B. Actual and Compensatory Damages

J. Damages; Kinds of Damages; When May Be Recovered (Civil Code, arts. 2197 and 2216)

Actual and Compensatory Damages – Civil Code, arts. 2199-2215

CHAPTER 2

Actual or Compensatory Damages

Article 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

Article 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain. (1106)

Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. (1107a)

Article 2202. In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of. It is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant.

Article 2203. The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question.

Article 2204. In crimes, the damages to be adjudicated may be respectively increased or lessened according to the aggravating or mitigating circumstances.

Article 2205. Damages may be recovered:

(1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury;

(2) For injury to the plaintiff's business standing or commercial credit.

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death;

(2) If the deceased was obliged to give support according to the provisions of article 291, the recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate succession, may demand support from the person causing the death, for a period not exceeding five years, the exact duration to be fixed by the court;

The reference to article 291 in Article 2206(2) is retained from the Civil Code text; entitlement to support is now governed by the Family Code, particularly Article 195.

(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for mental anguish by reason of the death of the deceased.

Article 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen's compensation and employer's liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

Article 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest. (1108)

The applicable legal-interest rate is generally 6% per annum under BSP Circular No. 799 and Nacar v. Gallery Frames; that rate is not stated in Article 2209.

Article 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.

Article 2211. In crimes and quasi-delicts, interest as a part of the damages may, in a proper case, be adjudicated in the discretion of the court.

Article 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point. (1109a)

Article 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty.

Article 2214. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover.

Article 2215. In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the damages under circumstances other than the case referred to in the preceding article, as in the following instances:

(1) That the plaintiff himself has contravened the terms of the contract;

(2) That the plaintiff has derived some benefit as a result of the contract;

(3) In cases where exemplary damages are to be awarded, that the defendant acted upon the advice of counsel;

(4) That the loss would have resulted in any event;

(5) That since the filing of the action, the defendant has done his best to lessen the plaintiff's loss or injury.

Moral Damages – Civil Code, arts. 2217-2220

SECTION 1

Moral Damages

Article 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission.

Article 2218. In the adjudication of moral damages, the sentimental value of property, real or personal, may be considered.

Article 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in article 309;

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named.

Article 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.

Nominal Damages – Civil Code, arts. 2221-2223

SECTION 2

Nominal Damages

Article 2221. 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.

Article 2222. The court may award nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has been invaded.

Article 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory questions, as between the parties to the suit, or their respective heirs and assigns.

Temperate or Moderate Damages – Civil Code, arts. 2224-2225

SECTION 3

Temperate or Moderate Damages

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.

Article 2225. Temperate damages must be reasonable under the circumstances.

Liquidated Damages – Civil Code, arts. 2226-2228

SECTION 4

Liquidated Damages

Article 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof.

Article 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.

Article 2228. 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.

Exemplary or Corrective Damages – Civil Code, arts. 2229-2235

SECTION 5

Exemplary or Corrective Damages

Article 2229. Exemplary 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.

Article 2230. In criminal offenses, exemplary damages as a part of the civil liability may be imposed when the crime was committed with one or more aggravating circumstances. Such damages are separate and distinct from fines and shall be paid to the offended party.

Article 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence.

Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

Article 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated.

Article 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages.

Article 2235. A stipulation whereby exemplary damages are renounced in advance shall be null and void.

ACTUAL AND COMPENSATORY DAMAGES

Actual damages are such compensation or damages for an injury that will put the injured party in the position in which he had been before he was injured. They pertain to such injuries or losses that are actually sustained and susceptible of measurement. (Filipinas (Pre-Fab Bldg.) Systems, Inc. v. MRT Development Corp., G.R. Nos. 167829-30, November 13, 2007)

NOTE: To recover damages, the amount of loss must not only be capable of proof but must actually be proven. (but must be pleaded and proven in Court) (BAR AREA)

Article 2199 of the Civil Code expressly mandates that “except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he duly proved.”

It must be proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. (Metro Rail Transit Dev’t. Corp. v. Gammon Phils., Inc., G.R. No. 200401, Jan. 17, 2018)

Kinds of Actual or compensatory damages

• Damnum Emerens/Dano Emergente (value of the loss suffered) – the value of what the injured party lost, classified as one for the loss of what a person already possesses.
• Lucrum Cessans/Lucro Cesante (profits not obtained) – for failure to receive, as benefit, that which would have pertained to him (expected profits). (Filipinas Synthetic v. De Los Santos, G.R. No. 152033, March 16, 2011)

NOTE: Actual or compensatory damages may include both the value of the loss suffered and the profits the obligee failed to obtain, as provided under Article 2200. In other words, there are two components to actual damages. (RCPI v. CA, G.R. No. L-55194, February 26, 1981)

Purpose of the law in awarding actual damages

Actual or compensatory damages proceed from a sense of natural justice and are designed to repair the wrong that has been done, to compensate for the injury inflicted. (Kabisig Real Wealth Dev., Inc. v. Young Builders Corp., G.R. No. 212375, Jan. 25, 2017)

Q: Petitioner Wyeth Philippines, Inc. (Wyeth) is the project owner of the "Dryer 3 and Wet Process Superstructure Works.” In 2007, Wyeth invited bidders to submit proposals for its project. Respondent SKI Construction Group, Inc. (SKI) submitted its qualified proposal to undertake the project for P242,800,000.00, and was later awarded the bid. Subsequently, the Project Manager directed the cessation of all construction activities. until further notice giving SKI ample time to address internal issues regarding its workforce. Wyeth wrote a letter to Mapfre, claiming on the bonds. Mapfre later confirmed that Wyeth will not be barred from pursuing its claims against the bonds. However, Mapfre refused to pay the amount under the payments bond. The parties failed to reach a settlement, however, the parties eventually agreed to resolve the dispute through arbitration before the Construction Industry Arbitration Commission (Commission).

After the conduct of hearings, Arbitral Tribunal held that while Wyeth suffered pecuniary loss, the evidence it submitted was not clear and convincing as to establish actual damages. Hence, the Tribunal applied Article 2224 of the Civil Codes and the parties' agreement on liquidated damages as a measure for temperate damages. It awarded Wyeth temperate damages amounting to P24,280,000.00. Upon appeal, the Court of Appeals held that while SKI is entitled to the value of rebars, formworks, and costs of repair, the amount cannot be established with certainty, thus, the Court of Appeals only awarded SKI temperate damages. It also held that the Arbitral Tribunal erred in awarding temperate damages to Wyeth, and instead awarded actual damages amounting to P90,717,632.06.

a) Is Wyeth entitled to actual damages?

b) Is SKI entitled to temperate damages?

A.

a) NO. Actual damages are provided for under Article 2199 of the Civil Code: “Article 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.”

Further, "[e]xcept as provided by law or by stipulation, [a claimant] is entitled to an adequate compensation only for pecuniary loss" duly proven. Thus, actual damages must be proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable" like official receipts and invoices, as explained in Metro Rail Transit Development Corp. v. Gammon Philippines.

Actual damages constitute compensation for sustained measurable losses. It must be proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. It is never presumed or based on personal knowledge of the court.

b) YES. Article 2224 of the Civil Code provides for temperate damages, as follows: “Art. 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.”

In concluding that respondent SKI's claims for the value of rebars, formworks, safety harness equipment, and costs of the repair were validly proven, the Arbitral Tribunal thoroughly examined and considered the evidence presented by the parties. Thus, its evaluation of the evidence and findings of fact must be upheld. (Wyeth Philippines Inc. v. CIAC, et. al., G.R. No. 220045-48, June 22, 2020)

When victim is unknown

The fact that the victim remains unknown and no heirs have come forward does not warrant the elimination of civil indemnity. (People v. De Guzman, G.R. No. 92537, April 25, 1994)

Proving the loss

GR: Loss must be proven with a reasonable degree of certainty, premised upon competent proof or best evidence obtainable of the actual amount thereof before one can be entitled to damages (PNOC Shipping and Transport Corp. v. Court of Appeals, G.R. No. 107518, December 13, 1999)

XPN: Certain awards do not require proof of the amount of actual loss in the following cases:

• Liquidated damages have been previously agreed upon (NCC, Art. 2226);
• Forfeiture of bonds in favor of the government for the purpose of promoting public interest or policy (Far Eastern Surety and Insurance Co. v. CA, G.R. No. L-12019, October 16, 1958);
• Loss is presumed (Manzanares v. Moreta, G.R. No. L-12306, October 22, 1918);
• When the penalty clause is agreed upon in the contract between the parties (NCC, Art. 1226); and
• Indemnity for death caused by a crime or quasi-delict, upon proof of the death and its cause, does not require separate proof of pecuniary loss (NCC, Art. 2206). Actual expenses and loss of earning capacity remain subject to their applicable proof requirements.

Civil liability ex delicto v. actual or compensatory damages distinguished

NOTE: Rule applies to civil and criminal cases. (People v. Abaño y Cañares, G.R. No. 188323, February 21, 2011)

GR: Documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity.

XPN: Damages for loss of earning capacity may be awarded despite the absence of documentary evidence when:

• The deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased's line of work, no documentary evidence is available; or
• The deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws. (Philippine Hawk Corporation v. Vivian Tan Lee, G.R. No. 166869, February 16, 2010)

Docketing fees must be based on allegation of actual damages

The amount of damages claimed must be alleged not only in the body of the complaint, petition or answer but also in the prayer portion thereof. (Siapno v. Manalo, G.R. No. 132260, August 30, 2005)

“Such other relief as this Honorable Court may deem reasonable”

A claim for actual damages must state the amount claimed in the pleading and prayer; a general prayer alone does not suffice. (2019 Amendments to the Rules of Civil Procedure, Rule 8, Sec. 1) The statement that a prayer for “such other relief as this Honorable Court may deem reasonable” may include actual damages although not alleged in the answer, if and when they are proved, must be read subject to that requirement. (Heirs of Basilisa Justiva v. Gustilo, G.R. No. L-16396, January 31, 1963)

NOTE: It is broad enough to comprehend an application as well for nominal damages and even exemplary damages.

Article 21 of NCC cannot be used as a basis for award of actual damages

Article 21 of the NCC cannot be used as a basis for award of actual damages when there is a preexisting contractual relation between the parties. (ACI Philippines, Inc. v. Coquia, G.R. No. 174466, July 14, 2008)

Coverage of actual damages

Actual damages may include pecuniary loss from the following:

• Loss or impairment of earning capacity in cases of temporary or permanent personal injury;
• Injury to the plaintiff’s business standing or commercial credit. (NCC, Art. 2205)

Loss or impairment of earning capacity

To be compensated for loss of earning capacity, it is not necessary that the victim be gainfully employed at the time of the injury or death. Actual damages are awarded not for the loss of earnings but for the loss of capacity to earn money. (People v. Sanchez, G.R. Nos. 121039-45, October 18, 2001)

Art. 1951:

General Rule: In commodatum, the bailee has no right of retention on the ground that the bailor owes him something (Art. 1944).

Separate rule: Under Art. 1951, a bailor who knows of flaws in the thing loaned but does not advise the bailee is liable for damages suffered because of those flaws.

Medical Expenses are in the nature of actual damages

Medical expenses are in the nature of actual damages which should be duly proved and the award for actual damages cannot be made on the basis of the doctor’s prescription alone. (People v. Enguito, G.R. No. 128812, February 28, 2000)

Adjustment fees do not constitute actual damages

Adjustment fees and expense of drivers in the recovery of cargo lost at sea done voluntarily, though unsuccessfully, does not constitute actual damages. (Schmitz Transport & Brokerage Corp. v. Transport Venture, Inc., G.R. No. 150255, April 22, 2005)

EXTENT OR SCOPE OF ACTUAL DAMAGES IN CONTRACTS AND QUASI-CONTRACTS

Amount of actual damages

The amount of actual damages should be that which would put the plaintiff in the same position as he would have been if he had not sustained the wrong for which he is claiming compensation or reparation:

• Property

Damage to or loss of personal property - the plaintiff is entitled to their value at the time of the destruction, that is, normally, the sum of money which he would have to pay in the market for identical or essentially similar goods, plus in a proper case, damages for the loss of the use during the period before replacement. (Marikina Auto Line v. People G.R. No. 152040, March 31, 2006)

Damage to or loss of profit-earning chattels - what has to be assessed is the value of the chattel to its owner as a going concern at the time and place of the loss. (PNOC Shipping v. CA, G.R. No. 107518, October 8, 1998; G.Q. Garments, Inc. v. Angel Miranda, Florenda Miranda and Executive Machineries and Equipment Corporation, G.R. No. 161722 July 20, 2006)

Damage to or loss of real property – value at the time of destruction, or market value, plus, in proper cases, damages for the loss of use during the period before replacement, value of use of premises, in case of mere deprivation of possession.

• Personal injury

Medical Expenses - plaintiff is entitled to the amount of medical expenses for the injury suffered as a result of the defendant’s tortious act.

NOTE: A person is entitled to the physical integrity of his or her body; if that integrity is violated or diminished, actual injury is suffered for which actual or compensatory damages are due and assessable. (Gatchalian v. Delim G.R. No. L-56487, October 21, 1991)

Rape - For rape punishable by death but for RA 9346, the civil indemnity is ₱100,000.00. For simple rape, the amount depends on the applicable penalty. (People v. Jugueta, G.R. No. 202124, April 5, 2016)

NOTE: Civil indemnity is mandatory upon the finding of the fact of rape; it is distinct from and should not be denominated as moral damages which are based on different jural foundations and assessed by the court in the exercise of sound discretion. (People v. Tabayan, G.R. No. 190620, June 18, 2014)

• Death – Civil indemnity ex delicto depends on the offense and applicable penalty; P100,000 is not a uniform amount. (People v. Jugueta, G.R. No. 202124, April 5, 2016)
• Physical Injuries – Civil indemnity depends on the particular offense, its stage, and the nature and severity of the injuries; P50,000.00 and P25,000 are not uniform amounts for all physical injuries.

Q: MV Lorcon Luzon, a commercial vessel owned by Lorenzo Shipping, hit and rammed National Power Corporation’s Power Barge 104. NPC submitted pieces of evidence to the court as basis for actual damages it has suffered. However, Lorenzo Shipping pointed out that these pieces of evidence fall short of the standard required for proving pecuniary loss, which shall be the basis for awarding actual damages. The CA awarded temperate damages to NPC in lieu of actual damages as the amount of damages was not proven by NPC. Is Lorenzo Shipping liable for actual damages?

A: NO. Article 2199 of the Civil Code spells out the basic requirement that compensation by way of actual damages is awarded only to the extent that pecuniary loss is proven. NPC failed to establish the precise amount of pecuniary loss it suffered. Nevertheless, it remains that Power Barge 104 sustained damage — which may be reckoned financially — as a result of the MV Lorcon Luzon's ramming into it. National Power Corporation suffered pecuniary loss, albeit its precise extent or amount had not been established. Accordingly, the Court of Appeals' conclusion that National Power Corporation is entitled to temperate damages should be sustained. (Lorenzo Shipping Corporation v. National Power Corporation, G.R. No. 181683, October 07, 2015)