his opponent’s claim.” From its explicit language it does not compel the defendant to bring the third-parties into the litigation, rather it simply permits the inclusion of anyone who meets the standard set forth in the rule. The secondary or derivative liability of the third-party is central — whether the basis is indemnity, subrogation, contribution, express or implied warranty or some other theory. The impleader of new parties under this rule is proper only when a right to relief exists under the applicable substantive law. This rule is merely a procedural mechanism, and cannot be utilized unless there is some substantive basis under applicable law.

Apart from the requirement that the third-party complainant should assert a derivative or secondary claim for relief from the third-party defendant there are other limitations on said party’s ability to implead. The rule requires that the third-party defendant is “not a party to the action” for otherwise the proper procedure for asserting a claim against one who is already a party to the suit is by means of counterclaim or cross-claim under sections 6 and 7 of Rule 6. In addition to the aforecited requirement, the claim against the third-party defendant must be based upon plaintiff’s claim against the original defendant (third-party claimant). The crucial characteristic of a claim under section 12 of Rule 6, is that the original “defendant is attempting to transfer to the third-party defendant the liability asserted against him by the original plaintiff.”

Accordingly, the requisites for a third-party action are, firstly, that the party to be impleaded must not yet be a party to the action; secondly, that the claim against the third-party defendant must belong to the original defendant; thirdly, the claim of the original defendant against the third-party defendant must be based upon the plaintiff’s claim against the original defendant; and, fourthly, the defendant is attempting to transfer to the third-party defendant the liability asserted against him by the original plaintiff.^[14][14]

As the foregoing indicates, the claim that the third-party complaint asserts against the third-party defendant must be predicated on substantive law. Here, the substantive law on which the right of Inland to seek such other relief through its third-party complaint rested were Article 2176 and Article 2180 of the Civil Code, which read:

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this chapter. (1902a)

Article 2180. The obligation imposed by article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible.

xxx

          Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

xxx

          The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. (1903a)

        Paras’ cause of action against Inland (breach of contract of carriage) did not need to be the same as the cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the impleader. It is settled that a defendant in a contract action may join as third-party defendants those who may be liable to him in tort for the plaintiff’s claim against him, or even directly to the plaintiff.^[15][15] Indeed, Prof. Wright, et al., commenting on the provision of the Federal Rules of Procedure of the United States from which Section 12, supra, was derived, observed so, to wit:^[16][16]

The third-party claim need not be based on the same theory as the main claim. For example, there are cases in which the third-party claim is based on an express indemnity contract and the original complaint is framed in terms of negligence. Similarly, there need not be any legal relationship between the third-party defendant and any of the other parties to the action. Impleader also is proper even though the third party’s liability is contingent, and technically does not come into existence until the original defendant’s liability has been established. In addition, the words ‘is or may be liable’ in Rule 14(a) make it clear that impleader is proper even though the third-party defendant’s liability is not automatically established once the third-party plaintiff’s liability to the original plaintiff has been determined.

Nor was it a pre-requisite for attachment of the liability to Philtranco and its driver that Inland be first declared and found liable to Paras for the breach of its contract of carriage with him.^[17][17] As the Court has cogently discoursed in Samala v. Judge Victor:^[18][18]

Appellants argue that since plaintiffs filed a complaint for damages against the defendants on a breach of contract of carriage, they cannot recover from the third-party defendants on a cause of action based on quasi-delict. The third party defendants, they allege, are never parties liable with respect to plaintiff s claim although they are with respect to the defendants for indemnification, subrogation, contribution or other reliefs. Consequently, they are not directly liable to the plaintiffs. Their liability commences only when the defendants are adjudged liable and not when they are absolved from liability as in the case at bar.

Quite apparent from these arguments is the misconception entertained by appellants with respect to the nature and office of a third party complaint.

Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a “claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnification, subrogation, or any other relief, in respect of his opponent’s claim.” In the case of Viluan vs. Court of Appeals, et al., 16 SCRA 742 [1966], this Court had occasion to elucidate on the subjects covered by this Rule, thus:

… As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity & Guaranty Co., 52 F. Supp. 177 (1943:)

‘From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like the admiralty rule, ‘covers two distinct subjects, the addition of parties defendant to the main cause of action, and the bringing in of a third party for a defendant’s remedy over’. xxx

‘If the third party complaint alleges facts showing a third party’s direct liability to plaintiff on the claim set out in plaintiff’s petition, then third party ‘shall’ make his defenses as provided in Rule 12 and his counterclaims against plaintiff as provided in Rule 13. In the case of alleged direct liability, no amendment (to the complaint) is necessary or required. The subject-matter of the claim is contained in plaintiff’s complaint, the ground of third party’s liability on that claim is alleged in third party complaint, and third party’s defense to set up in his answer to plaintiff’s complaint. At that point and without amendment, the plaintiff and third party are at issue as to their rights respecting the claim.

The provision in the rule that, ‘The third-party defendant may assert any defense which the third-party plaintiff may assert to the plaintiffs claim,’ applies to the other subject, namely, the alleged liability of third party defendant. The next sentence in the rule, ‘The third-party defendant is bound by the adjudication of the third party plaintiffs liability to the plaintiff, as well as of his own to the plaintiff or to the third-party plaintiff applies to both subjects. If third party is brought in as liable only to defendant and judgment is rendered adjudicating plaintiff’s right to recover against defendant and defendant’s rights to recover against third party, he is bound by both adjudications.That part of the sentence refers to the second subject. If third party is brought in as liable to plaintiff, then third party is bound by the adjudication as between him and plaintiff. That refers to the first subject. If third party is brought in as liable to plaintiff and also over to defendant, then third party is bound by both adjudications. xxx

Under this Rule, a person not a party to an action may be impleaded by the defendant either (a) on an allegation of liability to the latter; (b) on the ground of direct liability to the plaintiff-; or, (c) both (a) and (b). The situation in (a) is covered by the phrase “for contribution, indemnity or subrogation;” while (b) and (c) are subsumed under the catch all “or any other relief, in respect of his opponent’s claim.”

The case at bar is one in which the third party defendants are brought into the action as directly liable to the plaintiffs upon the allegation that “the primary and immediate cause as shown by the police investigation of said vehicular collision between (sic) the above-mentioned three vehicles was the recklessness and negligence and lack of imprudence (sic) of the third-party defendant Virgilio (should be Leonardo) Esguerra y Ledesma then driver of the passenger bus.” The effects are that “plaintiff and third party are at issue as to their rights respecting the claim” and “the third party is bound by the adjudication as between him and plaintiff.” It is not indispensable in the premises that the defendant be first adjudged liable to plaintiff before the third-party defendant may be held liable to the plaintiff, as precisely, the theory of defendant is that it is the third party defendant, and not he, who is directly liable to plaintiff. The situation contemplated by appellants would properly pertain to situation (a) above wherein the third party defendant is being sued for contribution, indemnity or subrogation, or simply stated, for a defendant’s “remedy over”.^[19][19]

It is worth adding that allowing the recovery of damages by Paras based on quasi-delict, despite his complaint being upon contractual breach, served the judicial policy of avoiding multiplicity of suits and circuity of actions by disposing of the entire subject matter in a single litigation.^[20][20] 

2.

Award of temperate damages was in order

        Philtranco assails the award of temperate damages by the CA considering that, firstly, Paras and Inland had not raised the matter in the trial court and in their respective appeals; secondly, the CA could not substitute the temperate damages granted to Paras if Paras could not properly establish his actual damages despite evidence of his actual expenses being easily available to him; and, thirdly, the CA gravely abused its discretion in granting motu proprio the temperate damages of P250,000.00 to Inland although Inland had not claimed temperate damages in its pleading or during trial and even on appeal.

        The Court cannot side with Philtranco.

        Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved with a reasonable degree of certainty. The reason is that the court “cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages,” but “there must be competent proof of the actual amount of loss, credence can be given only to claims which are duly supported by receipts.”^[21][21]

The receipts formally submitted and offered by Paras were limited to the costs of medicines purchased on various times in the period from February 1987 to July 1989 (Exhibits E to E-35, inclusive) totaling only P1,397.95.^[22][22] The receipts by no means included hospital and medical expenses, or the costs of at least two surgeries as well as rehabilitative therapy. Consequently, the CA fixed actual damages only at that small sum of P1,397.95. On its part, Inland offered no definite proof on the repairs done on its vehicle, or the extent of the material damage except the testimony of its witness, Emerlinda  Maravilla, to the effect that the bus had been damaged beyond economic repair.^[23][23]  The CA rejected Inland’s showing of unrealized income worth P3,945,858.50 for 30 months (based on alleged average weekly income of P239,143.02 multiplied by its guaranteed revenue amounting to 55% thereof, then spread over a period of 30 months, the equivalent to the remaining 40% of the vehicle’s un-depreciated or net book value), finding such showing arbitrary, uncertain and speculative.^[24][24]  As a result, the CA allowed no compensation to Inland for unrealized income.

Nonetheless, the CA was convinced that Paras should not suffer from the lack of definite proof of his actual expenses for the surgeries and rehabilitative therapy; and that Inland should not be deprived of recourse to recover its loss of the economic value of its damaged vehicle.  As the records indicated, Paras was first rushed for emergency treatment to the San Pablo Medical Center in San Pablo City, Laguna, and was later brought to the National Orthopedic Hospital in Quezon City where he was diagnosed to have suffered a dislocated hip, fracture of the fibula on the right leg, fracture of the small bone of the right leg, and closed fracture on the tibial plateau of the left leg. He underwent surgeries on March 4, 1987 and April 15, 1987 to repair the fractures.^[25][25] Thus, the CA awarded to him temperate damages of  P50,000.00 in the absence of definite proof of his actual expenses towards that end. As to Inland, Maravilla’s testimony of the bus having been damaged beyond economic repair showed a definitely substantial pecuniary loss, for which the CA fixed temperate damages of P250,000.00. We cannot disturb the CA’s determination, for we are in no position today to judge its reasonableness on account of the lapse of a long time from when the accident occurred.^[26][26]

In awarding temperate damages in lieu of actual damages, the CA did not err, because Paras and Inland were definitely shown to have sustained substantial pecuniary losses. It would really be a travesty of justice were the CA now to be held bereft of the discretion to calculate moderate or temperate damages, and thereby leave Paras and Inland without redress from the wrongful act of Philtranco and its driver.^[27][27] We are satisfied that the CA exerted effort and practiced great care to ensure that the causal link between the physical injuries of Paras and the material loss of Inland, on the one hand, and the negligence of Philtranco and its driver, on the other hand, existed in fact. It also rejected arbitrary or speculative proof of loss. Clearly, the costs of Paras’ surgeries and consequential rehabilitation, as well as the fact that repairing Inland’s vehicle would no longer be economical justly warranted the CA to calculate temperate damages of P50,000.00 and P250,000.00 respectively for Paras and Inland.

There is no question that Article 2224 of the Civil Code expressly authorizes the courts to award temperate damages despite the lack of certain proof of actual damages, to wit:

Article 2224. 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 cannot, from the nature of the case, be proved with certainty.

The rationale for Article 2224 has been stated in Premiere Development Bank v. Court of Appeals^[28][28] in the following manner:

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:

In some States of the American Union, temperate damages are allowed. There are cases where from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. For instance, injury to one’s commercial credit or to the goodwill of a business firm is often hard to show with certainty in terms of money. Should damages be denied for that reason? The judge should be empowered to calculate moderate damages in such cases, rather than that the plaintiff should suffer, without redress from the defendant’s wrongful act.

3.

Paras’ loss of earning capacity

must be compensated

In the body of its decision, the CA concluded that considering that Paras had a minimum monthly income of P8,000.00 as a trader he was entitled to recover compensation for unearned income during the 3-month period of his hospital confinement and the 6-month period of his recovery and rehabilitation; and aggregated his unearned income for those periods to P72,000.00.^[29][29] Yet, the CA omitted the unearned income from the dispositive portion.

The omission should be rectified, for there was credible proof of Paras’ loss of income during his disability. According to Article 2205, (1), of the Civil Code, damages may be recovered for loss or impairment of earning capacity in cases of temporary or permanent personal injury. Indeed, indemnification for damages comprehends not only the loss suffered (actual damages or damnum emergens) but also the claimant’s lost profits (compensatory damages or lucrum cessans).^[30][30]  Even so, the formula that has gained acceptance over time has limited recovery to net earning capacity; hence, the entire amount of P72,000.00 is not allowable. The premise is obviously that net earning capacity is the person’s capacity to acquire money, less the necessary expense for his own living.^[31][31] To simplify the determination, therefore, the net earning capacity of Paras during the 9-month period of his confinement, surgeries and consequential therapy is pegged at only half of his unearned monthly gross income of P8,000.00 as a trader, or a total of P36,000.00 for the 9-month period, the other half being treated as the necessary expense for his own living in that period.

It is relevant to clarify that awarding the temperate damages (for the substantial pecuniary losses corresponding to Paras’s surgeries and rehabilitation and for the irreparability of Inland’s damaged bus) and the actual damages to compensate lost earnings and costs of medicines give rise to no incompatibility. These damages cover distinct pecuniary losses suffered by Paras and Inland,^[32][32] and do not infringe the statutory prohibition against recovering damages twice for the same act or omission.^[33][33]

4.

Increase in award of attorney’s fees

        Although it is a sound policy not to set a premium on the right to litigate,^[34][34] we consider the grant to Paras and Inland of reasonable attorney’s fees warranted.  Their entitlement to attorney’s fees was by virtue of their having been compelled to litigate or to incur expenses to protect their interests,^[35][35] as well as by virtue of the Court now further deeming attorney’s fees to be just and equitable.^[36][36]

        In view of the lapse of a long time in the prosecution of the claim,^[37][37] the Court considers it reasonable and proper to grant attorney’s fees to each of Paras and Inland equivalent to 10% of the total amounts hereby awarded to them, in lieu of only P20,000.00 for that purpose granted to Paras. 

5.

Legal interest on the amounts awarded

        Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,^[38][38] legal interest at the rate of 6% per annum accrues on the amounts adjudged reckoned from July 18, 1997, the date when the RTC rendered its judgment; and legal interest at the rate of 12% per annum shall be imposed from the finality of the judgment until its full satisfaction, the interim period being regarded as the equivalent of a forbearance of credit.

WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of the Court of Appeals promulgated on September 25, 2002, by ordering PHILTRANCO SERVICE ENTERPRISES, INC. and APOLINAR MIRALLES to pay, jointly and severally, as follows:

1. To Felix Paras:

(a) P1,397.95, as reimbursement for the costs of medicines purchased between February 1987 and July 1989;

(b) P50,000.00 as temperate damages;

(c) P50,000.00 as moral damages;

(d) P36,000.00 for lost earnings;

(e) 10% of the total of items (a) to (d) hereof as attorney’s fees; and

(f) Interest of 6% per annum from July 18, 1997 on the total of items (a) to (d) hereof until finality of this decision, and 12% per annum thereafter until full payment.

2. To Inland Trailways, Inc.:

(d)  P250,000.00 as temperate damages;

(e)    10% of item (a) hereof; and

(f)     Interest of 6% per annum on item (a) hereof from July 18, 1997 until finality of this decision, and 12% per annum thereafter until full payment.

3. The petitioner shall pay the costs of suit.

SO ORDERED.

                                                          LUCAS P. BERSAMIN

                                                               Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

TERESITA J. LEONARDO-DE CASTRO    MARIANO C. DEL CASTILLO

                   Associate Justice                                     Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

        Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                         RENATO C. CORONA

                                                                   Chief Justice