Express vs. Implied Agency

Agency by Estoppel

Art. 1911. The principal is solidarily liable with the agent even when the latter has exceeded his authority, if the principal allowed him to act as though he had full powers. 

What is an agency by estoppel?

When a person, who is not really an agent, represents himself or is represented as such.

There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another. 

1.) Estoppel of Agent – One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in which he is engaged.

2.) Estoppel of Principal –

a.) As to Agent – One who knows that another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other.

b.) As to sub-agent – To estop the principal from denying his liability to a third person, he must have known or be charged with knowledge of the fact of the transmission and the terms of the agreement between the agent and sub-agent.

c.) As to third persons – One who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency.

3.) Estoppel of tirrd Persons – A third person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or third persons in interest.

4.) Estoppel of the government – The government is neither estopped by the mistake or error on the part of its agents. But it may be estopped through affirmative acts of its officers acting within the scope of their authority.

Jurisprudence:

Requisites for an agency by estoppel to exist

Article 1911, on the other hand, is based on the principle of estoppel, which is necessary for the protection of third persons. It states that the principal is solidarily liable with the agent even when the latter has exceeded his authority, if the principal allowed him to act as though he had full powers. However, for an agency by estoppel to exist, the following must be established:

1.  The principal manifested a representation of the agents authority or knowingly allowed the agent to assume such authority;

2.   The third person, in good faith, relied upon such representation; and

3.  Relying upon such representation, such third person has changed his position to his detriment.

In Litonjua, Jr. v. Eternit Corp., this Court said that [a]n agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance. (Country Bankers Insurance Corporation vs Keppel Cebu Shipyard, G.R. No. 166044, June 18, 2012)

General vs. Special Agency

Agency Requiring Special Power of Attorney

Special powers of attorney are necessary in the following cases:

(1) To make such payments as are not usually considered as acts of administration;

(2) To effect novations which put an end to obligations already in existence at the time the agency was constituted;

(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;

(4) To waive any obligation gratuitously;

(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;

(6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent;

(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration;

(8) To lease any real property to another person for more than one year;

(9) To bind the principal to render some service without compensation;

(10) To bind the principal in a contract of partnership;

(11) To obligate the principal as a guarantor or surety;

(12) To create or convey real rights over immovable property;

(13) To accept or repudiate an inheritance;

(14) To ratify or recognize obligations contracted before the agency;

(15) Any other act of strict dominion. (Art. 1878, CC)

May an agent specifically authorized to sell a property empowered to mortgage said property?

No, the agent is not empowered to mortgage the property. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (Art. 1879, CC) If the agent mortgage the property, the contract is unenforceable. 

May an agent specifically authorized to compromise submit to arbitration?

No. A special power to compromise does not authorize submission to arbitration. (Art. 1880, CC)

Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latter’s judgment and discretion to protect the former’s rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal.

What happens if the agent is specifically authorized to submit to arbitration?

Then the arbitration award binds the principal, provided that the agent acted within the scope of his authority.

Jurisprudence:

● The right to commence action for collection of debts owing to principal is not an incident of strict ownership, which must be conferred upon express terms. (Germann & Co vs. Donaldson, G.R. No. L-439, November 11, 1901)

The power to legally compel the payment of debts owing to the principal is an express grant of the right to bring suit for the collection of such debts. (Germann & Co vs. Donaldson, G.R. No. L-439, November 11, 1901)

● Unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying the agency into effect. (Macke vs. Camps, G.R. No. 2962, February 27, 1907)

● A power of attorney “to loan and borrow money” and to mortgage the principal’s property does not carry with it or imply that that the agent has a legal right to make the principal liable for the personal debts of the agent. (BPI vs De Coster, G.R. Nos. 25642 & 25643. November 12, 1926)

● Although the Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. (Dungo vs Lopena, G.R. No. L-18377, December 29, 1962)

● Special power of the attorney to mortgage real estate is limited to such authority and does not bind the grantor  personally to other obligations contracted by the grantee. (PNB vs. Sta. Maria, G.R. No. L-24765, August 29, 1969)

● There was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent or attorney in fact the power to sell the subject property. The special power of attorney can be included in the general power when it is specified therein the act or transaction for which the special power is required. (Bravo-Guerrero vs Bravo, G.R. No. 152658, July 29, 2005)

Agency by Operation of Law

1.) The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (Art. 1881, CC)

2.) The limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (Art. 1882, CC)

3.) The agent must finish the business already begun on the death of the principal, should delay entail any danger. (Art. 1884, CC)

4.) In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods. (Art. 1885, CC)

5.) The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (Art. 1929, CC)

6.) The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. (Art. 1930, CC)

7.) Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. (Art. 1931, CC)

8.) If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. (Art. 1932, CC)

Rights and Obligations of the Agent

Rights and Obligations of the Principal

Modes of Extinguishment of Agency

1. Expiration of the period for which the agency was constituted

● When the agency was created for a specific period of time, and the period has expired, it is automatically terminated.

● When an agency is created for a fixed period, the expiration of such period ends the agency, even though the purpose for which the agency was created has not been accomplished.

● If there is a period stipulated in the agency contract, the principal may still revoke the agent’s authority at will; but principal will be liable for damages. (Dialosa v CA)

2. Death, civil interdiction, insanity, insolvency

3. Withdrawal of the Agent

The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (Art. 1929, CC). This is to prevent damage or prejudice to the principal.

4. Accomplishment of the object or purpose of the agency

5. Revocation

6. Dissolution of the firm or corporation which entrusted or accepted the agency

Dissolution of a corporation extinguishes its juridical existence.

Irrevocable Agency

What are the exceptions to the rule that agency is revocable at will by the principal?

Agency is not revocable at will in the following cases:

1. If a bilateral contract depends upon it;

2. If it is the means of fulfilling an obligation already contracted;

3. If a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable;

4. If it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. (Art. 1927, 1930, CC)

If an agency is coupled with an interest, does this mean that the principal can never ever revoke it?

No. He can still revoke in extreme situations, e.g.:

1.) The authority can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal. of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal. (Coleongco vs. Claparols, G.R. No. L-18616, March 31, 1964)

2.) When the interest is already terminated.

Jurisprudence:

● Powers of attorney falling under Art. 1927 cannot be revoked at the pleasure of the principal, but may be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal. (Coleongco vs. Claparols, G.R. No. L-18616, March 31, 1964)

● A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does such interest consist must be stated in the power of attorney. (Del Rosario vs. Abad, G.R. No. L-10881, September 30, 1958)

Compromise

What is a contract of compromise?

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. (Art. 2028, Civil Code)

What are void compromises?

No compromise upon the following questions shall be valid:

(1) The civil status of persons;

(2) The validity of a marriage or a legal separation;

(3) Any ground for legal separation;

(4) Future support;

(5) The jurisdiction of courts;

(6) Future legitime. (Art. 2035, Civil Code)

What is the effect of a compromise?

A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise. (Art. 2037, Civil Code)

What is the remedy if one of the parties fails or refuses to abide by the compromise?

If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand. (Art. 2041, Civil Code)

Jurisprudence:

● Judicial vs. extrajudicial compromise

Under Article 2028 of the Civil Code, a compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. Accordingly, a compromise is either judicial, if the objective is to put an end to a pending litigation, or extrajudicial, if the objective is to avoid a litigation. As a contract, a compromise is perfected by mutual consent. However, a judicial compromise, while immediately binding between the parties upon its execution, is not executory until it is approved by the court and reduced to a judgment. The validity of a compromise is dependent upon its compliance with the requisites and principles of contracts dictated by law. Also, the terms and conditions of a compromise must not be contrary to law, morals, good customs, public policy and public order. (Land Bank of the Philippines vs. Heirs of Spouses Jorja Rigor Soriano and Magin Soriano, G.R. No. 178312. January 30, 2013)

●  Compromise agreement has the force of law and is conclusive between the parties

We have time and again ruled that a compromise agreement, when not contrary to law, public order, public policy, morals, or good customs, is a valid contract which is the law between the parties. It is a contract perfected by mere consent, whereby the parties, making reciprocal concessions, avoid litigation or put an end to one already commenced.  It has the force of law and is conclusive between the parties, and courts will not relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be unwise. (Cachopero vs. Celestial, G.R. No. 146754, March 21, 2012 citing Air Transportation Office v. Gopuco, Jr., 501 Phil. 228 (2005)

●  A decision on a compromise agreement is final and executory

Prevailing case law provides that a compromise once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery. Hence, a decision on a compromise agreement is final and executory.  Such agreement has the force of law and is conclusive on the parties. It transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a judgment that is subject to execution in accordance with the Rules. Judges therefore have the ministerial and mandatory duty to implement and enforce it. Hence, compromise agreements duly approved by the courts are considered the decisions in the particular cases they involve. (Cachopero vs. Celestial, G.R. No. 146754, March 21, 2012 citing PNOC-EDC) v. Abella, G.R. No. 153904, January 17, 2005, 448 SCRA 549

● A compromise agreement must comply with the requisites in Article 1318

It must be emphasized, though, that like any other contract, a compromise agreement must comply with the requisites in Article 1318 of the Civil Code, to wit:  (a) consent of the contracting parties; (b) object certain that is the subject matter of the contract; and (c) cause of the obligation that is established.  And, like any other contract, the terms and conditions of a compromise agreement must not be contrary to law, morals, good customs, public policy and public order.  Any compromise agreement that is contrary to law or public policy is null and void, and vests no rights in and holds no obligation for any party.  It produces no legal effect at all. (Uy vs. Chua, G.R. 183965, September 18, 2009. 600 SCRA, 806)

● Status and filiation of a child cannot be compromised

The status and filiation of a child cannot be compromised.  Public policy demands that there be no compromise on the status and filiation of a child.  Paternity and filiation or the lack of the same, is a relationship that must be judicially established, and it is for the Court to declare its existence or absence. It cannot be left to the will or agreement of the parties. (Uy vs. Chua, G.R. 183965, September 18, 2009. 600 SCRA, 806)

●  Future support cannot be the subject of compromise

It appears that the former dismissal was predicated upon a compromise. Acknowledgment, affecting as it does the civil status of persons and future support, cannot be the subject of compromise. Hence, the first dismissal cannot have force and effect and can not bar the filing of another action, asking for the same relief against the same defendant. Conformably, notwithstanding the dismissal of Civil Case 88-935 and the lower courts pronouncement that such dismissal was with prejudice, the second action for support may still prosper. (De Asis vs. Andres, G.R. No. 127578, February 15, 1999)

● Two-tiered mode of enforcement of an amicable settlement

It is true that an amicable settlement reached at the barangay conciliation proceedings, like the Kasunduang Pag-aayos in this case, is binding between the contracting parties and, upon its perfection, is immediately executory insofar as it is not contrary to law, good morals, good customs, public order and public policy.

Being a by-product of mutual concessions and good faith of the parties, an amicable settlement has the force and effect of res judicata even if not judicially approved. It transcends being a mere contract binding only upon the parties thereto, and is akin to a judgment that is subject to execution in accordance with the Rules. Thus, under Section 417 of the Local Government Code, such amicable settlement or arbitration award may be enforced by execution by the Barangay Lupon within six (6) months from the date of settlement, or by filing an action to enforce such settlement in the appropriate city or municipal court, if beyond the six-month period.

Under the first remedy, the proceedings are covered by the Local Government Code and the Katarungang Pambarangay Implementing Rules and Regulations. The Punong Barangay is called upon during the hearing to determine solely the fact of non-compliance of the terms of the settlement and to give the defaulting party another chance at voluntarily complying with his obligation under the settlement. Under the second remedy, the proceedings are governed by the Rules of Court, as amended. The cause of action is the amicable settlement itself, which, by operation of law, has the force and effect of a final judgment.

It must be emphasized, however, that enforcement by execution of the amicable settlement, either under the first or the second remedy, is only applicable if the contracting parties have not repudiated such settlement within ten (10) days from the date thereof in accordance with Section 416 of the Local Government Code. If the amicable settlement is repudiated by one party, either expressly or impliedly, the other party has two options, namely, to enforce the compromise in accordance with the Local Government Code or Rules of Court as the case may be, or to consider it rescinded and insist upon his original demand. This is in accord with Article 2041 of the Civil Code, which qualifies the broad application of Article 2037. (Miguel vs. Montanez, G.R. No. 191336, January 25, 2012)

● No action for rescission is required

Article 2041 does not require an action for rescission, and the aggrieved party, by the breach of compromise agreement, may just consider it already rescinded. The language of this Article 2041, particularly when contrasted with that of Article 2039, denotes that no action for rescission is required in said Article 2041, and that the party aggrieved by the breach of a compromise agreement may, if he chooses, bring the suit contemplated or involved in his original demand, as if there had never been any compromise agreement, without bringing an action for rescission thereof. He need not seek a judicial declaration of rescission, for he may "regard" the compromise agreement already "rescinded(Miguel vs. Montanez, G.R. No. 191336, January 25, 2012)

In exercising the second option under Art. 2041, the aggrieved party may, if he chooses, bring the suit contemplated or involved in his original demand, as if there had never been any compromise agreement, without bringing an action for rescission. This is because he may regard the compromise as already rescinded by the breach thereof of the other party. (Chavez vs. CA, G.R. No. 159411, March 18, 2005)

Compromise Codal Provisions

CHAPTER 1

COMPROMISES

Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. (1809a)

Art. 2029. The court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise. (n)

Art. 2030. Every civil action or proceeding shall be suspended:

(1) If willingness to discuss a possible compromise is expressed by one or both parties; or

(2) If it appears that one of the parties, before the commencement of the action or proceeding, offered to discuss a possible compromise but the other party refused the offer.

The duration and terms of the suspension of the civil action or proceeding and similar matters shall be governed by such provisions of the rules of court as the Supreme Court shall promulgate. Said rules of court shall likewise provide for the appointment and duties of amicable compounders. (n)

Art. 2031. The courts may mitigate the damages to be paid by the losing party who has shown a sincere desire for a compromise. (n)

Art. 2032. The court's approval is necessary in compromises entered into by guardians, parents, absentee's representatives, and administrators or executors of decedent's estates. (1810a)

Art. 2033. Juridical persons may compromise only in the form and with the requisites which may be necessary to alienate their property. (1812a)

Art. 2034. There may be a compromise upon the civil liability arising from an offense; but such compromise shall not extinguish the public action for the imposition of the legal penalty. (1813)

Art. 2035. No compromise upon the following questions shall be valid:

(1) The civil status of persons;

(2) The validity of a marriage or a legal separation;

(3) Any ground for legal separation;

(4) Future support;

(5) The jurisdiction of courts;

(6) Future legitime. (1814a)

Art. 2036. A compromise comprises only those objects which are definitely stated therein, or which by necessary implication from its terms should be deemed to have been included in the same.

A general renunciation of rights is understood to refer only to those that are connected with the dispute which was the subject of the compromise. (1815)

Art. 2037. A compromise has upon the parties the effect and authority of res judicata; but there shall be no execution except in compliance with a judicial compromise. (1816)

Art. 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents, is subject to the provisions of Article 1330 of this Code.

However, one of parties cannot set up a mistake of fact as against the other if the latter, by virtue of the compromise, has withdrawn from a litigation already commenced. (1817a)

Art. 2039. When the parties compromise generally on all differences which they might have with each other, the discovery of documents referring to one or more but not to all of the questions settled shall not itself be a cause for annulment or rescission of the compromise, unless said documents have been concealed by one of the parties.

But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties has no right, as shown by the newly-discovered documents. (n)

Art. 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded.

Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise. (1819a)

Art. 2041. If one of the parties fails or refuses to abide by the compromise, the other party may either enforce the compromise or regard it as rescinded and insist upon his original demand. (n)

Nominal Damages

What are nominal damages?

Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. (Art. 2221, Civil Code)

Award of nominal damages in labor cases

Nominal damages "may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a right." The amount of nominal damages to be awarded the employee is addressed to the sound discretion of the court, taking into consideration the relevant circumstances.43 Nevertheless, while the amount of damages is left to the discretion of the court, it has been held that –

Again, we stress that though the Court is given the latitude to determine the amount of nominal damages to be awarded to an employee who was validly dismissed but whose due process rights were violated, a distinction should be made between a valid dismissal due to just causes under Article 282 of the Labor Code and those based on authorized causes, under Article 283. The two causes for a valid dismissal were differentiated in the case of Jaka Food Processing Corporation v. Pacot where the Court held that:

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the employer’s exercise of his management prerogative, i.e. when the employer opts to install labor saving devices, when he decides to cease business operations or when, as in this case, he undertakes to implement a retrenchment program.

x x x x

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employer’s exercise of his management prerogative.

Since in the case of JAKA, the employee was terminated for authorized causes as the employer was suffering from serious business losses, the Court fixed the indemnity at a higher amount of P50,000.00. In the case at bar, the cause for termination was abandonment, thus it is due to the employee’s fault. It is equitable under these circumstances to order the petitioner company to pay nominal damages in the amount of P30,000.00, similar to the case of Agabon. (LIBCAP Marketing Corp vs. Baquial, G.R. No. 192011, June 30, 2014)

Award of actual, moral, temperate or moderate damages preclude nominal damages

It should be noted that nominal damages cannot co‐exist with actual or compensatory damages because nominal damages are recoverable when the damages suffered cannot be proved with reasonable certainty. The law presumes damage although actual or compensatory damages are not proven. Award of actual, moral, temperate or moderate damages preclude nominal damages. But it may be awarded together with attorney’s fees. (Pineda, pp. 284‐285, 2009 ed)

Nominal damages based on breach of contract

■ No moral or exemplary damages was awarded. Nevertheless, when confronted with their failure to deliver on the wedding day the wedding cake ordered and paid for, petitioners gave the lame excuse that delivery was probably delayed because of the traffic, when in truth, no cake could be delivered because the order slip got lost. For such prevarication, petitioners must be held liable for nominal damages for insensitivity, inadvertence or inattention to their customer's anxiety and need of the hour. (Francisco v. Ferrer)

■ Respondent admitted that three hotel functions coincided with petitioners’ reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes.

In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event. The Court recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind. Respondent’s lack of prudence is an affront to this right. (Sps. Guanio vs Makati Shangri-la Hotel and Resort, G.R. No. 190601, February 7, 2011)

Temperate or Moderate Damages

What are temperate of moderate damages?

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 provided with certainty. (Art. 2224, Civil Code)

Temperate damages in lieu of actual damages 

Despite the failure to submit proof of actual damages, “a party still has the option of claiming temperate damages, which 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.” In this case, the petitioners submitted photographs as evidence to show “the extent of damage done to the house, the tailoring shop and the petitioners’ appliances and equipment.” The loss thereof or damage to petitioner is directly attributed to the truck ramming her house and tailoring shop, as well as the gross negligence of the driver in handling the truck. However, the photographs alone is not sufficient to establish the amount with certainty. The Supreme Court found the award of P200,000.00 as a fair and sufficient award by way of temperate damages based on “the attendant circumstances and given the property destroyed.” (Tan v. OMC Carriers, Inc., G.R. No. 190521, January 12, 2011)

Temperate damages in lieu of loss of earning capacity 

For loss of earning capacity, temperate damages may be awarded in lieu of actual damages “where earning capacity is plainly established but no evidence was presented to support the allegation of the injured party’s actual income.” Here, the deceased income-earning capacity was never disputed. His five minor children “all relied mainly on the income earned by their father from his tailoring activities for their sustenance and support. Under these facts and taking into account the unrebutted annual earnings of the deceased, [the Court holds] that the petitioners are entitled to temperate damages in the amount of P300,000.00 [or roughly, the gross income for two (2) years] to compensate for damages for loss of the earning capacity of the deceased.” (Tan v. OMC Carriers, Inc.,)

Amount of temperate damages left to the discretion of the courts but should be reasonable

In the absence of competent proof on the amount of actual damages suffered, a party is entitled to temperate damages. 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 amount thereof is usually left to the discretion of the courts but the same should be reasonable, bearing in mind that temperate damages should be more than nominal but less than compensatory. (Meralco vs Castillo, G.R. No. 182976. January 14, 2013)

Even if the pecuniary loss is capable of proof, an award of temperate damages is not precluded

Even if the pecuniary loss suffered by the claimant is capable of proof, an award of temperate damages is not precluded. The grant of temperate damages is drawn from equity to provide relief to those definitely injured. Therefore, it may be allowed so long as the court is convinced that the aggrieved party suffered some pecuniary loss.” (Gonzales vs. CASURECO, et al., G.R. No. 181096, March 6, 2013)

Temperate damages cannot be granted concurrently with nominal damages

Temperate damages are incompatible with nominal damages hence, cannot be granted concurrently. (Citibank vs IAC)

Liquidated Damages

What are liquidated damages?

Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof. (Art. 2226, Civil Code)

When shall liquidated damages be reduced?

Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. (Art. 2227, Civil Code)

How shall liquidated damages be determined if the breach of contract committed was not the one contemplated by the parties?

When the breach of the contract committed by the defendant is not the one contemplated by the parties in agreeing upon the liquidated damages, the law shall determine the measure of damages, and not the stipulation. (Art. 2228, Civil Code)

Exemplary or Corrective Damages

WHAT ARE EXEMPLARY DAMAGES?

Exemplary damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. (Art. 2229, Civil Code)

PURPOSE

Exemplary or corrective damages are intended to serve as a deterrent to serious wrongdoings. (People v. Orilla, 422 SCRA 620)

WHEN MAY EXEMPLARY DAMAGES BE AWARDED?

Exemplary damages may be awarded in the following cases:

1. In  criminal  actions,  when  the  crime  was  committed  with  one  or more aggravating circumstances
2.  In quasi-delicts, if the defendant acted with gross negligence
3. In  contracts  and  quasi-contracts,  if  the  defendant  acted  in  a wanton, fraudulent, reckless, oppressive, or malevolent manner. (Art. 2230-2232, Civil Code)

However, before the court may award the damages, plaintiff must show that he is entitled as a matter of right to either moral, temperate or compensatory damages. In case liquidated damages have been agreed upon, he must show that he would be entitled s a matter of right to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages. (Art. 2234, Civil Code)

Such damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. (Art. 2233, Civil Code)

CRIMINAL CASES

Being corrective in nature, exemplary damages, therefore, can be awarded, not only in the presence of an aggravating circumstance, but also where the circumstances of the case show the highly reprehensible or outrageous conduct of the offender. In much the same way as Article 2230 prescribes an instance when exemplary damages may be awarded, Article 2229, the main provision, lays down the very basis of the award. Thus, in People v. Matrimonio, the Court imposed exemplary damages to deter other fathers with perverse tendencies or aberrant sexual behavior from sexually abusing their own daughters. Also, in People v. Cristobal, the Court awarded exemplary damages on account of the moral corruption, perversity and wickedness of the accused in sexually assaulting a pregnant married woman. Recently, in People of the Philippines v. Cristino Cañada, People of the Philippines v. Pepito Neverio and The People of the Philippines v. Lorenzo Layco, Sr., the Court awarded exemplary damages to set a public example, to serve as deterrent to elders who abuse and corrupt the youth, and to protect the latter from sexual abuse.(People vs Combate, G.R. No. 189301, December 15, 2010)

QUASI-DELICT

Our jurisprudence sets certain conditions when exemplary damages may be awarded: First, they may be imposed by way of example or correction only in addition, among others, to compensatory damages, and cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant. Second, the claimant must first establish his right to moral, temperate, liquidated or compensatory damages. Third, the wrongful act must be accompanied by bad faith, and the award would be allowed only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.

In motor vehicle accident cases, exemplary damages may be awarded where the defendant’s misconduct is so flagrant as to transcend simple negligence and be tantamount to positive or affirmative misconduct rather than passive or negative misconduct. In characterizing the requisite positive misconduct which will support a claim for punitive damages, the courts have used such descriptive terms as willful, wanton, grossly negligent, reckless, or malicious, either alone or in combination.

Gross negligence is the absence of care or diligence as to amount to a reckless disregard of the safety of persons or property. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.

In the case at bar, having established respondents’ right to compensatory damages, exemplary damages are also in order, given the fact that Mendoza was grossly negligent in driving the Mayamy bus. His act of intruding or encroaching on the lane rightfully occupied by the Isuzu truck shows his reckless disregard for safety.

In Baño v. Bachelor Express, Inc., et al., where an erring bus, in the process of overtaking a jeepney, also encroached on the opposite lane, and consequently collided with a dump truck, the Court held the driver of the bus grossly negligent and affirmed the award of exemplary damages. (Mendoza vs Sps. Gomez, G.R. No. 160110, June 18, 2014)

CONTRACTS AND QUASI-CONTRACTS

■ The prerequisite for the award of exemplary damages in cases of contract or quasi-contract is that the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. (PAL vs. Miano, G.R. No. 106664 March 8, 1995)

■ To warrant the award of exemplary damages, [t]he wrongful act must be accompanied by bad faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent manner.

The requirements of an award of exemplary damages are: (1) they may be imposed by way of example in addition to compensatory damages, and only after the claimants right to them has been established; (2) that they can not be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant; (3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner. (Francisco vs. Ferrer, G.R. No. 142029. February 28, 2001)


MANNER OF DETERMINATION

1. The claimant is entitled to moral, temperate or compensatory damages; and

2. The crime was committed with one or more aggravating circumstances, or the quasi-­delict was committed with gross negligence, or in contracts and quasi-contracts the act must be accompanied by bad faith or done in wanton, fraudulent, oppressive or malevolent manner

REDUCTION OF EXEMPLARY DAMAGES PROPER

Exemplary or corrective damages are imposed “by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence.” The death of the deceased and the destruction of petitioner’s home and tailoring shop “were unquestionably caused by the respondents’ gross negligence. The law allows the grant of exemplary damages in cases such as this to serve as a warning to the pubic and as a deterrent against the repetition of this kind of deleterious actions. The grant, however, should be tempered, as it is not intended to enrich one party or to impoverish another. From this perspective, [the Court finds] the CA’s reduction of the exemplary damages awarded to the petitioners from P500,000.00 to P200,000.00 to be proper.” (Tan v. OMC Carriers, Inc., G.R. No. 190521, 12 January 2011)

NOT AS A MATTER OF RIGHT

A complainant is not entitled to exemplary damages as a matter of right; it is the court that will decide whether the same is proper. In fact, a complainant needs first to prove that he is entitled to moral, temperate or compensatory damages – even in the existence of stipulation for liquidated damages – before the court may consider the question of granting exemplary damages, and, if applicable, on top of liquidated damages. (Tan v. OMC Carriers, Inc., ibid)

PARTIES CANNOT AGREE TO RENOUNCE IN ADVANCE ANY CLAIM TO EXEMPLARY DAMAGES

Parties cannot agree to renounce in advance any claim to exemplary damages as the same is imposed for the public good. (Tan v. OMC Carriers, Inc., ibid)


CAN A PASSENGER OF A JEEPNEY WHO WAS INJURED AS A RESULT OF THE GROSS NEGLIGENCE OF THE DRIVER HOLD THE OPERATOR OF SAID JEEPNEY LIABLE FOR EXEMPLARY DAMAGES?

No. A principal or master can be held liable for exemplary or punitive damages based upon the wrongful act of his agent or servant only where he participated in the doing of such wrongful act or has previously authorized or subsequently ratified it with full knowledge of the facts. Reasons given for this rule are that since damages are penal in character, the motive authorizing their infliction will not be imputed by presumption to the principal when the act is committed by an agent or servant, and that since they are awarded not by way of compensation, but as a warning to others, they can only be awarded against one who has participated in the offense, and the principal therefore cannot be held liable for them merely by reason of wanton, oppressive or malicious intent on the part of the agent.

If the operator is to be held liable for exemplary damages by reason of the wrongful act of his driver, it must be shown that he had previously authorized or knowingly ratified it thereafter, in effect making him a co-participant. It is not enough to say that an example should be made, or corrective measures employed, for the public good, especially in accident cases where public carriers are involved. For the causative negligence in such cases is personal to the employees actually in charge of the vehicles, and it is they who should be made to pay this kind of damages by way of example or correction, unless by the demonstrated tolerance or approval of the owners they themselves can be held at fault and their fault is of the character described in Article 2232 of the Civil Code. Otherwise there would be practically no difference between their liability for exemplary damages and their liability for compensatory damages. (Munsayac vs. De Lara, G.R. No. L-21151, June 26, 1968)

Western Mindanao Lumber vs Medalle

An agreement creating an easement of right-of-way is not one of those contracts covered by the statue of frauds since it is not a sale of property or of an interest therein

Facts: In 1955, Western Mindanao Lumber (Western), a logging company, obtained a right-of-way over a property owned by Hernandez. Medalle, the new owner of the property, notified Western that he will close the road running through his property through which Western's trucks pass in hauling logs. Western's filed a complaint for injunction praying that a writ of preliminary injunction be issued restraining Medalle from closing the said road, and after hearing, make the injunction permanent. Medalle filed a motion to dismiss the complaint upon the ground that the claim on which the action or suit is founded is unenforceable under the provisions of the Statute of Frauds and special law, in that the first page of the said road right-of-way agreement was not signed by both parties and their instrumental witnesses; page two thereof is not dated, and the signature of the plaintiffs corporate agent does not appear; and that said agreement is not acknowledged before a person authorized to administer oaths. Western opposed the motion, stating that the agreement between Western and Hernandez is not one of those agreements specified in the Statute of Frauds. The trial court granted the motion to dismiss. Hence, Western appealed. 

Issue: Whether statute of frauds is applicable to agreements creating a right of way 

Held: The Statute of Frauds refers to specific kinds of transactions and cannot apply to any that is not enumerated therein. Obviously, an agreement creating an easement of right-of-way is not one of those contracts covered by the statue of frauds since it is not a sale of property or of an interest therein. The trial court therefore, erred in dismissing the case upon the defendants' claim that the road fight-of-way agreement in question is unenforceable under the statute of frauds. (Western Mindanao Lumber vs Medalle, G.R. No. L-23213, October 28, 1977) 

Note: Also, the Statute of Frauds is applicable only to executory contracts, not to contracts that are totally or partially performed. Here, the verbal agreement with respect to the right of way had already been totally executed.