Actual damages

Lawyer, Author, Mentor

Actual or compensatory damages is award to a person who is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved except as otherwise provided by law or by stipulation.

1. Concept

Actual or compensatory damages is award to a person who is entitled “to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved” except as otherwise provided by law or by stipulation.[1]

Actual or compensatory damages include the value of the loss suffered and the profits which the injured party failed to obtain.[2]

Tan v. OMC Carriers, Inc. (January 2011)
Petitioners Leticia Tan filed a Complaint for damages against Respondent OMC Carriers. Previously, a truck owned by OMC lost its brakes resulting in its driver and his companion to jump out. The driverless truck rammed into the hosue and tailoring shop owned by Petitioner Leticia Tan resulting in the instant death of her husband who happened to be standing at the doorway at the time of the incident. In their defense, OMC claimed that everything was due to a fortuitous event as the truck skidded due to the slippery condition of the road caused by spilled motor vehicle.
HELD: OMC was liable.However, no actual damages were awarded. It is a basic rule that “to recover damages there must be pleading and proof of actual damages suffered.” This is so as courts “cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages. To justify an award of actual damages, there must be competent proof of the actual amount of loss, credence can be given only to claims which are duly supported by receipts.”
Here, petitioners did not submit any receipt to support their claim for actual damages “to prove the monetary value of the damage caused to the house and tailoring shop when the truck rammed into them.”  Thus, there is no basis for awarding actual damages on petitioner’s house and tailoring shop.
Similarly, there is no basis for actual damages arising from loss of earning capacity. It is a rule that “documentary evidence should be presented to substantiate the claim for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed 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 (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.” Petitioners claimed that the deceased was self-employed and earning around 3.5 times (P13,000.00/month or P156,000.00/year) the prevailing minimum wage then (P3,770.00/month).
The above exemption was not applied as the deceased was not a daily minimum wage earner. “Even if [the Court takes] judicial notice of the fact that a small tailoring shop normally does not issue receipts to its customers, and would probably not have any documentary evidence of the income it earns, [the deceased’s] alleged monthly income of P13,000.00 greatly exceeded the prevailing monthly minimum wage; thus, the exception set forth above does not apply.”
Attorney’s fees in order – As exemplary damages are proper and thus awarded, it is also proper “to award the petitioners attorney’s fees.” The Court awarded attorney’s fees, equivalent to 10% of the total amount adjudged the petitioners, which is just and reasonable under the circumstances.
Nevertheless, the following were awarded: temperate and exemplary damages, attorney’s fees, and interest (See additional discussion under respective topic.):
“(1) P50,000.00 as indemnity for the death of Celedonio Tan;
“(2) P72,295.00 as actual damages for funeral expenses;
“(3) P200,000.00 as temperate damages for the damage done to petitioner Leticia’s house, tailoring shop, household appliances and shop equipment;
“(4) P300,000.00 as damages for the loss of Celedonio Tan’s earning capacity;
“(5) P500,000.00 as moral damages;
“(6) P200,000.00 as exemplary damages; and
“(7) 10% of the total amount as attorney’s fees; and costs of suit.
“In addition, the total amount adjudged shall earn interest at the rate of 6% per annum from May 14, 2003, and at the rate of 12% per annum, from the finality of this Resolution on the balance and interest due, until fully paid.”
Best Legal Practice
Keep records of actual payments made – As actual damages depend on proof, the injured party should keep records of actual payments made. Without such pieces of evidence, actual damages cannot be awarded.

a. Contract or quasi-contracts

In the case of contracts and quasi-contracts, the defendant who acted in good faith is liable only for damages which 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.”[3] If there is fraud, bad faith, malice or wanton attitude, the defendant is responsible for “all damages which may be reasonably attributed to the non-performance of the obligation.”[4]

b. Crimes or quasi-delicts

In the case of crimes and quasi-delicts, the defendant is liable for all damages which are the “natural and probable consequences of the act or omission complained of” by the plaintiff.[5] Here, it is not necessary that the damages have been or could have reasonably been foreseen by the defendant.[6] In addition, the defendant is liable for the “loss of the earning capacity of the deceased”, which shall be paid to the latter’s heirs, if he had any.[7] The defendant is likewise liable to give support to the heirs for a period of not exceeding five years if the decedent was obliged to give it.[8] Meanwhile, damages resulting from a crime may be increased or decreased depending on the existence of aggravating or mitigating circumstances.[9]

2. Injured party’s responsibility

In any circumstance, the injured party is required to exercise the “diligence of a good father of family” with the aim “to minimize the damages resulting from the act or omission in question.”[10]

3. What may also be recovered

Damages may likewise be recovered in these situations: (a) loss/impairment of earning capacity for temporary or permanent personal injury; and (b) injury to complainant’s business standing or commercial credit.[11]

a. Deficiency of insurance

Should the defendant’s insurance do not fully cover the injury or loss, the complainant is entitled to recover the deficiency from the complainant and not from the insurance company.[12]

a. Attorney’s fees

General Rule: Absent any stipulation to the contrary, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered.[13]
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; and
11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.[14]
Lopez v. Pan American World Airways
Plaintiffs were entitled to attorney’s fees. “Now, as to attorney’s fees, the record shows a written contract of services executed on June 1, 1960… whereunder plaintiffs-appellants engaged the services of their counsel — Atty. Vicente J. Francisco — and agreed to pay the sum of P25,000.00 as attorney’s fees upon the termination of the case in the Court of First Instance, and an additional sum of P25,000.00 in the event the case is appealed to the Supreme Court… A consideration of the subject matter of the present controversy, of the professional standing of the attorney for plaintiffs-appellants, and of the extent of the service rendered by him, shows that said amount provided for in the written agreement is reasonable. Said lawyer — whose prominence in the legal profession is well known — studied the case, prepared and filed the complaint, conferred with witnesses, analyzed documentary evidence, personally appeared at the trial of the case in twenty-two days, during a period of three years, prepared four sets of cross-interrogatories for deposition taking, prepared several memoranda and the motion for reconsideration, filed a joint record on appeal with defendant, filed a brief for plaintiffs as appellants consisting of 45 printed pages and a brief for plaintiffs as appellees consisting of 265 printed pages. And we are further convinced of its reasonableness because defendant’s counsel likewise valued at P50,000.00 the proper compensation for his services rendered to defendant in the trial court and on appeal.”
Best Legal Practices
  Stipulate attorney’s fees – It is a good and sound practice to agree on attorney’s fees that will be paid by the defaulting party in a case a litigation is resorted to by the injured party.

4. Interest

Interest is imposed as indemnity for damages incurred when the defendant incurred delay in an obligation consisting of the payment of a sum of money and there was no stipulation thereof to the contrary.[15]

If there was no stipulation, the legal interest of six percent (6%) will be imposed as indemnity.[16]

Tan v. OMC Carriers, Inc. (January 2011)
Interests due – Finally, legal interest is due based on the prevailing rule:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
“1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
“2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
“3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
“Accordingly, legal interest at the rate of 6% per annum on the amounts awarded starts to run from May 14, 2003, when the trial court rendered judgment. From the time this judgment becomes final and executory, the interest rate shall be 12% per annum on the judgment amount and the interest earned up to that date, until the judgment is wholly satisfied.” (Citations omitted)

a. Court may award different and separate interest

A different and separate interest, in the discretion of the court, may be imposed upon the damages awarded for a breach of contract. [17] The same may also be observed in crimes and quasi-delicts where interest is part of the damages.[18]

b. When interest is due

Any interest due earns interest from the time it is judicially demanded even if the obligation did not specify such.[19] Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonably certainty.[20]

5. When liability is mitigated

The courts may mitigate the liability for damages arising from contracts, quasi-contracts, and quasi-delict in the following instances:[21]
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; or
5) That since the filing of the action, the defendant has done his best to lessen the plaintiff’s loss or injury.

a. Contributory negligence mitigates liability

Meanwhile, in quasi-delicts, the damages may be reduced upon finding of contributory negligence on the part of the complainant.[22]

[1] Ibid. Article 2199.

[2] Ibid. Article 2200.

[3] Ibid. Paragraph 1, Article 2201.

[4] Ibid. Paragraph 2, Article 2201.

[5] Ibid. Article 2202.

[6] Ibid.

[7] CIVIL CODE. Paragraph 1, Article 2206.

[8] Ibid. Paragraph 2, Article 2206.

[9] Ibid. Article 2204.

[10] Ibid. Article 2203.

[11] Ibid. Article 2205.

[12] Ibid. Article 2207.

[13] Ibid. Article 2208.

[14] Ibid. Article 2208. Should attorney’s fees and expenses of litigation be awarded, they must be reasonable.

[15] Ibid. Article 2209.

[16] Ibid.

[17] Ibid. Article 2210.

[18] Ibid. Article 2211.

[19] Ibid. Article 2212.

[20] Ibid. Article 2213.

[21] Ibid. Article 2215.

[22] Ibid. Article 2214.

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