5. Exemplary or Corrective Damages

EXEMPLARY OR CORRECTIVE DAMAGES

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

NOTE: They are also known as “punitive” or “vindictive” damages.

Nature of exemplary damages

Exemplary damages are mere accessories to other forms of damages except nominal damages. They are mere additions which may or may not be granted at all depending upon the necessity of setting an example for public good as a form of deterrent to the repetition of the same act by anyone.

Updated: In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence. In criminal offenses, the crime must have been committed with one or more aggravating circumstances; in contracts and quasi-contracts, the defendant must have acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner (Civil Code, Arts. 2230–2232; Aleta v. Sofitel Philippine Plaza Manila, G.R. No. 228150, 11 January 2023).

Rationale behind exemplary damages

The rationale behind exemplary damages is to provide an example or correction for the public good and not to enrich the victim. (Rana v. Wong, G.R. No. 192861, June 30, 2014)

Cases where exemplary damages may be imposed as accessory damages

GR: Exemplary damages cannot be recovered as a matter of right. (NCC, Art. 2233)

XPN: They can be imposed in the following cases:

• Criminal offense – when the crime was committed with one or more aggravating circumstances (NCC, Art. 2230);
• Quasi-delicts – when the defendant acted with gross negligence (NCC, Art. 2231);
• Contracts and Quasi-contracts – when defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. (NCC, Art. 2232)

Requirements for an award of exemplary damages

• The claimant’s right to exemplary damages has been established;
• Before exemplary damages may be considered, the claimant must show entitlement to moral, temperate, or compensatory damages; the amount of exemplary damages need not be proved. (Civil Code, Art. 2234)
• The ground depends on the action: an aggravating circumstance in criminal offenses; gross negligence in quasi-delicts; or wanton, fraudulent, reckless, oppressive, or malevolent conduct in contracts and quasi-contracts. (Civil Code, Arts. 2230–2232; Mendoza v. Spouses Gomez, G.R. No. 160110, June 18, 2014)

Award in Crime, Quasi-Delict, Contracts and Quasi-contracts

NOTE: In quasi-contracts, award of exemplary damages is discretionary. (Ong Bun v. Bank of the Phil. Islands, G.R. No. 212362, March 14, 2018)

Q: Meralco was contracted to supply electricity to Marvex Industrial Corporation (Marvex) under an Agreement for Sale of Electric Energy. It installed metering devices at Marvex's premises. Marvex was billed according to the monthly electric consumption recorded in its meter. Meralco service inspectors inspected Marvex's electric metering facilities and found that the main meter terminal and cover seals had been tampered with. During a second inspection, Meralco found that the metering devices were tampered with again. Subsequently, Meralco assessed Marvex a differential billing. Meralco sent demand letters and disconnected Marvex's electric service when it did not pay. Nordec, the new owner of Marvex, sued Meralco for damages with prayer for preliminary mandatory injunction. It alleged that Meralco's service inspectors conducted the inspections without its consent or approval. Following the inspections, Meralco's inspectors gave an unnamed Nordec employee a Power Field Order that did not mention the alleged defects in the metering devices. Nordec further claimed that the parties exchanged letters on the alleged unregistered electric bill, and that it requested a recomputation, which Meralco denied in its letter. However, Meralco asked Nordec to show the basis for its recomputation request, to which Nordec complied in its letter. Meralco required Nordec to pay P371,919.58 for the unregistered electricity bill. Nordec then informed Meralco of the pending resolution of the recomputation. Nordec claimed that Meralco then disconnected its service without prior notice, resulting to loss of income and cancellation of other business opportunities. Is Nordec Philippines is entitled to actual, temperate, moral or exemplary damages, attorney's fees, and legal interest?

A: NO. Under Article 2234 of the Civil Code, exemplary damages, which cannot be recovered as a matter of right, may be considered only if the claimant shows entitlement to moral, temperate, or compensatory damages; those damages need not already have been granted. If liquidated damages were stipulated, the claimant must show that, absent the stipulation, it would be entitled to moral, temperate, or compensatory damages. Since exemplary damages cannot be awarded, the award of attorney's fees should likewise be deleted.

Moral damages are also not proper, in line with Manila Electric Company v. T.E.A.M. Electronics Corporation:

As a rule, a corporation is not entitled to moral damages because, not being a natural person, it cannot experience physical suffering or sentiments like wounded feelings, serious anxiety, mental anguish and moral shock. Here, the records are bereft of evidence that would show that Nordec's name or reputation suffered due to the disconnection of its electric supply. Moreover, contrary to Nordec's claim, it cannot be awarded temperate or moderate damages. Under Article 2224 of the Civil Code. When the court finds that a party fails to prove the fact of pecuniary loss, and not just the amount of this loss, then Article 2224 does not apply. Here, the Court of Appeals found that Meralco's disconnection had a "domino effect" on Nordec's business, but that Nordec did not offer actual proof of its losses. Nordec even admitted in its petition for review that there was an "oversight" on its part in "adducing proof of the accurate amount of damages it sustained" due to Meralco's acts. No pecuniary loss has been established in this case, apart from the claim in Nordec's complaint that the "serious anxiety" of the disconnection had caused Nordec's president to cancel business appointments, purchase orders, and fail to fulfill contractual obligations, among others.

In this instance, nominal damages may be awarded. Nominal damages are awarded to vindicate the violation of a right suffered by a party, in an amount considered by the courts reasonable under the circumstances. Meralco's negligence in not providing Nordec sufficient notice of disconnection of its electric supply, especially when there was an ongoing dispute between them concerning the recomputation of the electricity bill to be paid, violated Nordec's rights. Because of this, Nordec is entitled to nominal damages in the amount of P30,000.00. (Manila Electric Company, Vicente Montero, Mr. Bondoc, And Mr. Bayona v. Nordec Philippines And/Or Marvex Industrial Corp. Represented By Its President, Dr. Potenciano R. Malvar, G.R. 196020, April 18, 2018)