Oceaneering Contractors (Phils), Inc. vs. Barretto

Actual or compensatory damages are recoverable only for pecuniary loss duly proved with a reasonable degree of certainty through competent proof or the best evidence obtainable; self-serving statements of account are insufficient, and attorney's fees are not awarded absent stipulation, an Article 2208 exception, or bad faith.

Barretto, doing business as N.N.B. Lighterage, owned the Barge Antonieta, which was licensed for coastwise trading. Oceaneering, a construction firm, chartered the barge under a Time Charter Agreement to transport construction materials from Manila to Ayungon, Negros Oriental. The dispute required the application of the Civil Code rules on actual or compensatory damages and attorney's fees, particularly the requirement that pecuniary loss be duly proved.

Barretto, doing business under the name and style of N.N.B. Lighterage, owned the Barge Antonieta, which was last licensed and permitted to engage in coastwise trading for a period of one year expiring on 21 August 1998. On 27 November 1997, Barretto and Oceaneering entered into a Time Charter Agreement whereby, for the contract price of P306,000.00, Oceaneering hired the barge for a renewable period of thirty calendar days to transport construction materials from Manila to Ayungon, Negros Oriental. The agreement, brokered by freelance ship broker Manuel Velasco, included Oceaneering's acknowledgment of the barge's seaworthiness and stipulated that Barretto would be responsible for the crew's salaries, subsistence, SSS premium, medical, workmen's compensation contribution, and other legal expenses; that Oceaneering would be responsible for all port charges, insurance of all equipment, cargo loaded on the deck barge against all risks, theft, security, stevedoring during loading and unloading, and other expenses pertinent to assessment, fines, and forfeiture for violations related to the barge's operation; that delivery and re-delivery would be made in Pasig River, Metro Manila; that damage to the deck barge caused by carelessness or negligence of stevedores hired by Oceaneering would be Oceaneering's liability, with repairs required before loading or leaving port if damage endangered seaworthiness and stability; and that Barretto reserved the right to stop, abort, or deviate any voyage in case of imminent danger to the crew or vessel from storm, typhoon, tidal wave, or similar events.

In accordance with the agreement, Oceaneering's hired stevedores loaded the barge with pipe piles, steel bollards, concrete mixers, gravel, sand, cement, and other construction materials in the presence of and under the direct supervision of broker Manuel Velasco and Barretto's bargemen. In addition to the polythene ropes used to lash them, the cargoes were secured by steel stanchions that Oceaneering caused to be welded on the port and starboard sides of the barge. On 3 December 1997, the barge left Manila for Negros Oriental, towed by the tug-boat Ayalit, which Oceaneering had chartered from Lea Mer Industries, Inc.

On 5 December 1997, Barretto's bargeman Eddie La Chica executed a Marine Protest reporting that, on 3 December 1997 at 1635, the barge departed Pico de Loro, Pasig River, towed by the Ayalit and bound for Ayungon, Negros Oriental with steel pipes and various construction materials; that while underway on 4 December 1997 at 0245, it encountered rough sea in the vicinity of Cape Santiago, Batangas; that the barge rolled and pitched, causing the steel pipes and construction materials to shift to the starboard side, breaking the steel stanchions welded on the deck and leaving holes through which water entered the hold; and that on 5 December 1997 at 1529, with seawater continuously entering the hold, the barge totally capsized and touched bottom. On 9 December 1997, Barretto apprised Oceaneering that the mishap was caused by the incompetence and negligence of Oceaneering's personnel in loading the cargo and that he would proceed with the salvage, refloating, and repair of the barge. Oceaneering, in turn, contended that the barge tilted because water seeped through a hole in its hull; through counsel, it served Barretto a letter dated 12 March 1998 demanding the return of the unused portion of the charter payment amounting to P224,400.00 and the expenses of P125,000.00 it purportedly incurred in salvaging its construction materials. In a letter dated 25 March 1998, Barretto's counsel informed Oceaneering that the unused charter payment was withheld by Barretto, who was also seeking reimbursement for the P836,425.00 he expended in salvaging, refloating, and repairing the barge. After Barretto's 29 June 1998 formal demand for the same expenses, Oceaneering reiterated its demand for the return of the unused charter payment and reimbursement of its salvaging expenses.

On 6 October 1998, Barretto commenced the suit for damages against Oceaneering, docketed as Civil Case No. LP-98-0244 before Branch 255 of the Regional Trial Court of Las Piñas City. Contending that the accident was attributable to the incompetence and negligence of Oceaneering's hired employees in loading the cargo, Barretto sought indemnities for expenses incurred and lost income in the aggregate sum of P2,750,792.50 and attorney's fees equivalent to 25% of that sum. In its 26 January 1999 answer, Oceaneering specifically denied the material allegations and averred that the accident was caused by the negligence of Barretto's employees and the dilapidated hull of the barge, which rendered it unseaworthy. Oceaneering prayed for counterclaims for the value of its cargo in the sum of P4,055,700.00, salvaging expenses of P125,000.00, exemplary damages, attorney's fees, and litigation expenses.

At trial, Barretto testified to prove the seaworthiness of the barge and the alleged negligent loading by Oceaneering's employees. He also presented Toribio Barretto II, Vice President for Operations of N.N.B. Lighterage, who testified on the salvage effort, and Manuel Velasco, who testified on the execution of the Time Charter Agreement and the circumstances before and after the sinking. Oceaneering presented Engr. Wenifredo Oracion, its Operations Manager, on the value of the cargo and the salvage operation, and Maria Flores Escaño, an accounting staff member, on its claim for attorney's fees and litigation expenses. To disprove the rough sea and the negligence imputed to its employees, Oceaneering further presented Rosa Barba, a Senior Weather Specialist at PAGASA; Cmdr. Herbert Catapang, Officer-in-Charge of the Hydrographic Division at NAMRIA; and Engr. Carlos Gigante, a freelance marine surveyor and licensed naval architect. Recalled as a rebuttal witness, Toribio Barretto II asserted that the hull of the barge was not damaged and that the sinking was attributable to the improper loading of Oceaneering's construction materials. The RTC admitted the documentary evidence formally offered by the parties. The RTC found that Barretto failed to adduce sufficient and convincing evidence that the accident was due to the negligence of Oceaneering's employees, but it brushed aside Oceaneering's claim that the barge was unseaworthy as acknowledged in the Time Charter Agreement; it denied Oceaneering's salvage reimbursement for lack of evidence, denied the cargo-value claim because it was not included in the demand letters and because Oceaneering failed to insure its cargo against all risks as provided in the agreement, and denied exemplary damages and attorney's fees for lack of bad faith.

• Proof of Lost Cargo: Oceaneering argued that the CA erred in holding that there were no valid documents showing the real value of the materials lost and those actually recovered; it pointed to the inventory prepared by Engr. Winifredo Oracion pegging the construction materials at P4,055,700.00 and to sales receipts, order slips, cash vouchers, and invoices formally offered and admitted in evidence.
• Actual Damages for Lost Cargo: Oceaneering maintained that, having salvaged only nine steel pipes worth P351,000.00, it should be indemnified P3,703,700.00 for the lost cargo, with legal interest at 12% per annum from the date of demand until fully paid.
• Salvaging Expenses and Refund: Oceaneering argued that Barretto should refund the P306,000.00 it paid as consideration for the Time Charter Agreement and pay P125,000.00 in salvaging expenses.
• Attorney's Fees: Oceaneering claimed attorney's fees in the sum of P750,000.00.
• Unseaworthiness and Causation: On appeal, Oceaneering argued that the RTC erred in not finding that the accident was caused by the unseaworthy condition of the barge and in denying its counterclaims for actual and exemplary damages, attorney's fees, and litigation expenses.

• Negligent Loading: Barretto contended that the accident was attributable to the incompetence and negligence of Oceaneering's hired employees in loading the cargo.
• Seaworthiness and Causation: Barretto maintained that the barge was seaworthy and that its hull was not damaged; the sinking was due to the improper loading of Oceaneering's construction materials.
• Damages Claim: Barretto sought indemnities for expenses incurred and lost income in the aggregate sum of P2,750,792.50 and attorney's fees equivalent to 25% of that sum.

• Proof of Value of Lost Cargo: Whether the CA erred in holding that there were no valid documents showing the real value of the materials lost and those actually recovered.
• Actual Damages for Lost Cargo and Salvaging Expenses: Whether Oceaneering is entitled to actual damages of P3,704,700.00 representing the value of the materials lost due to the sinking of Barretto's barge and P125,000.00 representing the expenses it incurred for salvaging its cargo.
• Refund of Time Charter Consideration: Whether the CA correctly awarded P306,000.00 as refund of the consideration for the Time Charter Agreement.
• Attorney's Fees: Whether the CA erred in awarding Oceaneering attorney's fees in the reduced amount of P30,000.00 only.

• Proof of Value of Lost Cargo: Yes, in part. The CA erred in disregarding competent documentary evidence; actual damages must be pleaded and proved with reasonable certainty, and the vouchers and receipts on record established P2,577,620.00 worth of lost cargo, less P351,000.00 salvaged.
• Actual Damages for Lost Cargo and Salvaging Expenses: Partly yes as to lost cargo; no as to salvaging expenses. Only P2,226,620.00 was duly proved for lost cargo; the P125,000.00 salvaging claim lacked credible evidence.
• Refund of Time Charter Consideration: Partly yes. The refund should be P224,400.00, the unused charter payment claimed in the demand letters, not P306,000.00.
• Attorney's Fees: No. Attorney's fees cannot be awarded absent stipulation or an Article 2208 exception, and no bad faith was shown; the CA's P30,000.00 award was deleted.

• Proof of Value of Lost Cargo: Actual or compensatory damages are those recoverable for wrong done and injuries received when none were intended, and they are intended to put the injured party in the position before the injury. Article 2199 entitles a party to adequate compensation only for pecuniary loss duly proved. The rule requires pleading and proof of actual damages, with the amount of loss capable of proof and actually proven with a reasonable degree of certainty based on competent proof or the best evidence obtainable. The burden is on the claimant, who should adduce sales and delivery receipts, cash and check vouchers, and similar documentary evidence; self-serving statements of account are insufficient, and courts must state the factual bases of the award. Although Oceaneering's counterclaims for lost cargo and salvaging expenses were pleaded in its answer, the lost cargo was not included in its demand letters. The inventory of P4,055,700.00 was not fully supported; only the following items were duly proved by vouchers and receipts: (a) P1,720,850.00 worth of spiral welded pipes with coal tar epoxy procured on 22 November 1997; (b) P629,640.00 worth of spiral welded steel pipes procured on 28 October 1997; (c) P155,500.00 worth of various stainless steel materials procured on 27 November 1997; (d) P66,750.00 worth of gaskets and shackles procured on 20 November 1997; and (e) P4,880.00 worth of anchor bolt procured on 27 November 1997. These sum to P2,577,620.00; deducting P351,000.00 for the nine steel pipes salvaged leaves P2,226,620.00 in actual damages for lost cargo. Excluded were P1,129,640.00 worth of WO#1995 and PO#OCPI-060-97 procured on 9 December 1997 and P128,000.00 worth of bollard procured on 16 December 1997 because their procurement dates could not have been included in the 29 November 1997 inventory; also excluded were the anchor bolt with nut procured for an unspecified amount on 3 November 1997 and P109,018.50 worth of Petron oil procured on 28 November 1997, which did not fit the categories of lost cargo or salvaging expenses.
• Actual Damages for Lost Cargo and Salvaging Expenses: The lost-cargo claim was pleaded in Oceaneering's answer, and the proved amount was P2,226,620.00. The P125,000.00 salvaging-expense claim, although included in the demand letters and pleaded in the answer, could not be granted for lack of credible evidence. Interest on the lost-cargo award was fixed at 6% per annum, not the 12% urged by Oceaneering, because the obligation breached was not a loan or forbearance of money; since the lost cargo was not included in the demand letters, the 6% interest runs from the filing of the complaint, which is equivalent to a judicial demand. Upon finality, the sums earn 12% per annum until full payment under Eastern Shipping Lines, Inc. vs. Court of Appeals.
• Refund of Time Charter Consideration: The CA erred in awarding the full P306,000.00 refund. The refund was not clearly pleaded in Oceaneering's answer, and its demand letters claimed only the unused charter payment of P224,400.00, which is the correct measure of the award. Because the breached obligation did not constitute a loan or forbearance of money, Barretto is liable for 6% interest per annum on the P224,400.00 from 12 March 1998, and on the P2,226,620.00 lost-cargo award from the filing of the complaint; both amounts earn 12% per annum from finality until full payment.
• Attorney's Fees: For lack of sufficient showing of bad faith on Barretto's part, the CA erred in granting Oceaneering's claim for attorney's fees even in the reduced sum of P30,000.00. In the absence of stipulation, attorney's fees and litigation expenses other than judicial costs are recoverable only in the instances enumerated in Article 2208 of the Civil Code. Attorney's fees are the exception rather than the rule and are not awarded every time a party prevails, because no premium should be placed on the right to litigate. Even when a claimant is compelled to litigate or incur expenses to protect rights, attorney's fees may not be awarded absent sufficient showing of bad faith, which was not present here.

• Actual or compensatory damages — Under Article 2199 of the Civil Code, one is entitled to adequate compensation only for pecuniary loss duly proved. A claim for actual damages must be both pleaded and proved with a reasonable degree of certainty through competent proof or the best evidence obtainable; self-serving statements of account are insufficient, and the burden of proof rests on the claimant. The Court applied this by awarding only the lost-cargo items supported by vouchers and receipts, deducting the value of salvaged pipes, and excluding items not shown to be part of the pleaded claim.
• Common carrier and presumption of negligence — The Court of Appeals' finding that Barretto, as a time charterer retaining possession and control of the barge, was a common carrier charged with extraordinary diligence, and that the sinking created a presumption of negligence or unseaworthiness, was left undisturbed; the Supreme Court modified only the damages awards.
• Interest on damages — When an obligation not constituting a loan or forbearance of money is breached, interest on damages may be imposed at 6% per annum. No interest is adjudged on unliquidated claims until the demand is established with reasonable certainty; once established, interest runs from judicial or extrajudicial demand. Upon finality, the award earns 12% per annum until satisfaction. The Court applied 6% from the filing of the complaint for lost cargo, from 12 March 1998 for the refund, and 12% from finality.
• Attorney's fees — Attorney's fees are not recoverable absent stipulation or an exception under Article 2208 of the Civil Code; they are the exception rather than the rule, and no premium should be placed on the right to litigate. Even a party compelled to litigate is not entitled to attorney's fees absent a sufficient showing of bad faith. The Court deleted the CA's P30,000.00 award because no bad faith was shown.

• "Art. 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." — This provision supplies the statutory basis for the Court's requirement that actual damages be limited to pecuniary loss duly proved.
• "Conformably with the foregoing provision, the rule is long and well settled that there must be pleading and proof of actual damages suffered for the same to be recovered." — This states the twin requirement of pleading and proof that controlled the counterclaims.
• "In addition to the fact that the amount of loss must be capable of proof, it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable." — This defines the quantum of evidence for actual damages and explains why only voucher-supported items were awarded.
• "For lack of sufficient showing of bad faith on the part of Barretto, we find that the CA, finally, erred in granting Oceaneering's claim for attorney's fees, albeit in the much reduced sum of P30,000.00." — This is the ratio for deleting the attorney's fees award.

• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78, 96-97 — Quoted for the rules on legal interest: 6% per annum on damages when the obligation is not a loan or forbearance of money, and 12% per annum from finality until satisfaction.
• Canada vs. All Commodities Marketing Corporation, G.R. No. 146141, 17 October 2008, 569 SCRA 321, 329 — Cited for the requirement of pleading and proof of actual damages.
• Manila Electric Corporation vs. T.E.A.M. Electronics Corporation, G.R. No. 131723, 13 December 2007, 540 SCRA 62, 79 — Cited for proof with a reasonable degree of certainty based on competent proof or the best evidence obtainable.
• MCC Industrial Sales Corporation vs. Ssangayong Corporation, G.R. No. 153051, 18 October 2007, 536 SCRA 408, 467-468 — Cited for the rule that self-serving statements of account are insufficient basis for actual damages.
• Scott Consultants & Resource Development Corporation, Inc. vs. CA, 312 Phil. 466, 480 (1995) — Cited for the rule that attorney's fees are recoverable only in the instances enumerated under Article 2208.
• Felsan Realty & Development Corporation vs. Commonwealth of Australia, G.R. No. 169656, 11 October 2007, 535 SCRA 618, 632 — Cited for denial of attorney's fees absent sufficient showing of bad faith.

• Article 2199, Civil Code — Provides that one is entitled to adequate compensation only for pecuniary loss duly proved; used as the basis for requiring pleading and proof of actual damages.
• Article 2208, Civil Code — Enumerates the exceptions to the rule against attorney's fees; cited to deny attorney's fees absent stipulation or an exception.
• Article 1169, Civil Code — Referenced in the Eastern Shipping rules on when interest begins from judicial or extrajudicial demand.
• Rule 45, 1997 Rules of Civil Procedure — The petition for review was filed under this Rule; the Supreme Court partially granted it and modified the CA decision.

Corona, C.J., (Chairperson), Velasco, Jr., Leonardo-De Castro, and Del Castillo, JJ., concur.