FACTS:

The case involves a Construction Agreement between petitioner Emerita M. De Guzman and respondent Antonio Tumolva for the construction of an orphanage. The Agreement included a plan and specifications for the perimeter fence, which the Contractor deviated from. After the completion of the project, a portion of the fence collapsed and other portions tilted during a typhoon.

De Guzman demanded the repair of the fence, but the Contractor claimed that it was an act of God and refused to comply. De Guzman filed a Request for Arbitration before the Construction Industry Arbitration Commission (CIAC), seeking damages for the defective construction.

The CIAC awarded De Guzman actual damages for reconstructing the fence, as well as moral and exemplary damages and attorney's fees. The Contractor appealed to the Court of Appeals (CA) and the CA modified the CIAC's award, deleting the actual, moral, and exemplary damages, but still awarding temperate damages for rebuilding the fence.

De Guzman filed a motion for reconsideration, which was denied. She then filed a petition for review with the Supreme Court, arguing that the evidence sufficiently established the amount of actual damages she can recover and that she is entitled to moral and exemplary damages.

ISSUES:

1. Whether the Contractor is liable for damages caused by the collapse of the perimeter fence.

2. Whether the award of actual damages is proper.

3. Whether De Guzman is entitled to an increase in the amount of temperate damages awarded for the damaged portions of the perimeter fence.

4. Whether De Guzman is entitled to the award of moral damages.

5. Whether De Guzman is entitled to the award of exemplary damages.

6. Whether there was a deviation in the construction of the perimeter fence.

7. Whether the deviation had an effect on the columns.

8. Whether the claimant approved the deviation.

9. Whether the claimant is entitled to attorney's fees.

10. Whether the contractor's counterclaim for damages should be awarded.

RULING:

1. Yes, the Contractor is liable for damages caused by the collapse of the perimeter fence. The Contractor was found to be negligent in failing to place weepholes on the collapsed portion of the fence. The omission of weepholes was a result of the Contractor's failure to exercise proper supervision over the work. The Contractor cannot be relieved from liability for the damages caused.

2. No, the award of actual damages is not proper. The claimant failed to provide concrete evidence to support the amount of actual damage incurred. The handwritten calculation of reconstruction costs attached to an affidavit was ruled inadmissible as hearsay evidence. Therefore, the court disregarded the affidavit and found no tangible document or concrete evidence to support the award of actual damages.

3. The Court held that the amount of temperate damages awarded for the damaged portions of the perimeter fence should be increased to ?150,000.00.

4. The Court held that De Guzman is not entitled to the award of moral damages. The record lacks proof that she actually suffered the necessary mental and emotional anguish required for the award of moral damages.

5. The Court held that De Guzman is not entitled to the award of exemplary damages as there was no evidence to show that the Contractor acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

6. The Court found that there was a deviation in the construction of the perimeter fence.

7. The Court held that the deviation had no effect on the columns as the factor of safety was still well provided for.

8. The Court determined that the claimant approved the deviation as they were present and observing the works during the construction.

9. The Court recognized the claimant's entitlement to reasonable attorney's fees due to the defendant's unjust refusal to satisfy the claimant's valid and just claim, which compelled them to litigate and incur expenses to protect their interest.

10. The Court affirmed the dismissal of the contractor's counterclaim for damages as it was not among the issues raised in the petition.

PRINCIPLES:

• Negligence of the obligor consists of failure to exercise due care and prudence in the performance of an obligation.

• Findings of fact of quasi-judicial bodies, such as construction arbitrators, are generally accorded respect and finality, especially when affirmed by the Court of Appeals.

• Actual or compensatory damages must be proven with adequate and competent proof, relying on the best evidence obtainable.

• Hearsay evidence, such as affidavits prepared by someone other than the affiant, are generally rejected unless the affiants themselves testify and are subject to cross-examination.

• Temperate damages may be awarded when pecuniary loss has been suffered but the exact amount cannot be proven with certainty.

• To be entitled to the award of moral damages, there must be a clear showing that the claimant actually experienced mental and emotional sufferings.

• Moral damages cannot be recovered if the destruction is not the proximate result of the defendant's act or omission.

• The breach of contract must be fraudulent or made in bad faith for the award of moral damages.

• Exemplary damages can only be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

• In the absence of stipulation, attorney's fees and expenses of litigation can be recovered when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. (Article 2208 of the Civil Code)

• It is a sound policy not to set a premium on the right to litigate.

• Damages cannot be awarded for claims or issues not raised in the petition.