G.R. No.

161921 July 17, 2013 If such was petitioner's only intention, then she should have advised
respondent spouses before or immediately after submitting her request
for disconnection, telling them that her request was simply to force them
JOYCE V. ARDIENTE, PETITIONER,
to comply with their obligation under their Memorandum of Agreement.
vs.
But she did not. What made matters worse is the fact that COWD
SPOUSES JAVIER AND MA. THERESA PASTORFIDE, CAGAYAN DE ORO
undertook the disconnection also without prior notice and even failed to
WATER DISTRICT AND GASPAR GONZALEZ,* JR., RESPONDENTS.
reconnect the Spouses Pastorfide’s water supply despite payment of their
arrears. There was clearly an abuse of right on the part of petitioner, COWD
FACTS and Gonzalez. They are guilty of bad faith.

Joyce V. Ardiente and her husband Dr. Roberto S. Ardiente are owners of
a housing unit at Emily Homes, Balulang, Cagayan de Oro City with a lot
area of one hundred fifty-three (153) square meters. Joyce Ardiente
entered into a Memorandum of Agreement selling, transferring and
conveying in favor of Ma. Theresa Pastorfide all their rights and interests
in the housing unit at Emily Homes in consideration of ₱70,000.00. The
Memorandum of Agreement carries a stipulation:
"4. That the water and power bill of the subject property shall be for the
account of the Second Party (Ma. Theresa Pastorfide) effective June 1,
1994."
Ma. Theresa Pastorfide's assumption of the payment of the mortgage loan
secured by Joyce Ardiente from the National Home Mortgage. For four (4)
years, Ma. Theresa's use of the water connection in the name of Joyce
Ardiente was never questioned until without notice, the water connection
of Ma. Theresa was cut off.
The principle of abuse of rights as enshrined in Article 19 of the Civil Code
provides that every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
One of the more notable innovations of the New Civil Code is the
codification of "some basic principles that are to be observed for the
rightful relationship between human beings and for the stability of the
social order." [REPORT ON THE CODE COMMISSION ON THE PROPOSED
CIVIL CODE OF THE PHILIPPINES, p. 39]. The framers of the Code, seeking
to remedy the defect of the old Code which merely stated the effects of
the law, but failed to draw out its spirit, incorporated certain fundamental
precepts which were "designed to indicate certain norms that spring from
the fountain of good conscience" and which were also meant to serve as
"guides for human conduct [that] should run as golden threads through
society, to the end that law may approach its supreme ideal, which is the
sway and dominance of justice." (Id.) Foremost among these principles is
that pronounced in Article 19 x x x.

Proceeding to the office of the Cagayan de Oro Water District (COWD) to

complain, a certain Mrs. Madjos told Ma. Theresa that she was delinquent
for three (3) months. Ma. Mrs. Madjos later told her that it was at the
instance of Joyce Ardiente that the water line was cut off. Ma. Theresa paid
the delinquent bills. Ma. Theresa wrote a letter to the COWD to explain
who authorized the cutting of the water line. COWD, through the general
manager answered the letter and reiterated that it was at the instance of
Joyce Ardiente that the water line was cut off. Aggrieved, Ma. Theresa
Pastorfide filed complaint for damages against petitioner, COWD and its
manager Gaspar Gonzalez
In the meantime, Ma. Theresa Pastorfide's water line was only restored
and reconnected when the trial court issued a writ of preliminary
mandatory injunction.After trial, the RTC held in favor of Spouses
Pastorfide,
ISSUE
WON ARDIENTE SHOULD BE HELD LIABLE FOR DAMAGES FOR THE
DISCONNECTION OF WATER SUPPLY OF THE SPOUSES PASTORFIDE.
xxxx
This article, known to contain what is commonly referred to as the
principle of abuse of rights, sets certain standards which must be observed
not only in the exercise of one's rights, but also in the performance of one's
duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. The law,
therefore, recognizes a primordial limitation on all rights; that in their
exercise, the norms of human conduct set forth in Article 19 must be
observed. A right, though by itself legal because recognized or granted by
law as such, may nevertheless become the source of some illegality. When
a right is exercised in a manner which does not conform with the norms
enshrined in Article 19 and results in damage to another, a legal wrong is
thereby committed for which the wrongdoer must be held responsible. But
while Article 19 lays down a rule of conduct for the government of human
relations and for the maintenance of social order, it does not provide a
remedy for its violation. Generally, an action for damages under either
Article 20 or Article 21 would be proper.

HELD

YES.

Petitioner insists that she should not be held liable for the disconnection
of respondent spouses' water supply, because she had no participation in
the actual disconnection. However, she admitted in the present petition
that it was she who requested COWD to disconnect the Spouses
Pastorfide's water supply.

This was confirmed by COWD and Gonzalez in their cross-claim against

petitioner. While it was COWD which actually discontinued respondent
spouses' water supply, it cannot be denied that it was through the instance
of petitioner that the Spouses Pastorfide's water supply was disconnected
in the first place.

It is true that it is within petitioner's right to ask and even require the
Spouses Pastorfide to cause the transfer of the former's account with
COWD to the latter's name pursuant to their Memorandum of Agreement.
However, the remedy to enforce such right is not to cause the
disconnection of the respondent spouses' water supply. The exercise of a
right must be in accordance with the purpose for which it was established
and must not be excessive or unduly harsh; there must be no intention to
harm another.15 Otherwise, liability for damages to the injured party will
attach.16 In the present case, intention to harm was evident on the part of
petitioner when she requested for the disconnection of respondent
spouses’ water supply without warning or informing the latter of such
request. Petitioner claims that her request for disconnection was based on
the advise of COWD personnel and that her intention was just to compel
the Spouses Pastorfide to comply with their agreement that petitioner's
account with COWD be transferred in respondent spouses' name.
G.R. No. 184315 November 28, 2011
ALFONSO T. YUCHENGCO, Petitioner,
vs.
THE MANILA CHRONICLE PUBLISHING CORPORATION, NOEL CABRERA,
GERRY ZARAGOZA, DONNA GATDULA, RODNEY P. DIOLA, RAUL VALINO,
THELMA SAN JUAN and ROBERT COYIUTO, JR.,Respondents.
R E S O L U T I ON
PERALTA, J.:
For resolution is the Motion for Reconsideration1 dated January 15, 2010,
filed by the respondents, and the Supplemental Motion for
Reconsideration2 of respondent Robert Coyiuto, Jr., dated March 17, 2010,
from the Decision rendered in favor of petitioner Alfonso T. Yuchengco,
dated November 25, 2009.
At the outset, a brief narration of the factual and procedural antecedents
that transpired and led to the filing of the motions is in order.
The present controversy arose when in the last quarter of 1993, several
allegedly defamatory articles against petitioner were published in The
Manila Chronicle by Chronicle Publishing Corporation. Consequently,
petitioner filed a complaint against respondents before the Regional Trial
Court (RTC) of Makati City, Branch 136, docketed as Civil Case No. 94-1114,
under three separate causes of action, namely: (1) for damages due to
libelous publication against Neal H. Cruz, Ernesto Tolentino, Noel Cabrera,
Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino, Rodney P.
Diola, all members of the editorial staff and writers of The Manila
Chronicle, and Chronicle Publishing; (2) for damages due to abuse of right
against Robert Coyiuto, Jr. and Chronicle Publishing; and (3) for attorney’s
fees and costs against all the respondents.
On November 8, 2002, the trial court rendered a Decision3 in favor of
petitioner.
Aggrieved, respondents sought recourse before the Court of Appeals (CA).
On March 18, 2008, the CA rendered a Decision4 affirming in toto the
decision of the RTC.
Respondents then filed a Motion for Reconsideration5 praying that the CA
reconsider its earlier decision and reverse the decision of the trial court.
On August 28, 2008, the CA rendered an Amended Decision6 reversing the
earlier Decision.
Subsequently, petitioner filed the present recourse before this Court which
puts forth the following assignment of errors:
A. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR IN RULING THAT THE CASE OF ARTURO BORJAL, ET AL. V. COURT OF
APPEALS, ET AL., CITED BY RESPONDENTS IN THEIR MOTION FOR
RECONSIDERATION, WARRANTED THE REVERSAL OF THE CA DECISION
DATED MARCH 18, 2008.
B. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR IN RULING THAT THE SUBJECT ARTICLES IN THE COMPLAINT FALL
WITHIN THE CONCEPT OF PRIVILEGED COMMUNICATION.
C. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE
ERROR IN RULING THAT PETITIONER IS A PUBLIC OFFICIAL OR PUBLIC
FIGURE.7
On November 25, 2009, this Court rendered a Decision partially granting
the petition.
Respondents later filed a Motion for Reconsideration dated January 15,
2010, which the Court denied in the Resolution8 dated March 3, 2010.
Meanwhile, respondent Coyiuto, Jr. also filed a Motion for Leave to File
Supplemental Motion for Reconsideration with Attached Supplemental
Motion, both dated March 17, 2010.
On April 21, 2010, this Court issued a Resolution9 resolving to recall the
Resolution dated March 3, 2010; grant Coyiuto, Jr.’s motion for leave to file
supplemental motion for reconsideration; note the supplemental motion
for reconsideration; and require petitioner to comment on the motion for
reconsideration and supplemental motion for reconsideration.
On June 22, 2010, petitioner filed his Comment on the Motion for
Reconsideration10 dated January 15, 2010 and Comment on respondent
Coyiuto, Jr.’s Supplemental Motion for Reconsideration11 dated 17 March
2010.
In the Motion for Reconsideration, respondents moved for a
reconsideration of the earlier decision on the following grounds:
1. MALICE-IN-FACT HAS NOT BEEN PROVEN.
2. PETITIONER IS A "PUBLIC FIGURE."
3. THE SUBJECT OF THE PUBLICATIONS CONSTITUTES FAIR
COMMENTS, ON PUBLIC ISSUES, ON MATTERS OF PUBLIC
INTEREST AND NATIONAL CONCERN.
4. RESPONDENTS DID NOT ACT IN A RECKLESS MANNER OR IN
COMPLETE DISREGARD OF THE TRUTH OF THE MATTERS
COVERED BY THE SUBJECT PUBLICATIONS.
5. THE PROTECTIVE MANTLE OF QUALIFIED PRIVILEGED
COMMUNICATIONS PROTECTS THE SUBJECT PUBLICATIONS.
6. THERE IS NO LEGAL OR EVIDENTIARY BASIS TO HOLD DONNA
GATDULA, JOINTLY AND SEVERALLY, LIABLE FOR THE SUBJECT
PUBLICATIONS, TOGETHER WITH THE EDITORS AND STAFF OF
THE NEWSPAPER.
7. THERE IS NO EVIDENCE TO HOLD THELMA SAN JUAN
RESPONSIBLE FOR THE SUBJECT PUBLICATIONS.
8. THE "QUICK NOTES" COLUMN OF MR. RAUL VALINO ARE
BASED ON FACTS; THUS, NOT LIBELOUS.
9. ROBERT COYIUTO, JR. IS NOT IMPLEADED WITH THE EDITORS
AND STAFF MEMBERS OF THE MANILA CHRONICLE, BUT IS SUED
IN "HIS PERSONAL CAPACITY" FOR AN "ABUSE OF RIGHT" AND
NO EVIDENCE LINKS HIM TO THE SUBJECT PUBLICATIONS.
10. THE AWARDED DAMAGES ARE EXCESSIVE, EQUITABLE AND
UNJUSTIFIED.12
In his Supplemental Motion for Reconsideration, Coyiuto, Jr. raises the
following arguments:
I.
WITH ALL DUE RESPECT, THIS HONORABLE COURT OBVIOUSLY
OVERLOOKED THE FACT THAT IN PETITIONER’S AMENDED
COMPLAINT (DATED OCTOBER 17, 1994), RESPONDENT ROBERT
COYIUTO, JR. WAS NOT SUED FOR DAMAGES ALLEGEDLY DUE
TO "LIBELOUS PUBLICATIONS" (FIRST CAUSE OF ACTION). HE
WAS SUED, HOWEVER, IN HIS PERSONAL CAPACITY FOR "ABUSE
OF RIGHT" (SECOND CAUSE OF ACTION) ALLEGEDLY, AS
"CHAIRMAN" OF THE BOARD, "OFFICER," "PRINCIPAL OWNER,"
OF THE MANILA CHRONICLE PUBLISHING CORPORATION
UNDER ARTICLES 19 AND 20 OF THE CIVIL CODE. AS SUCH, THE
IMPOSITION OF MORAL (₱25 MILLION PESOS) AND EXEMPLARY
(₱10 MILLION PESOS) DAMAGES AGAINST RESPONDENT
COYIUTO, JR. HAS NO BASIS IN LAW AND CONTRARY TO THE
SPECIFIC PROVISIONS OF ARTICLES 2219 AND 2229, IN
RELATION TO ARTICLE 2233, RESPECTIVELY, OF THE CIVIL CODE
AS WILL BE ELUCIDATED HEREUNDER.
II.
WITH ALL DUE RESPECT, APART FROM THE SELF-
SERVING/UNILATERAL ALLEGATION IN PARAGRAPH 3.11 OF
THE AMENDED COMPLAINT (ANNEX "C" OF PETITION FOR
REVIEW), NO IOTA OF EVIDENCE WAS ADDUCED ON TRIAL IN
SUPPORT OF THE ALLEGATION THAT RESPONDENT COYIUTO,
JR. WAS "CHAIRMAN", "PRINCIPAL OWNER" AND "OFFICER" OF
RESPONDENT MANILA CHRONICLE PUBLISHING CORPORATION.
SEC DOCUMENTS SHOW THE CONTRARY, AS WILL BE
DISCUSSED HEREUNDER. SO HOW COULD RESPONDENT
COYIUTO, JR. BE IMPLEADED TO HAVE "ABUSED HIS RIGHT AS A
NON-CHAIRMAN, NON-STOCKHOLDER, NON-OFFICER OF
RESPONDENT MANILA CHRONICLE PUBLISHING
CORPORATION? IT IS FUNDAMENTAL THAT THE BURDEN OF
PROOF RESTS ON THE PARTY ASSERTING A FACT OR
ESTABLISHING A CLAIM (RULE 131, REVISED RULES OF COURT).13
From the foregoing, it is apparent that the motion for reconsideration
generally restates and reiterates the arguments, which were previously
advanced by respondents and does not present any substantial reasons,
which were not formerly invoked and passed upon by the Court.
However, from the supplemental motion for reconsideration, it is apparent
that Coyiuto, Jr. raises a new matter which has not been raised in the
proceedings below. This notwithstanding, basic equity dictates that
Coyiuto, Jr. should be given all the opportunity to ventilate his arguments
in the present action, but more importantly, in order to write finis to the
present controversy. It should be noted that the Resolution denying the
Motion for Reconsideration was later recalled by this Court in the
Resolution dated March 3, 2010, and therein, petitioner was given the
opportunity to refute Coyiuto, Jr.’s arguments by filing his comment on the
motion for reconsideration and the supplemental motion for
reconsideration, which petitioner complied with.
From these Comments and contrary to Coyiuto, Jr.’s contention, it was
substantially established that he was the Chairman of Manila Chronicle
Publishing Corporation when the subject articles were published. Coyiuto,
Jr. even admitted this fact in his Reply and Comment on Request for
Admission,14 to wit:
4. Defendant Robert Coyiuto Jr. ADMITS that he was the Chairman of the
Board but not President of the Manila Chronicle during the period
Novemeber (sic) to December 1993.
5. Defendant Robert Coyiuto Jr. DENIES paragraph 11. He has already
conveyed such denial to plaintiff in the course of the pre-trial. It was The
Manila Chronicle, a newspaper of general circulation, of which he is,
admittedly Chairman of the Board, that published the items marked as
plaintiff’s Exhibits A, B, C, D, E, F, and G.
xxxx
12. This case, based on plaintiff’s Amended Complaint, is limited to the
publications in The Manila Chronicle marked plaintiff’s Exhibits "A" to "G",
consecutively, published by defendant Manila Chronicle. Thus, only the
question of whether Mr. Robert Coyiuto, Jr. was Chairman and President
of defendant Manila Chronicle, during these publications and whether he
caused these publications, among all of plaintiffs’ queries, are relevant and
material to this case. And defendant Robert Coyiuto, Jr. has answered that:
"Yes", he was Chairman of the Board. "No", he was never President of The
Manila Chronicle. "No", he did not cause the publications in The Manila
Chronicle: it was the Manila Chronicle that published the news items
adverted to.15
Both the trial court and the CA affirmed this fact. We reiterate that factual
findings of the trial court, when adopted and confirmed by the CA, are
binding and conclusive on this Court and will generally not be reviewed on
appeal. While this Court has recognized several exceptions 16 to this rule,
none of these exceptions exists in the present case. Accordingly, this Court
finds no reason to depart from the findings of fact of the trial court and the
CA.
More importantly and contrary again to Coyiuto, Jr.’s contention, the cause
of action of petitioner based on "abuse of rights," or Article 19, in relation
to Article 20 of the Civil Code, warrants the award of damages.
The principle of abuse of rights as enshrined in Article 19 of the Civil Code
provides:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
This provision of law sets standards which must be observed in the exercise
of one’s rights as well as in the performance of its duties, to wit: to act with
justice; give everyone his due; and observe honesty and good faith.17
In Globe Mackay Cable and Radio Corporation v. Court of Appeals,18 it was
elucidated that while Article 19 "lays down a rule of conduct for the
government of human relations and for the maintenance of social order, it
does not provide a remedy for its violation. Generally, an action for
damages under either Article 20 or Article 21 would be proper." The Court
said:
One of the more notable innovations of the New Civil Code is the
codification of "some basic principles that are to be observed for the
rightful relationship between human beings and for the stability of the
social order." [REPORT ON THE CODE COMMISSION ON THE PROPOSED
CIVIL CODE OF THE PHILIPPINES, p. 39]. The framers of the Code, seeking
to remedy the defect of the old Code which merely stated the effects of
the law, but failed to draw out its spirit, incorporated certain fundamental
precepts which were "designed to indicate certain norms that spring from
the fountain of good conscience" and which were also meant to serve as
"guides for human conduct [that] should run as golden threads through
society, to the end that law may approach its supreme ideal, which is the
sway and dominance of justice." (Id.) Foremost among these principles is
that pronounced in Article 19 which provides:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
This article, known to contain what is commonly referred to as the
principle of abuse of rights, sets certain standards which must be observed
not only in the exercise of one's rights, but also in the performance of one's
duties. These standards are the following: to act with justice; to give
everyone his due; and to observe honesty and good faith. The law,
therefore, recognizes a primordial limitation on all rights; that in their
exercise, the norms of human conduct set forth in Article 19 must be
observed. A right, though by itself legal because recognized or granted by
law as such, may nevertheless become the source of some illegality. When
a right is exercised in a manner which does not conform with the norms
enshrined in Article 19 and results in damage to another, a legal wrong is
thereby committed for which the wrongdoer must be held responsible. But
while Article 19 lays down a rule of conduct for the government of human
relations and for the maintenance of social order, it does not provide a
remedy for its violation. Generally, an action for damages under either
Article 20 or Article 21 would be proper.19
Corollarilly, Article 20 provides that "every person who, contrary to law,
willfully or negligently causes damage to another shall indemnify the latter
for the same." It speaks of the general sanctions of all other provisions of
law which do not especially provide for its own sanction. When a right is
exercised in a manner which does not conform to the standards set forth
in the said provision and results in damage to another, a legal wrong is
thereby committed for which the wrongdoer must be responsible. 20 Thus,
if the provision does not provide a remedy for its violation, an action for
damages under either Article 20 or Article 21 of the Civil Code would be
proper.
The question of whether or not the principle of abuse of rights has been
violated resulting in damages under Article 20 or other applicable provision
of law, depends on the circumstances of each case. In the present case, it
was found that Coyiuto, Jr. indeed abused his rights as Chairman of The
Manila Chronicle, which led to the publication of the libelous articles in the
said newspaper, thus, entitling petitioner to damages under Article 19, in
relation to Article 20.
Consequently, the trial court and the CA correctly awarded moral damages
to petitioner. Such damages may be awarded when the transgression is the
cause of petitioner’s anguish.21 Further, converse to Coyiuto, Jr.’s
argument, although petitioner is claiming damages for violation of Articles
19 and 20 of the Civil Code, still such violations directly resulted in the
publication of the libelous articles in the newspaper, which, by analogy, is
one of the ground for the recovery of moral damages under (7) of Article
2219.22
However, despite the foregoing, the damages awarded to petitioner
appear to be too excessive and warrants a second hard look by the Court.
While there is no hard-and-fast rule in determining what would be a fair
and reasonable amount of moral damages, the same should not be
palpably and scandalously excessive. Moral damages are not intended to
impose a penalty to the wrongdoer, neither to enrich the claimant at the
expense of the defendant.23
Even petitioner, in his Comment24 dated June 21, 2010, agree that moral
damages "are not awarded in order to punish the respondents or to make
the petitioner any richer than he already is, but to enable the latter to find
some cure for the moral anguish and distress he has undergone by reason
of the defamatory and damaging articles which the respondents wrote and
published."25 Further, petitioner cites as sufficient basis for the award of
damages the plain reason that he had to "go through the ordeal of
defending himself everytime someone approached him to ask whether or
not the statements in the defamatory article are true."
In Philippine Journalists, Inc. (People’s Journal) v.
Thoenen,26 citing Guevarra v. Almario,27 We noted that the damages in a
libel case must depend upon the facts of the particular case and the sound
discretion of the court, although appellate courts were "more likely to
reduce damages for libel than to increase them." So it must be in this case.
Moral damages are not a bonanza. They are given to ease the defendant’s b. the amount of One Million Pesos (₱1,000,000.00)
grief and suffering. Moral damages should be reasonably approximate to as exemplary damages;
the extent of the hurt caused and the gravity of the wrong done. 28 The
Court, therefore, finds the award of moral damages in the first and second
3. On the Third Cause of Action, ordering all defendants to pay
cause of action in the amount of ₱2,000,000.00 and ₱25,000,000.00,
plaintiff Yuchengco, jointly and severally, the amount of Two
respectively, to be too excessive and holds that an award of ₱1,000,000.00
Hundred Thousand Pesos (₱200,000.00) as attorney’s fee and
and ₱10,000,000.00, respectively, as moral damages are more reasonable.
legal costs.

As for exemplary damages, Article 2229 provides that exemplary damages

Costs against respondents.
may be imposed by way of example or correction for the public good.
Nonetheless, exemplary damages are imposed not to enrich one party or
impoverish another, but to serve as a deterrent against or as a negative SO ORDERED.
incentive to curb socially deleterious actions.29 On this basis, the award of
exemplary damages in the first and second cause of action in the amount
of ₱500,000.00 and ₱10,000,000.00, respectively, is reduced to
₱200,000.00 and ₱1,000,000.00, respectively.

On the matter of attorney’s fees and costs of suit, Article 2208 of the same
Code provides, among others, that attorney’s fees and expenses of
litigation may be recovered in cases when exemplary damages are
awarded and where the court deems it just and equitable that attorney’s
fees and expenses of litigation should be recovered. In any event, however,
such award must be reasonable, just and equitable.30 Thus, the award of
attorney’s fees and costs is reduced from ₱1,000,000.00 to ₱200,000.00.

One final note, the case against respondent was one for damages based on
the publication of libelous articles against petitioner; hence, only civil in
nature. The rule is that a party who has the burden of proof in a civil case
must establish his cause of action by a preponderance of evidence. Thus,
respondents’ liability was proven only on the basis of preponderance of
evidence, which is quite different from a criminal case for libel where proof
beyond reasonable doubt must be established.

Corollarilly, under Article 360 of the Revised Penal Code, the person who
"caused the publication" of a defamatory article shall be responsible for
the same. Hence, Coyiuto, Jr. should have been held jointly and solidarily
liable with the other respondents in the first cause of action under this
article and not on the basis of violation of the principle of abuse of rights
founded on Articles 19 and 20 of the Civil Code. Because of the exclusion
of Coyiuto, Jr. in the first cause of action for libel, he cannot be held
solidarily liable with the other respondents in the first cause of action.
Nonetheless, since damage to petitioner was in fact established
warranting the award of moral and exemplary damages, the same could
only be awarded based on petitioner’s second cause of action impleading
Coyiuto, Jr. for violation of the principle of abuse of right.

It did not escape the attention of the Court that in filing two different
causes of action based on the same published articles, petitioner intended
the liability of Coyiuto, Jr. to be different from the other respondents. It
can be inferred that if Coyiuto, Jr. was impleaded in the first cause of action
for recovery of the civil liability in libel, petitioner could not have prayed
for higher damages, considering that the other respondents, who are
jointly and severally liable with one another, are not in the same financial
standing as Coyiuto, Jr. Petitioner, in effect, had spared the other
respondents from paying such steep amount of damages, while at the
same time prayed that Coyiuto, Jr. pay millions of pesos by way of moral
and exemplary damages in the second cause of action.

WHEREFORE, the Motion for Reconsideration and Supplemental Motion

for Reconsideration are PARTIALLY GRANTED.1âwphi1 The Decision of this
Court, dated November 25, 2009, is MODIFIED to read as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered as

follows:

1. On the First Cause of Action, ordering defendants Chronicle

Publishing, Neil H. Cruz, Ernesto Tolentino, Noel Cabrera,
Thelma San Juan, Gerry Zaragoza, Donna Gatdula, Raul Valino
and Rodney Diola, to pay plaintiff Yuchengco, jointly and
severally:

a. the amount of One Million Pesos (₱1,000,000.00)

as moral damages; and

b. the amount of Two Hundred Thousand Pesos

(₱200,000.00) as exemplary damages;

2. On the Second Cause of Action, ordering defendants Robert

Coyiuto, Jr. and Chronicle Publishing to pay plaintiff
Yuchengco, jointly and severally:

a. the amount of Ten Million Pesos

(₱10,000,000.00) as moral damages; and
G.R. No. 164703 May 4, 2010
ALLAN C. GO, doing business under the name and style "ACG Express
Liner," Petitioner,
vs.
MORTIMER F. CORDERO, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 164747
MORTIMER F. CORDERO, Petitioner,
vs.
ALLAN C. GO, doing business under the name and style "ACG Express
Liner," FELIPE M. LANDICHO and VINCENT D. TECSON, Respondents.
DECISION
VILLARAMA, JR., J.:
For review is the Decision1 dated March 16, 2004 as modified by the
Resolution2 dated July 22, 2004 of the Court of Appeals (CA) in CA-G.R. CV
No. 69113, which affirmed with modifications the Decision3 dated May 31,
2000 of the Regional Trial Court (RTC) of Quezon City, Branch 85 in Civil
Case No. 98-35332.
The factual antecedents:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana
Marketing Corporation (Pamana), ventured into the business of marketing
inter-island passenger vessels. After contacting various overseas fast ferry
manufacturers from all over the world, he came to meet Tony Robinson,
an Australian national based in Brisbane, Australia, who is the Managing
Director of Aluminium Fast Ferries Australia (AFFA).
Between June and August 1997, Robinson signed documents appointing
Cordero as the exclusive distributor of AFFA catamaran and other fast ferry
vessels in the Philippines. As such exclusive distributor, Cordero offered for
sale to prospective buyers the 25-meter Aluminium Passenger catamaran
known as the SEACAT 25.4
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of
Allan C. Go who is the owner/operator of ACG Express Liner of Cebu City,
a single proprietorship, Cordero was able to close a deal for the purchase
of two (2) SEACAT 25 as evidenced by the Memorandum of Agreement
dated August 7, 1997.5 Accordingly, the parties executed Shipbuilding
Contract No. 7825 for one (1) high-speed catamaran (SEACAT 25) for the
price of US$1,465,512.00.6 Per agreement between Robinson and Cordero,
the latter shall receive commissions totalling US$328,742.00, or 22.43% of
the purchase price, from the sale of each vessel.7
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and
on one (1) occasion even accompanied Go and his family and Landicho, to
monitor the progress of the building of the vessel. He shouldered all the
expenses for airfare, food, hotel accommodations, transportation and
entertainment during these trips. He also spent for long distance
telephone calls to communicate regularly with Robinson, Go, Tecson and
Landicho.
However, Cordero later discovered that Go was dealing directly with
Robinson when he was informed by Dennis Padua of Wartsila Philippines
that Go was canvassing for a second catamaran engine from their company
which provided the ship engine for the first SEACAT 25. Padua told Cordero
that Go instructed him to fax the requested quotation of the second engine
to the Park Royal Hotel in Brisbane where Go was then staying. Cordero
tried to contact Go and Landicho to confirm the matter but they were
nowhere to be found, while Robinson refused to answer his calls. Cordero
immediately flew to Brisbane to clarify matters with Robinson, only to find
out that Go and Landicho were already there in Brisbane negotiating for
the sale of the second SEACAT 25. Despite repeated follow-up calls, no
explanation was given by Robinson, Go, Landicho and Tecson who even
made Cordero believe there would be no further sale between AFFA and
ACG Express Liner.
In a handwritten letter dated June 24, 1998, Cordero informed Go that such
act of dealing directly with Robinson violated his exclusive distributorship
and demanded that they respect the same, without prejudice to legal
action against him and Robinson should they fail to heed the
same.8 Cordero’s lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm,
also wrote ACG Express Liner assailing the fraudulent actuations and
misrepresentations committed by Go in connivance with his lawyers
(Landicho and Tecson) in breach of Cordero’s exclusive distributorship
appointment.9
Having been apprised of Cordero’s demand letter, Thyne & Macartney, the
lawyer of AFFA and Robinson, faxed a letter to ACCRA law firm asserting
that the appointment of Cordero as AFFA’s distributor was for the purpose
of one (1) transaction only, that is, the purchase of a high-speed catamaran
vessel by ACG Express Liner in August 1997. The letter further stated that
Cordero was offered the exclusive distributorship, the terms of which were
contained in a draft agreement which Cordero allegedly failed to return to
AFFA within a reasonable time, and which offer is already being revoked
by AFFA.10
As to the response of Go, Landicho and Tecson to his demand letter,
Cordero testified before the trial court that on the same day, Landicho,
acting on behalf of Go, talked to him over the telephone and offered to
amicably settle their dispute. Tecson and Landicho offered to convince Go
to honor his exclusive distributorship with AFFA and to purchase all vessels
for ACG Express Liner through him for the next three (3) years. In an effort
to amicably settle the matter, Landicho, acting in behalf of Go, set up a
meeting with Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m.
at the Mactan Island Resort Hotel lobby. On said date, however, only
Landicho and Tecson came and no reason was given for Go’s absence.
Tecson and Landicho proposed that they will convince Go to pay him
US$1,500,000.00 on the condition that they will get a cut of 20%. And so it
was agreed between him, Landicho and Tecson that the latter would give
him a weekly status report and that the matter will be settled in three (3)
to four (4) weeks and neither party will file an action against each other
until a final report on the proposed settlement. No such report was made
by either Tecson or Landicho who, it turned out, had no intention to do so
and were just buying time as the catamaran vessel was due to arrive from
Australia. Cordero then filed a complaint with the Bureau of Customs (BOC)
to prohibit the entry of SEACAT 25 from Australia based on misdeclaration
and undervaluation. Consequently, an Alert Order was issued by Acting
BOC Commissioner Nelson Tan for the vessel which in fact arrived on July
17, 1998. Cordero claimed that Go and Robinson had conspired to
undervalue the vessel by around US$500,000.00.11
On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to
hold Robinson, Go, Tecson and Landicho liable jointly and solidarily for
conniving and conspiring together in violating his exclusive distributorship
in bad faith and wanton disregard of his rights, thus depriving him of his
due commissions (balance of unpaid commission from the sale of the first
vessel in the amount of US$31,522.01 and unpaid commission for the sale
of the second vessel in the amount of US$328,742.00) and causing him
actual, moral and exemplary damages, including ₱800,000.00 representing
expenses for airplane travel to Australia, telecommunications bills and
entertainment, on account of AFFA’s untimely cancellation of the exclusive
distributorship agreement. Cordero also prayed for the award of moral and
exemplary damages, as well as attorney’s fees and litigation expenses.12
Robinson filed a motion to dismiss grounded on lack of jurisdiction over his
person and failure to state a cause of action, asserting that there was no
act committed in violation of the distributorship agreement. Said motion
was denied by the trial court on December 20, 1999. Robinson was likewise
declared in default for failure to file his answer within the period granted
by the trial court.13 As for Go and Tecson, their motion to dismiss based on
failure to state a cause of action was likewise denied by the trial court on
February 26, 1999.14 Subsequently, they filed their Answer denying that
they have anything to do with the termination by AFFA of Cordero’s
authority as exclusive distributor in the Philippines. On the contrary, they
averred it was Cordero who stopped communicating with Go in connection
with the purchase of the first vessel from AFFA and was not doing his part
in making progress status reports and airing the client’s grievances to his
principal, AFFA, such that Go engaged the services of Landicho to fly to
Australia and attend to the documents needed for shipment of the vessel
to the Philippines. As to the inquiry for the Philippine price for a Wartsila
ship engine for AFFA’s other on-going vessel construction, this was merely
requested by Robinson but which Cordero misinterpreted as indication
that Go was buying a second vessel. Moreover, Landicho and Tecson had
no transaction whatsoever with Cordero who had no document to show
any such shipbuilding contract. As to the supposed meeting to settle their
dispute, this was due to the malicious demand of Cordero to be given
US$3,000,000 as otherwise he will expose in the media the alleged
undervaluation of the vessel with the BOC. In any case, Cordero no longer
had cause of action for his commission for the sale of the second vessel
under the memorandum of agreement dated August 7, 1997 considering
the termination of his authority by AFFA’s lawyers on June 26, 1998.15
Pre-trial was reset twice to afford the parties opportunity to reach a
settlement. However, on motion filed by Cordero through counsel, the trial
court reconsidered the resetting of the pre-trial to another date for the
third time as requested by Go, Tecson and Landicho, in view of the latter’s
failure to appear at the pre-trial conference on January 7, 2000 despite due
notice. The trial court further confirmed that said defendants misled the
trial court in moving for continuance during the pre-trial conference held
on December 10, 1999, purportedly to go abroad for the holiday season
when in truth a Hold-Departure Order had been issued against
them.16 Accordingly, plaintiff Cordero was allowed to present his evidence
ex parte.
Cordero’s testimony regarding his transaction with defendants Go,
Landicho and Tecson, and the latter’s offer of settlement, was
corroborated by his counsel who also took the witness stand. Further,
documentary evidence including photographs taken of the June 29, 1998
meeting with Landicho, Tecson and Atty. Tabujara at Shangri-la’s Mactan
Island Resort, photographs taken in Brisbane showing Cordero, Go with his
family, Robinson and Landicho, and also various documents,
communications, vouchers and bank transmittals were presented to prove
that: (1) Cordero was properly authorized and actually transacted in behalf
of AFFA as exclusive distributor in the Philippines; (2) Cordero spent
considerable sums of money in pursuance of the contract with Go and ACG
Express Liner; and (3) AFFA through Robinson paid Cordero his
commissions from each scheduled payment made by Go for the first
SEACAT 25 purchased from AFFA pursuant to Shipbuilding Contract No.
7825.17
On May 31, 2000, the trial court rendered its decision, the dispositive
portion of which reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in
favor of Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe
Landicho, and Vincent Tecson. As prayed for, defendants are hereby
ordered to pay Plaintiff jointly and solidarily, the following:
1. On the First Cause of Action, the sum total of SIXTEEN
MILLION TWO HUNDRED NINETY ONE THOUSAND THREE
HUNDRED FIFTY TWO AND FORTY THREE CENTAVOS
(P16,291,352.43) as actual damages with legal interest from 25
June 1998 until fully paid;
2. On the Second Cause of Action, the sum of ONE MILLION
PESOS (P1,000,000.00) as moral damages;
3. On the Third Cause of Action, the sum of ONE MILLION PESOS
(P1,000,000.00) as exemplary damages; and
4. On the Fourth Cause of Action, the sum of ONE MILLION
PESOS (P1,000,000.00) as attorney’s fees;
Costs against the defendants.
SO ORDERED.18
Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming
that they have been unduly prejudiced by the negligence of their counsel
who was allegedly unaware that the pre-trial conference on January 28,
2000 did not push through for the reason that Cordero was then allowed
to present his evidence ex-parte, as he had assumed that the said ex-parte
hearing was being conducted only against Robinson who was earlier
declared in default.19 In its Order dated July 28, 2000, the trial court denied
the motion for new trial.20 In the same order, Cordero’s motion for
execution pending appeal was granted. Defendants moved to reconsider
the said order insofar as it granted the motion for execution pending
appeal.21 On August 8, 2000, they filed a notice of appeal.22
On August 18, 2000, the trial court denied the motion for reconsideration
and on August 21, 2000, the writ of execution pending appeal was
issued.23 Meanwhile, the notice of appeal was denied for failure to pay the
appellate court docket fee within the prescribed period.24 Defendants filed
a motion for reconsideration and to transmit the case records to the CA.25
On September 29, 2000, the CA issued a temporary restraining order at the
instance of defendants in the certiorari case they filed with said court
docketed as CA-G.R. SP No. 60354 questioning the execution orders issued
by the trial court. Consequently, as requested by the defendants, the trial
court recalled and set aside its November 6, 2000 Order granting the ex-
parte motion for release of garnished funds, cancelled the scheduled public
auction sale of levied real properties, and denied the ex-parte Motion for
Break-Open Order and Ex-Parte Motion for Encashment of Check filed by
Cordero.26 On November 29, 2000, the trial court reconsidered its Order
dated August 21, 2000 denying due course to the notice of appeal and
forthwith directed the transmittal of the records to the CA.27
On January 29, 2001, the CA rendered judgment granting the petition for
certiorari in CA-G.R. SP No. 60354 and setting aside the trial court’s orders
of execution pending appeal. Cordero appealed the said judgment in a
petition for review filed with this Court which was eventually denied under
our Decision dated September 17, 2002.28
On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court
(1) in allowing Cordero to present his evidence ex-parte after the
unjustified failure of appellants (Go, Tecson and Landicho) to appear at the
pre-trial conference despite due notice; (2) in finding that it was Cordero
and not Pamana who was appointed by AFFA as the exclusive distributor
in the Philippines of its SEACAT 25 and other fast ferry vessels, which is not
limited to the sale of one (1) such catamaran to Go on August 7, 1997; and
(3) in finding that Cordero is entitled to a commission per vessel sold for
AFFA through his efforts in the amount equivalent to 22.43% of the price
of each vessel or US$328,742.00, and with payments of US$297,219.91
having been made to Cordero, there remained a balance of US$31,522.09
still due to him. The CA sustained the trial court in ruling that Cordero is
entitled to damages for the breach of his exclusive distributorship
agreement with AFFA. However, it held that Cordero is entitled only to
commission for the sale of the first catamaran obtained through his efforts
with the remaining unpaid sum of US$31,522.09 or ₱1,355,449.90 (on the
basis of US$1.00=₱43.00 rate) with interest at 6% per annum from the time
of the filing of the complaint until the same is fully paid. As to the
₱800,000.00 representing expenses incurred by Cordero for
transportation, phone bills, entertainment, food and lodging, the CA
declared there was no basis for such award, the same being the logical and
necessary consequences of the exclusive distributorship agreement which
are normal in the field of sales and distribution, and the expenditures
having redounded to the benefit of the distributor (Cordero).
On the amounts awarded by the trial court as moral and exemplary
damages, as well as attorney’s fees, the CA reduced the same to
₱500,000.00, ₱300,000.00 and ₱50,000.00, respectively. Appellants were
held solidarily liable pursuant to the provisions of Article 1207 in relation
to Articles 19, 20, 21 and 22 of the New Civil Code. The CA further ruled
that no error was committed by the trial court in denying their motion for
new trial, which said court found to be pro forma and did not raise any
substantial matter as to warrant the conduct of another trial.
By Resolution dated July 22, 2004, the CA denied the motions for
reconsideration respectively filed by the appellants and appellee, and
affirmed the Decision dated March 16, 2004 with the sole modification that
the legal interest of 6% per annum shall start to run from June 24, 1998
until the finality of the decision, and the rate of 12% interest per annum
shall apply once the decision becomes final and executory until the
judgment has been satisfied.
The case before us is a consolidation of the petitions for review under Rule
45 separately filed by Go (G.R. No. 164703) and Cordero (G.R. No. 164747)
in which petitioners raised the following arguments:
G.R. No. 164703
(Petitioner Go)
I. THE HONORABLE COURT OF APPEALS DISREGARDED THE RULES OF
COURT AND PERTINENT JURISPRUDENCE AND ACTED WITH GRAVE ABUSE
OF DISCRETION IN NOT RULING THAT THE RESPONDENT IS NOT THE REAL
PARTY-IN-INTEREST AND IN NOT DISMISSING THE INSTANT CASE ON THE
GROUND OF LACK OF CAUSE OF ACTION;
II. THE HONORABLE COURT OF APPEALS IGNORED THE LAW AND
JURISPRUDENCE AND ACTED WITH GRAVE ABUSE OF DISCRETION IN
HOLDING HEREIN PETITIONER RESPONSIBLE FOR THE BREACH IN THE
ALLEGED EXCLUSIVE DISTRIBUTORSHIP AGREEMENT WITH ALUMINIUM
FAST FERRIES AUSTRALIA;
III. THE HONORABLE APPELLATE COURT MISAPPLIED THE LAW AND ACTED
WITH GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER LIABLE IN
SOLIDUM WITH THE CO-DEFENDANTS WITH RESPECT TO THE CLAIMS OF
RESPONDENT;
IV. THE HONORABLE COURT OF APPEALS MISAPPLIED LAW AND
JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN IT FOUND
PETITIONER LIABLE FOR UNPAID COMMISSIONS, DAMAGES, ATTORNEY’S
FEES, AND LITIGATION EXPENSES; and
V. THE HONORABLE APPELLATE COURT ACTED CONTRARY TO LAW AND
JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN IT
EFFECTIVELY DEPRIVED HEREIN PETITIONER OF HIS RIGHT TO DUE PROCESS
BY AFFIRMING THE LOWER COURT’S DENIAL OF PETITIONER’S MOTION
FOR NEW TRIAL.29
G.R. No. 164747
(Petitioner Cordero)
I.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE JUDGMENT OF
THE TRIAL COURT AWARDING PETITIONER ACTUAL DAMAGES FOR HIS
COMMISSION FOR THE SALE OF THE SECOND VESSEL, SINCE THERE IS
SUFFICIENT EVIDENCE ON RECORD WHICH PROVES THAT THERE WAS A
SECOND SALE OF A VESSEL.
A. THE MEMORANDUM OF AGREEMENT DATED 7 AUGUST 1997 PROVIDES
THAT RESPONDENT GO WAS CONTRACTUALLY BOUND TO BUY TWO (2)
VESSELS FROM AFFA.
B. RESPONDENT GO’S POSITION PAPER AND COUNTER-
AFFIDAVIT/POSITION PAPER THAT WERE FILED BEFORE THE BUREAU OF
CUSTOMS, ADMITS UNDER OATH THAT HE HAD INDEED PURCHASED A
SECOND VESSEL FROM AFFA.
C. RESPONDENTS ADMITTED IN THEIR PRE-TRIAL BRIEF THAT THEY HAD
PURCHASED A SECOND VESSEL.
II.
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER IS NOT
ENTITLED TO HIS COMMISSIONS FOR THE PURCHASE OF A SECOND VESSEL,
SINCE IT WAS PETITIONER’S EFFORTS WHICH ACTUALLY FACILITATED AND
SET-UP THE TRANSACTION FOR RESPONDENTS.
III.
THE COURT OF APPEALS ERRED IN NOT IMPOSING THE PROPER LEGAL
INTEREST RATE ON RESPONDENTS’ UNPAID OBLIGATION WHICH SHOULD
BE TWELVE PERCENT (12%) FROM THE TIME OF THE BREACH OF THE
OBLIGATION.
IV.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE ORIGINAL
AMOUNT OF CONSEQUENTIAL DAMAGES AWARDED TO PETITIONER BY
THE TRIAL COURT CONSIDERING THE BAD FAITH AND FRAUDULENT
CONDUCT OF RESPONDENTS IN MISAPPROPRIATING THE MONEY OF
PETITIONER.30
The controversy boils down to two (2) main issues: (1) whether petitioner
Cordero has the legal personality to sue the respondents for breach of
contract; and (2) whether the respondents may be held liable for damages
to Cordero for his unpaid commissions and termination of his exclusive
distributorship appointment by the principal, AFFA.
I. Real Party-in-Interest
First, on the issue of whether the case had been filed by the real party-in-
interest as required by Section 2, Rule 3 of the Rules of Court, which
defines such party as the one (1) to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit. The purposes of
this provision are: 1) to prevent the prosecution of actions by persons
without any right, title or interest in the case; 2) to require that the actual
party entitled to legal relief be the one to prosecute the action; 3) to avoid
a multiplicity of suits; and 4) to discourage litigation and keep it within
certain bounds, pursuant to sound public policy.31 A case is dismissible for
lack of personality to sue upon proof that the plaintiff is not the real party-
in-interest, hence grounded on failure to state a cause of action.32
On this issue, we agree with the CA in ruling that it was Cordero and not
Pamana who is the exclusive distributor of AFFA in the Philippines as
shown by the Certification dated June 1, 1997 issued by Tony
Robinson.33 Petitioner Go mentions the following documents also signed
by respondent Robinson which state that "Pamana Marketing Corporation
represented by Mr. Mortimer F. Cordero" was actually the exclusive
distributor: (1) letter dated 1 June 199734; (2) certification dated 5 August
199735; and (3) letter dated 5 August 1997 addressed to petitioner Cordero
concerning "commissions to be paid to Pamana Marketing
Corporation."36 Such apparent inconsistency in naming AFFA’s exclusive
distributor in the Philippines is of no moment. For all intents and purposes,
Robinson and AFFA dealt only with Cordero who alone made decisions in
the performance of the exclusive distributorship, as with other clients to
whom he had similarly offered AFFA’s fast ferry vessels. Moreover, the
stipulated commissions from each progress payments made by Go were
directly paid by Robinson to Cordero.37 Respondents Landicho and Tecson
were only too aware of Cordero’s authority as the person who was
appointed and acted as exclusive distributor of AFFA, which can be gleaned
from their act of immediately furnishing him with copies of bank
transmittals everytime Go remits payment to Robinson, who in turn
transfers a portion of funds received to the bank account of Cordero in the
Philippines as his commission. Out of these partial payments of his
commission, Cordero would still give Landicho and Tecson their respective
"commission," or "cuts" from his own commission. Respondents Landicho
and Tecson failed to refute the evidence submitted by Cordero consisting
of receipts signed by them. Said amounts were apart from the earlier
expenses shouldered by Cordero for Landicho’s airline tickets,
transportation, food and hotel accommodations for the trip to Australia.38
Moreover, petitioner Go, Landicho and Tecson never raised petitioner
Cordero’s lack of personality to sue on behalf of Pamana,39 and did so only
before the CA when they contended that it is Pamana and not Cordero,
who was appointed and acted as exclusive distributor for AFFA.40 It was
Robinson who argued in support of his motion to dismiss that as far as said
defendant is concerned, the real party plaintiff appears to be Pamana,
against the real party defendant which is AFFA.41 As already mentioned,
the trial court denied the motion to dismiss filed by Robinson.
We find no error committed by the trial court in overruling Robinson’s
objection over the improper resort to summons by publication upon a
foreign national like him and in an action in personam, notwithstanding
that he raised it in a special appearance specifically raising the issue of lack
of jurisdiction over his person. Courts acquire jurisdiction over the
plaintiffs upon the filing of the complaint, while jurisdiction over the
defendants in a civil case is acquired either through the service of summons
upon them in the manner required by law or through their voluntary
appearance in court and their submission to its authority.42 A party who
makes a special appearance in court challenging the jurisdiction of said
court based on the ground of invalid service of summons is not deemed to
have submitted himself to the jurisdiction of the court.43
In this case, however, although the Motion to Dismiss filed by Robinson
specifically stated as one (1) of the grounds the lack of "personal
jurisdiction," it must be noted that he had earlier filed a Motion for Time
to file an appropriate responsive pleading even beyond the time provided
in the summons by publication.44 Such motion did not state that it was a
conditional appearance entered to question the regularity of the service of
summons, but an appearance submitting to the jurisdiction of the court by
acknowledging the summons by publication issued by the court and
praying for additional time to file a responsive pleading. Consequently,
Robinson having acknowledged the summons by publication and also
having invoked the jurisdiction of the trial court to secure affirmative relief
in his motion for additional time, he effectively submitted voluntarily to
the trial court’s jurisdiction. He is now estopped from asserting otherwise,
even before this Court.45
II. Breach of Exclusive Distributorship, Contractual Interference and
Respondents’ Liability for Damages
In Yu v. Court of Appeals,46 this Court ruled that the right to perform an
exclusive distributorship agreement and to reap the profits resulting from
such performance are proprietary rights which a party may protect. Thus,
injunction is the appropriate remedy to prevent a wrongful interference
with contracts by strangers to such contracts where the legal remedy is
insufficient and the resulting injury is irreparable. In that case, the former
dealer of the same goods purchased the merchandise from the
manufacturer in England through a trading firm in West Germany and sold
these in the Philippines. We held that the rights granted to the petitioner
under the exclusive distributorship agreement may not be diminished nor
rendered illusory by the expedient act of utilizing or interposing a person
or firm to obtain goods for which the exclusive distributorship was
conceptualized, at the expense of the sole authorized distributor.47
In the case at bar, it was established that petitioner Cordero was not paid
the balance of his commission by respondent Robinson. From the time
petitioner Go and respondent Landicho directly dealt with respondent
Robinson in Brisbane, and ceased communicating through petitioner
Cordero as the exclusive distributor of AFFA in the Philippines, Cordero was
no longer informed of payments remitted to AFFA in Brisbane. In other
words, Cordero had clearly been cut off from the transaction until the
arrival of the first SEACAT 25 which was sold through his efforts. When
Cordero complained to Go, Robinson, Landicho and Tecson about their acts
prejudicial to his rights and demanded that they respect his exclusive
distributorship, Go simply let his lawyers led by Landicho and Tecson
handle the matter and tried to settle it by promising to pay a certain
amount and to purchase high-speed catamarans through Cordero.
However, Cordero was not paid anything and worse, AFFA through its
lawyer in Australia even terminated his exclusive dealership insisting that
his services were engaged for only one (1) transaction, that is, the purchase
of the first SEACAT 25 in August 1997.
Petitioner Go argues that unlike in Yu v. Court of Appeals 48 there is no
conclusive proof adduced by petitioner Cordero that they actually
purchased a second SEACAT 25 directly from AFFA and hence there was no
violation of the exclusive distributorship agreement. Further, he contends
that the CA gravely abused its discretion in holding them solidarily liable
to Cordero, relying on Articles 1207, 19 and 21 of the Civil Code despite
absence of evidence, documentary or testimonial, showing that they
conspired to defeat the very purpose of the exclusive distributorship
agreement.49
We find that contrary to the claims of petitioner Cordero, there was indeed
no sufficient evidence that respondents actually purchased a second
SEACAT 25 directly from AFFA. But this circumstance will not absolve
respondents from liability for invading Cordero’s rights under the exclusive
distributorship. Respondents clearly acted in bad faith in bypassing
Cordero as they completed the remaining payments to AFFA without
advising him and furnishing him with copies of the bank transmittals as
they previously did, and directly dealt with AFFA through Robinson
regarding arrangements for the arrival of the first SEACAT 25 in Manila and
negotiations for the purchase of the second vessel pursuant to the
Memorandum of Agreement which Cordero signed in behalf of AFFA. As a
result of respondents’ actuations, Cordero incurred losses as he was not
paid the balance of his commission from the sale of the first vessel and his
exclusive distributorship revoked by AFFA.
Petitioner Go contends that the trial and appellate courts erred in holding
them solidarily liable for Cordero’s unpaid commission, which is the sole
obligation of the principal AFFA. It was Robinson on behalf of AFFA who, in
the letter dated August 5, 1997 addressed to Cordero, undertook to pay
commission payments to Pamana on a staggered progress payment plan in
the form of percentage of the commission per payment. AFFA explicitly
committed that it will, "upon receipt of progress payments, pay to Pamana
their full commission by telegraphic transfer to an account nominated by
Pamana within one to two days of [AFFA] receiving such
payments."50 Petitioner Go further maintains that he had not in any way
violated or caused the termination of the exclusive distributorship
agreement between Cordero and AFFA; he had also paid in full the first and
only vessel he purchased from AFFA.51
While it is true that a third person cannot possibly be sued for breach of
contract because only parties can breach contractual provisions, a
contracting party may sue a third person not for breach but for inducing
another to commit such breach.
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract
shall be liable for damages to the other contracting party.
The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of a contract;
and (3) interference of the third person is without legal justification.52
The presence of the first and second elements is not disputed. Through the
letters issued by Robinson attesting that Cordero is the exclusive
distributor of AFFA in the Philippines, respondents were clearly aware of
the contract between Cordero and AFFA represented by Robinson. In fact,
evidence on record showed that respondents initially dealt with and
recognized Cordero as such exclusive dealer of AFFA high-speed catamaran
vessels in the Philippines. In that capacity as exclusive distributor,
petitioner Go entered into the Memorandum of Agreement and
Shipbuilding Contract No. 7825 with Cordero in behalf of AFFA.
As to the third element, our ruling in the case of So Ping Bun v. Court of
Appeals53 is instructive, to wit:
A duty which the law of torts is concerned with is respect for the property
of others, and a cause of action ex delicto may be predicated upon an
unlawful interference by one person of the enjoyment by the other of his
private property. This may pertain to a situation where a third person
induces a party to renege on or violate his undertaking under a contract.
In the case before us, petitioner’s Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result petitioner deprived
respondent corporation of the latter’s property right. Clearly, and as
correctly viewed by the appellate court, the three elements of tort
interference above-mentioned are present in the instant case.
Authorities debate on whether interference may be justified where the
defendant acts for the sole purpose of furthering his own financial or
economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exists where the actor’s
motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities
believe that it is not necessary that the interferer’s interest outweigh that
of the party whose rights are invaded, and that an individual acts under an
economic interest that is substantial, not merely de minimis, such that
wrongful and malicious motives are negatived, for he acts in self-
protection. Moreover, justification for protecting one’s financial position
should not be made to depend on a comparison of his economic interest in
the subject matter with that of others. It is sufficient if the impetus of his
conduct lies in a proper business interest rather than in wrongful motives.
As early as Gilchrist vs. Cuddy, we held that where there was no malice in
the interference of a contract, and the impulse behind one’s conduct lies
in a proper business interest rather than in wrongful motives, a party
cannot be a malicious interferer. Where the alleged interferer is financially
interested, and such interest motivates his conduct, it cannot be said that
he is an officious or malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon
DCCSI to lease the warehouse to his enterprise at the expense of
respondent corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record imputes
deliberate wrongful motives or malice in him.
xxx
While we do not encourage tort interferers seeking their economic interest
to intrude into existing contracts at the expense of others, however, we
find that the conduct herein complained of did not transcend the limits
forbidding an obligatory award for damages in the absence of any malice.
The business desire is there to make some gain to the detriment of the
contracting parties. Lack of malice, however, precludes damages. But it
does not relieve petitioner of the legal liability for entering into contracts
and causing breach of existing ones. The respondent appellate court
correctly confirmed the permanent injunction and nullification of the lease
contracts between DCCSI and Trendsetter Marketing, without awarding
damages. The injunction saved the respondents from further damage or
injury caused by petitioner’s interference.54 [emphasis supplied.]
Malice connotes ill will or spite, and speaks not in response to duty. It
implies an intention to do ulterior and unjustifiable harm. Malice is bad
faith or bad motive.55 In the case of Lagon v. Court of Appeals,56 we held
that to sustain a case for tortuous interference, the defendant must have
acted with malice or must have been driven by purely impure reasons to
injure the plaintiff; in other words, his act of interference cannot be
justified. We further explained that the word "induce" refers to situations
where a person causes another to choose one course of conduct by
persuasion or intimidation. As to the allegation of private respondent in
said case that petitioner induced the heirs of the late Bai Tonina Sepi to sell
the property to petitioner despite an alleged renewal of the original lease
contract with the deceased landowner, we ruled as follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such
knowledge alone was not sufficient to make him liable for tortuous
interference. x x x
Furthermore, the records do not support the allegation of private
respondent that petitioner induced the heirs of Bai Tonina Sepi to sell the
property to him. The word "induce" refers to situations where a person
causes another to choose one course of conduct by persuasion or
intimidation. The records show that the decision of the heirs of the late Bai
Tonina Sepi to sell the property was completely of their own volition and
that petitioner did absolutely nothing to influence their judgment. Private
respondent himself did not proffer any evidence to support his claim. In
short, even assuming that private respondent was able to prove the
renewal of his lease contract with Bai Tonina Sepi, the fact was that he was
unable to prove malice or bad faith on the part of petitioner in purchasing
the property. Therefore, the claim of tortuous interference was never
established.57
In their Answer, respondents denied having anything to do with the unpaid
balance of the commission due to Cordero and the eventual termination
of his exclusive distributorship by AFFA. They gave a different version of
the events that transpired following the signing of Shipbuilding Contract
No. 7825. According to them, several builder-competitors still entered the
picture after the said contract for the purchase of one (1) SEACAT 25 was
sent to Brisbane in July 1997 for authentication, adding that the contract
was to be effective on August 7, 1997, the time when their funds was to
become available. Go admitted he called the attention of AFFA if it can
compete with the prices of other builders, and upon mutual agreement,
AFFA agreed to give them a discounted price under the following terms
and conditions: (1) that the contract price be lowered; (2) that Go will
obtain another vessel; (3) that to secure compliance of such conditions, Go
must make an advance payment for the building of the second vessel; and
(4) that the payment scheme formerly agreed upon as stipulated in the first
contract shall still be the basis and used as the guiding factor in remitting
money for the building of the first vessel. This led to the signing of another
contract superseding the first one (1), still to be dated 07 August 1997.
Attached to the answer were photocopies of the second contract stating a
lower purchase price (US$1,150,000.00) and facsimile transmission of AFFA
to Go confirming the transaction.58
As to the cessation of communication with Cordero, Go averred it was
Cordero who was nowhere to be contacted at the time the shipbuilding
progress did not turn good as promised, and it was always Landicho and
Tecson who, after several attempts, were able to locate him only to obtain
unsatisfactory reports such that it was Go who would still call up Robinson
regarding any progress status report, lacking documents for MARINA, etc.,
and go to Australia for ocular inspection. Hence, in May 1998 on the
scheduled launching of the ship in Australia, Go engaged the services of
Landicho who went to Australia to see to it that all documents needed for
the shipment of the vessel to the Philippines would be in order. It was also
during this time that Robinson’s request for inquiry on the Philippine price
of a Wartsila engine for AFFA’s then on-going vessel construction, was
misinterpreted by Cordero as indicating that Go was buying a second
vessel.59
We find these allegations unconvincing and a mere afterthought as these
were the very same averments contained in the Position Paper for the
Importer dated October 9, 1998, which was submitted by Go on behalf of
ACG Express Liner in connection with the complaint-affidavit filed by
Cordero before the BOC-SGS Appeals Committee relative to the shipment
valuation of the first SEACAT 25 purchased from AFFA.60 It appears that the
purported second contract superseding the original Shipbuilding Contract
No. 7825 and stating a lower price of US$1,150,000.00 (not
US$1,465,512.00) was only presented before the BOC to show that the
vessel imported into the Philippines was not undervalued by almost
US$500,000.00. Cordero vehemently denied there was such modification
of the contract and accused respondents of resorting to falsified
documents, including the facsimile transmission of AFFA supposedly
confirming the said sale for only US$1,150,000.00. Incidentally, another
document filed in said BOC case, the Counter-Affidavit/Position Paper for
the Importer dated November 16, 1998,61 states in paragraph 8 under the
Antecedent facts thereof, that --
8. As elsewhere stated, the total remittances made by herein Importer to
AFFA does not alone represent the purchase price for Seacat 25. It includes
advance payment for the acquisition of another vessel as part of the deal
due to the discounted price.62
which even gives credence to the claim of Cordero that respondents
negotiated for the sale of the second vessel and that the nonpayment of
the remaining two (2) instalments of his commission for the sale of the first
SEACAT 25 was a result of Go and Landicho’s directly dealing with
Robinson, obviously to obtain a lower price for the second vessel at the
expense of Cordero.
The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter
into another contract directly with ACG Express Liner to obtain a lower
price for the second vessel resulted in AFFA’s breach of its contractual
obligation to pay in full the commission due to Cordero and
unceremonious termination of Cordero’s appointment as exclusive
distributor. Following our pronouncement in Gilchrist v. Cuddy (supra),
such act may not be deemed malicious if impelled by a proper business
interest rather than in wrongful motives. The attendant circumstances,
however, demonstrated that respondents transgressed the bounds of
permissible financial interest to benefit themselves at the expense of
Cordero. Respondents furtively went directly to Robinson after Cordero
had worked hard to close the deal for them to purchase from AFFA two (2)
SEACAT 25, closely monitored the progress of building the first vessel sold,
attended to their concerns and spent no measly sum for the trip to
Australia with Go, Landicho and Go’s family members. But what is
appalling is the fact that even as Go, Landicho and Tecson secretly
negotiated with Robinson for the purchase of a second vessel, Landicho
and Tecson continued to demand and receive from Cordero their
"commission" or "cut" from Cordero’s earned commission from the sale of
the first SEACAT 25.
Cordero was practically excluded from the transaction when Go, Robinson,
Tecson and Landicho suddenly ceased communicating with him, without
giving him any explanation. While there was nothing objectionable in
negotiating for a lower price in the second purchase of SEACAT 25, which
is not prohibited by the Memorandum of Agreement, Go, Robinson,
Tecson and Landicho clearly connived not only in ensuring that Cordero
would have no participation in the contract for sale of the second SEACAT
25, but also that Cordero would not be paid the balance of his commission
from the sale of the first SEACAT 25. This, despite their knowledge that it
was commission already earned by and due to Cordero. Thus, the trial and
appellate courts correctly ruled that the actuations of Go, Robinson,
Tecson and Landicho were without legal justification and intended solely
to prejudice Cordero.
The existence of malice, ill will or bad faith is a factual matter. As a rule,
findings of fact of the trial court, when affirmed by the appellate court, are
conclusive on this Court.63 We see no compelling reason to reverse the
findings of the RTC and the CA that respondents acted in bad faith and in
utter disregard of the rights of Cordero under the exclusive distributorship
agreement.
The failure of Robinson, Go, Tecson and Landico to act with fairness,
honesty and good faith in securing better terms for the purchase of high-
speed catamarans from AFFA, to the prejudice of Cordero as the duly
appointed exclusive distributor, is further proscribed by Article 19 of
the Civil Code:
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
As we have expounded in another case:
Elsewhere, we explained that when "a right is exercised in a manner which
does not conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for which the
wrongdoer must be responsible." The object of this article, therefore, is to
set certain standards which must be observed not only in the exercise of
one’s rights but also in the performance of one’s duties. These standards
are the following: act with justice, give everyone his due and observe
honesty and good faith. Its antithesis, necessarily, is any act evincing bad
faith or intent to injure. Its elements are the following: (1) There is a legal
right or duty; (2) which is exercised in bad faith; (3) for the sole intent of
prejudicing or injuring another. When Article 19 is violated, an action for
damages is proper under Articles 20 or 21 of the Civil Code. Article 20
pertains to damages arising from a violation of law x x x. Article 21, on the
other hand, states:
Art. 21. Any person who willfully causes loss or injury to another in a
manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.
Article 21 refers to acts contra bonus mores and has the following
elements: (1) There is an act which is legal; (2) but which is contrary to
morals, good custom, public order, or public policy; and (3) it is done
with intent to injure.
A common theme runs through Articles 19 and 21, and that is, the act
complained of must be intentional.64
Petitioner Go’s argument that he, Landicho and Tecson cannot be held
liable solidarily with Robinson for actual, moral and exemplary damages,
as well as attorney’s fees awarded to Cordero since no law or contract
provided for solidary obligation in these cases, is equally bereft of merit.
Conformably with Article 2194 of the Civil Code, the responsibility of two
or more persons who are liable for the quasi-delict is solidary.65 In Lafarge
Cement Philippines, Inc. v. Continental Cement Corporation,66 we held:
[O]bligations arising from tort are, by their nature, always solidary. We
have assiduously maintained this legal principle as early as 1912 in
Worcester v. Ocampo, in which we held:
x x x The difficulty in the contention of the appellants is that they fail to
recognize that the basis of the present action is tort. They fail to recognize
the universal doctrine that each joint tort feasor is not only individually
liable for the tort in which he participates, but is also jointly liable with his
tort feasors. x x x
It may be stated as a general rule that joint tort feasors are all the persons
who command, instigate, promote, encourage, advise, countenance,
cooperate in, aid or abet the commission of a tort, or who approve of it
after it is done, if done for their benefit. They are each liable as principals,
to the same extent and in the same manner as if they had performed the
wrongful act themselves. x x x
Joint tort feasors are jointly and severally liable for the tort which they
commit.1avvphi1 The persons injured may sue all of them or any number
less than all. Each is liable for the whole damages caused by all, and all
together are jointly liable for the whole damage. It is no defense for one
sued alone, that the others who participated in the wrongful act are not
joined with him as defendants; nor is it any excuse for him that his
participation in the tort was insignificant as compared to that of the others.
xxx
Joint tort feasors are not liable pro rata. The damages can not be
apportioned among them, except among themselves. They cannot insist
upon an apportionment, for the purpose of each paying an aliquot part.
They are jointly and severally liable for the whole amount. x x x

A payment in full for the damage done, by one of the joint tort feasors, of
course satisfies any claim which might exist against the others. There can
be but satisfaction. The release of one of the joint tort feasors by
agreement generally operates to discharge all. x x x

Of course, the court during trial may find that some of the alleged tort
feasors are liable and that others are not liable. The courts may release
some for lack of evidence while condemning others of the alleged tort
feasors. And this is true even though they are charged jointly and
severally.67 [emphasis supplied.]

The rule is that the defendant found guilty of interference with contractual
relations cannot be held liable for more than the amount for which the
party who was inducted to break the contract can be held
liable.68 Respondents Go, Landicho and Tecson were therefore correctly
held liable for the balance of petitioner Cordero’s commission from the
sale of the first SEACAT 25, in the amount of US$31,522.09 or its peso
equivalent, which AFFA/Robinson did not pay in violation of the exclusive
distributorship agreement, with interest at the rate of 6% per annum from
June 24, 1998 until the same is fully paid.

Respondents having acted in bad faith, moral damages may be recovered

under Article 2219 of the Civil Code.69On the other hand, the requirements
of an award of exemplary damages are: (1) they may be imposed by way
of example in addition to compensatory damages, and only after the
claimant’s right to them has been established; (2) that they cannot be
recovered as a matter of right, their determination depending upon the
amount of compensatory damages that may be awarded to the claimant;
and (3) the act must be accompanied by bad faith or done in a wanton,
fraudulent, oppressive or malevolent manner.70 The award of exemplary
damages is thus in order. However, we find the sums awarded by the trial
court as moral and exemplary damages as reduced by the CA, still excessive
under the circumstances.

Moral damages are meant to compensate and alleviate the physical

suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injuries
unjustly caused. Although incapable of pecuniary estimation, the amount
must somehow be proportional to and in approximation of the suffering
inflicted. Moral damages are not punitive in nature and were never
intended to enrich the claimant at the expense of the defendant. There is
no hard-and-fast rule in determining what would be a fair and reasonable
amount of moral damages, since each case must be governed by its own
peculiar facts. Trial courts are given discretion in determining the amount,
with the limitation that it "should not be palpably and scandalously
excessive." Indeed, it must be commensurate to the loss or injury
suffered.71

We believe that the amounts of ₱300,000.00 and ₱200,000.00 as moral and

exemplary damages, respectively, would be sufficient and reasonable.
Because exemplary damages are awarded, attorney’s fees may also be
awarded in consonance with Article 2208 (1).72 We affirm the appellate
court’s award of attorney’s fees in the amount of ₱50,000.00.

WHEREFORE, the petitions are DENIED. The Decision dated March 16, 2004
as modified by the Resolution dated July 22, 2004 of the Court of Appeals
in CA-G.R. CV No. 69113 are hereby AFFIRMED with MODIFICATION in that
the awards of moral and exemplary damages are hereby reduced to
₱300,000.00 and ₱200,000.00, respectively.

With costs against the petitioner in G.R. No. 164703.

SO ORDERED.
G.R. No. 161075 July 15, 2013
RAFAEL JOSE-CONSING, JR., Petitioner,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
BERSAMIN, J.:
An independent civil action based on fraud initiated by the defrauded
party does not raise a prejudicial question to stop the proceedings in a
pending criminal prosecution of the defendant for estafa through
falsification. This is because the result of the independent civil action is
irrelevant to the issue of guilt or innocence of the accused.
The Case
On appeal is the amended decision promulgated on August 18,
2003,1 whereby the Court of Appeals (CA) granted the writ of certiorari
upon petition by the State in C.A.-G.R. No. 71252 entitled People v. Han.
Winlove M Dumayas, Presiding Judge, Branch 59, Regional Trial Court,
Makati City and Rafael Consing, Jr., and set aside the assailed order issued
on November 26, 2001 by the Regional Trial Court (RTC), Branch 59, in
Makati City deferring the arraignment of petitioner in Criminal Case No.
00-120 entitled People v. Rafael Consing, Jr. upon his motion on the ground
of the existence of a prejudicial question in the civil cases pending between
him and the complainant in the trial courts in Pasig City and Makati City.
Antecedents
Petitioner negotiated with and obtained for himself and his mother, Cecilia
de la Cruz (de la Cruz) various loans totaling ₱18,000,000.00 from
Unicapital Inc. (Unicapital). The loans were secured by a real estate
mortgage constituted on a parcel of land (property) covered by Transfer
Certificate of Title (TCT) No. T-687599 of the Registry of Deeds for the
Province of Cavite registered under the name of de la Cruz. 2 In accordance
with its option to purchase the mortgaged property, Unicapital agreed to
purchase one-half of the property for a total consideration of
₱21,221,500.00. Payment was effected by off-setting the amounts due to
Unicapital under the promissory notes of de la Cruz and Consing in the
amount of ₱18,000,000.00 and paying an additional amount of
₱3,145,946.50. The other half of the property was purchased by Plus
Builders, Inc. (Plus Builders), a joint venture partner of Unicapital.3
Before Unicapital and Plus Builders could develop the property, they
learned that the title to the property was really TCT No. 114708 in the
names of Po Willie Yu and Juanito Tan Teng, the parties from whom the
property had been allegedly acquired by de la Cruz. TCT No. 687599 held
by De la Cruz appeared to be spurious.4
On its part, Unicapital demanded the return of the total amount of
₱41,377,851.48 as of April 19, 1999 that had been paid to and received by
de la Cruz and Consing, but the latter ignored the demands.5
On July 22, 1999, Consing filed Civil Case No. 1759 in the Pasig City Regional
Trial Court (RTC) (Pasig civil case) for injunctive relief, thereby seeking to
enjoin Unicapital from proceeding against him for the collection of the
₱41,377,851.48 on the ground that he had acted as a mere agent of his
mother.
On the same date, Unicapital initiated a criminal complaint for estafa
through falsification of public document against Consing and de la Cruz in
the Makati City Prosecutor’s Office.6
On August 6, 1999, Unicapital sued Consing in the RTC in Makati City (Civil
Case No. 99-1418) for the recovery of a sum of money and damages, with
an application for a writ of preliminary attachment (Makati civil case).7
On January 27, 2000, the Office of the City Prosecutor of Makati City filed
against Consing and De la Cruz an information for estafa through
falsification of public document in the RTC in Makati City (Criminal Case
No. 00-120), which was assigned to Branch 60 (Makati criminal case).8
On February 15, 2001, Consing moved to defer his arraignment in the
Makati criminal case on the ground of existence of a prejudicial question
due to the pendency of the Pasig and Makati civil cases. On September 25,
2001, Consing reiterated his motion for deferment of his arraignment,
citing the additional ground of pendency of CA-G.R. SP No. 63712 in the CA.
On November 19, 2001, the Prosecution opposed the motion.9
On November 26, 2001, the RTC issued an order suspending the
proceedings in the Makati criminal case on the ground of the existence of
a prejudicial question, and on March 18, 2001, the RTC denied the
Prosecution’s motion for reconsideration.10
The State thus assailed in the CA the last two orders of the RTC in the
Makati criminal case via petition for certiorari (C.A.-G.R. SP No. 71252).
On May 20, 2003, the CA promulgated its decision in C.A.-G.R. SP No.
71252,11 dismissing the petition for certiorari and upholding the RTC’s
questioned orders, explaining:
Is the resolution of the Pasig civil case prejudicial to the Cavite and Makati
criminal cases?
We hold that it is. The resolution of the issue in the Pasig case, i.e. whether
or not private respondent may be held liable in the questioned transaction,
will determine the guilt or innocence of private respondent Consing in both
the Cavite and Makati criminal cases.
The analysis and comparison of the Pasig civil case, Makati criminal case,
Makati civil case and Cavite criminal case show that: (1) the parties are
identical; (2) the transactions in controversy are identical; (3) the Transfer
Certificate of Titles (TCT) involved are identical; (4) the questioned Deeds
of Sale/Mortgage are identical; (5) the dates in question are identical; and
(6) the issue of private respondent’s culpability for the questioned
transactions is identical in all the proceedings.
As discussed earlier, not only was the issue raised in the Pasig civil case
identical to or intimately related to the criminal cases in Cavite and Makati.
The similarities also extend to the parties in the cases and the TCT and
Deed of Sale/ Mortgage involved in the questioned transactions.
The respondent Judge, in ordering the suspension of the arraignment of
private respondent in the Makati case, in view of CA-G.R. SP No. 63712,
where Unicapital was not a party thereto, did so pursuant to its mandatory
power to take judicial notice of an official act of another judicial authority.
It was also a better legal tack to prevent multiplicity of action, to which our
legal system abhors.
Applying the Tuanda ruling, the pendency of CA-G.R. SP No. 63712 may be
validly invoked to suspend private respondent’s arraignment in the Makati
City criminal case, notwithstanding the fact that CA-G.R. SP No. 63712 was
an offshoot, merely, in the Cavite criminal case.12
In the meanwhile, on October 13, 1999, Plus Builders commenced its own
suit for damages against Consing (Civil Case No. 99-95381) in the RTC in
Manila (Manila civil case).13
On January 21, 2000, an information for estafa through falsification of
public document was filed against Consing and De la Cruz in the RTC in
Imus, Cavite, docketed as Criminal Case No. 7668-00 and assigned to
Branch 21 (Cavite criminal case). Consing filed a motion to defer the
arraignment on the ground of the existence of a prejudicial question, i.e.,
the pendency of the Pasig and Manila civil cases. On January 27, 2000,
however, the RTC handling the Cavite criminal case denied Consing’s
motion. Later on, it also denied his motion for reconsideration. Thereafter,
Consing commenced in the CA a special civil action for certiorari with
prayer for the issuance of a temporary restraining order (TRO) and/or writ
of preliminary injunction (C.A.-G.R. SP No. 63712), seeking to enjoin his
arraignment and trial in the Cavite criminal case. The CA granted the TRO
on March 19, 2001, and later promulgated its decision on May 31, 2001,
granting Consing’ petition for certiorari and setting aside the January 27,
2000 order of the RTC, and permanently enjoining the RTC from proceeding
with the arraignment and trial until the Pasig and Manila civil cases had
been finally decided.
Not satisfied, the State assailed the decision of the CA in this Court (G.R.
No. 148193), praying for the reversal of the May 31, 2001 decision of the
CA. On January 16, 2003, the Court granted the petition for review in G.R.
No. 148193, and reversed and set aside the May 31, 2001 decision of the
CA,14 viz:
In the case at bar, we find no prejudicial question that would justify the
suspension of the proceedings in the criminal case (the Cavite criminal
case). The issue in Civil Case No. SCA 1759 (the Pasig civil case) for
Injunctive Relief is whether or not respondent (Consing) merely acted as
an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381
(the Manila civil case), for Damages and Attachment, the question is
whether respondent and his mother are liable to pay damages and to
return the amount paid by PBI for the purchase of the disputed lot. Even if
respondent is declared merely an agent of his mother in the transaction
involving the sale of the questioned lot, he cannot be adjudged free from
criminal liability. An agent or any person may be held liable for conspiring
to falsify public documents. Hence, the determination of the issue involved
in Civil Case No. SCA 1759 for Injunctive Relief is irrelevant to the guilt or
innocence of the respondent in the criminal case for estafa through
falsification of public document.
Likewise, the resolution of PBI’s right to be paid damages and the purchase
price of the lot in question will not be determinative of the culpability of
the respondent in the criminal case for even if PBI is held entitled to the
return of the purchase price plus damages, it does not ipso facto follow
that respondent should be held guilty of estafa through falsification of
public document. Stated differently, a ruling of the court in the civil case
that PBI should not be paid the purchase price plus damages will not
necessarily absolve respondent of liability in the criminal case where his
guilt may still be established under penal laws as determined by other
evidence.
Moreover, neither is there a prejudicial question if the civil and the
criminal action can, according to law, proceed independently of each
other. Under Rule 111, Section 3 of the Revised Rules on Criminal
Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil
Code, the independent civil action may be brought by the offended party.
It shall proceed independently of the criminal action and shall require only
a preponderance of evidence. In no case, however, may the offended party
recover damages twice for the same act or omission charged in the criminal
action.
Thus, in Rojas v. People, the petitioner was accused in a criminal case for
violation of Article 319 of the Revised Penal Code, for executing a new
chattel mortgage on personal property in favor of another party without
consent of the previous mortgagee. Thereafter, the offended party filed a
civil case for termination of management contract, one of the causes of
action of which consisted of petitioner having executed a chattel mortgage
while the previous chattel mortgage was still valid and subsisting.
Petitioner moved that the arraignment and trial of the criminal case be
held in abeyance on the ground that the civil case was a prejudicial
question, the resolution of which was necessary before the criminal
proceedings could proceed. The trial court denied the suspension of the
criminal case on the ground that no prejudicial question exist. We affirmed
the order of the trial court and ruled that:
… the resolution of the liability of the defendant in the civil case on the
eleventh cause of action based on the fraudulent misrepresentation that
the chattel mortgage the defendant executed in favor of the said CMS
Estate, Inc. on February 20, 1957, that his D-6 "Caterpillar" Tractor with
Serial No. 9-U-6565 was "free from all liens and encumbrances" will not
determine the criminal liability of the accused in the said Criminal Case No.
56042 for violation of paragraph 2 of Article 319 of the Revised Penal Code.
. . . (i) That, even granting for the sake of argument, a prejudicial question
is involved in this case, the fact remains that both the crime charged in the
information in the criminal case and the eleventh cause of action in the
civil case are based upon fraud, hence both the civil and criminal cases
could proceed independently of the other pursuant to Article 33 of the new
Civil Code which provides: "In cases of defamation, fraud and physical
injuries, a civil action for damages, entirely separate and distinct from the
criminal action shall proceed independently of the criminal prosecution,
and shall require only a preponderance of evidence." (j) That, therefore,
the act of respondent judge in issuing the orders referred to in the instant
petition was not made with "grave abuse of discretion."
In the instant case, Civil Case No. 99-95381, for Damages and Attachment
on account of the alleged fraud committed by respondent and his mother
in selling the disputed lot to PBI is an independent civil action under Article
33 of the Civil Code. As such, it will not operate as a prejudicial question
that will justify the suspension of the criminal case at bar.15
Turning back to the Makati criminal case, the State moved for the
reconsideration of the adverse decision of the CA, citing the ruling in G.R.
No. 148193, supra, to the effect that the Pasig and Manila civil cases did
not present a prejudicial question that justified the suspension of the
proceedings in the Cavite criminal case, and claiming that under the ruling
in G.R. No. 148193, the Pasig and Makati civil cases did not raise a
prejudicial question that would cause the suspension of the Makati
criminal case.
In his opposition to the State’s motion for reconsideration, Consing
contended that the ruling in G.R. No. 148193 was not binding because G.R.
No. 148193 involved Plus Builders, which was different from Unicapital,
the complainant in the Makati criminal case. He added that the decision in
G.R. No. 148193 did not yet become final and executory, and could still be
reversed at any time, and thus should not control as a precedent to be
relied upon; and that he had acted as an innocent attorney-in-fact for his
mother, and should not be held personally liable under a contract that had
involved property belonging to his mother as his principal.
On August 18, 2003, the CA amended its decision, reversing itself. It relied
upon the ruling in G.R. No. 148193, and held thusly:
CA-G.R. SP No. 63712 is similar with the case at bench. The transactions in
controversy, the documents involved; the issue of the respondent’s
culpability for the questioned transactions are all identical in all the
proceedings; and it deals with the same parties with the exception of
private complainant Unicapital.
However, the Supreme Court, upon review of CA-G.R. SP No. 63712, People
of the Philippines vs. Rafael Jose Consing, Jr. (G.R. No. 148193, January 16,
2003) held that "Civil Case No. 99-95381, for Damages and attachment on
account of alleged fraud committed by respondent and his mother in
selling the disputed lot to Plus Builders, Inc. is an independent civil action
under Article 33 of the Civil Code. As such, it will not operate as a
prejudicial question that will justify the suspension of the criminal case at
bar." In view of the aforementioned decision of the Supreme Court, We
are thus amending Our May 20, 2003 decision.
WHEREFORE, the petitioner’s motion for reconsideration is GRANTED. The
Orders dated November 26, 2001 and March 18, 2002 issued by the
respondent Judge are hereby REVERSED and SET ASIDE. Respondent Judge
is hereby ordered to proceed with the hearing of Criminal Case No. 00-120
with dispatch.
SO ORDERED.16
Consing filed a motion for reconsideration,17 but the CA denied the motion
through the second assailed resolution of December 11, 2003.18
Hence, this appeal by petition for review on certiorari.
Issue
Petitioner reiterates his contention that the decision in G.R. No. 148193
was not controlling in relation to C.A.-G.R. No. 71252, which involved Plus
Builders, not Unicapital, the complainant in Criminal Case No. 00-120. He
posits that in arriving at its amended decision, the CA did not consider the
pendency of the Makati civil case (Civil Case No. 99-1418), which raised a
prejudicial question, considering that the resolution of such civil action
would include the issue of whether he had falsified a certificate of title or
had willfully defrauded Unicapital, the resolution of either of which would
determine his guilt or innocence in Criminal Case No. 00-120.
In its comment,19 the Office of the Solicitor General (OSG) counters that
Unicapital brought the Makati civil case as an independent civil action
intended to exact civil liability separately from Criminal Case No. 00-120 in
a manner fully authorized under Section 1(a) and Section 2, Rule 111 of the
Rules of Court.20 It argues that the CA correctly took cognizance of the
ruling in G.R. No. 148193, holding in its challenged amended decision that
the Makati civil case, just like the Manila civil case, was an independent
civil action instituted by virtue of Article 33 of the Civil Code; that the
Makati civil case did not raise a prejudicial question that justified the
suspension of Criminal Case No. 00-120; and that as finally settled in G.R.
No. 148193, the Pasig civil case did not also raise any prejudicial question,
because the sole issue thereat was whether Consing, as the mere agent of
his mother, had any obligation or liability toward Unicapital.
In his reply,21 Consing submits that the Pasig civil case that he filed and
Unicapital’s Makati civil case were not intended to delay the resolution of
Criminal Case No. 00-120, nor to pre-empt such resolution; and that such
civil cases could be validly considered determinative of whether a
prejudicial question existed to warrant the suspension of Criminal Case No.
00-120.
Did the CA err in reversing itself on the issue of the existence of a
prejudicial question that warranted the suspension of the proceedings in
the Makati criminal case?
Ruling
The petition for review on certiorari is absolutely meritless.
Consing has hereby deliberately chosen to ignore the firm holding in the
ruling in G.R. No. 148193 to the effect that the proceedings in Criminal Case
No. 00-120 could not be suspended because the Makati civil case was an
independent civil action, while the Pasig civil case raised no prejudicial
question. That was wrong for him to do considering that the ruling fully
applied to him due to the similarity between his case with Plus Builders
and his case with Unicapital.
A perusal of Unicapital’s complaint in the Makati civil case reveals that the
action was predicated on fraud. This was apparent from the allegations of
Unicapital in its complaint to the effect that Consing and de la Cruz had
acted in a "wanton, fraudulent, oppressive, or malevolent manner in
offering as security and later object of sale, a property which they do not
own, and foisting to the public a spurious title."22 As such, the action was
one that could proceed independently of Criminal Case No. 00-120
pursuant to Article 33 of the Civil Code, which states as follows:

Article 33. In cases of defamation, fraud, and physical injuries a civil action
for damages, entirely separate and distinct from the criminal action, may
be brought by the injured party. Such civil action shall proceed
independently of the criminal prosecution, and shall require only a
preponderance of evidence.

It is well settled that a civil action based on defamation, fraud and physical
injuries may be independently instituted pursuant to Article 33 of the Civil
Code, and does not operate as a prejudicial question that will justify the
suspension of a criminal case.23 This was precisely the Court’s thrust in G.R.
No. 148193, thus:

Moreover, neither is there a prejudicial question if the civil and the

criminal action can, according to law, proceed independently of each
other. Under Rule 111, Section 3 of the Revised Rules on Criminal
Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil
Code, the independent civil action may be brought by the offended party.
It shall proceed independently of the criminal action and shall require only
a preponderance of evidence. In no case, however, may the offended party
recover damages twice for the same act or omission charged in the criminal
action.

xxxx

In the instant case, Civil Case No. 99-95381, for Damages and Attachment
on account of the alleged fraud committed by respondent and his mother
in selling the disputed lot to PBI is an independent civil action under Article
33 of the Civil Code. As such, it will not operate as a prejudicial question
that will justify the suspension of the criminal case at bar.24

Contrary to Consing’s stance, it was not improper for the CA to apply the
ruling in G.R. No. 148193 to his case with Unicapital, for, although the
Manila and Makati civil cases involved different complainants (i.e., Plus
Builders and Unicapital), the civil actions Plus Builders and Unicapital had
separately instituted against him were undeniably of similar mold, i.e.,
they were both based on fraud, and were thus covered by Article 33 of the
Civil Code. Clearly, the Makati criminal case could not be suspended
pending the resolution of the Makati civil case that Unicapital had filed.

As far as the Pasig civil case is concerned, the issue of Consing’s being a
mere agent of his mother who should not be criminally liable for having so
acted due to the property involved having belonged to his mother as
principal has also been settled in G.R. No. 148193, to wit:

In the case at bar, we find no prejudicial question that would justify the
suspension of the proceedings in the criminal case (the Cavite criminal
case). The issue in Civil Case No. SCA 1759 (the Pasig civil case) for
Injunctive Relief is whether or not respondent (Consing) merely acted as
an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381
(the Manila civil case), for Damages and Attachment, the question is
whether respondent and his mother are liable to pay damages and to
return the amount paid by PBI for the purchase of the disputed lot. Even if
respondent is declared merely an agent of his mother in the transaction
involving the sale of the questioned lot, he cannot be adjudged free from
criminal liability. An agent or any person may be held liable for conspiring
to falsify public documents. Hence, the determination of the issue involved
in Civil Case No. SCA 1759 for Injunctive Relief is irrelevant to the guilt or
innocence of the respondent in the criminal case for estafa through
falsification of public document.25 (Words in parentheses supplied; bold
underscoring supplied for emphasis)

WHEREFORE, the Court AFFIRMS the amended decision promulgated on

August 18, 2003; and ORDERS petitioner to pay the costs of suit.

SO ORDERED.
G.R. No. 122150 March 17, 2003
GEORGE (CULHI) HAMBON, petitioner,
vs.
COURT OF APPEALS AND VALENTINO U. CARANTES, respondents.
AUSTRIA-MARTINEZ, J.:
Petitioner George (Culhi) Hambon filed herein petition for review on
certiorari, raising the following issues:
WHETHER OR NOT A CIVIL CASE FOR DAMAGES BASED ON AN
INDEPENDENT CIVIL ACTION FALLING UNDER ARTICLE 32, 33, 34 AND
2176 OF THE NEW CIVIL CODE BE DULY DISMISSED FOR FAILURE TO MAKE
RESERVATION TO FILE A SEPARATE CIVIL ACTION IN A CRIMINAL CASE
FILED ARISING FROM THE SAME ACT OR OMISSION OF THE ACCUSED
PURSUANT TO RULE 111, SECTION 1 OF THE RULES OF COURT, THE
FAILURE TO MAKE RESERVATION BEING DUE TO THE FACT THAT THE
CRIMINAL CASE WAS DISMISSED BEFORE THE PROSECUTION STARTED TO
PRESENT EVIDENCE FOR FAILURE OF THE PRIVATE COMPLAINANT TO
APPEAR DESPITE NOTICE
SHOULD A STRICT INTERPRETATION OF RULE 111, SECTION 1 OF THE
RULES OF COURT WHICH INFRINGES ON A RIGHT OF A PARTY BASED ON A
SUBSTANTIVE LAW BE PERMITTED WHEN TO DO SO WOULD DIMINISH,
MODIFY AND/OR AMEND A SUBSTANTIVE RIGHT CONTRARY TO LAW.1
The factual background that led to the filing of the petition is as follows:
On June 6, 1989, the petitioner filed before the Regional Trial Court of
Baguio (Branch 6), a complaint for damages2for the injuries and expenses
he sustained after the truck driven by the respondent bumped him on the
night of December 9, 1985.3 In answer thereto, respondent contended
that the criminal case arising from the same incident, Criminal Case No.
2049 for Serious Physical Injuries thru Reckless Imprudence, earlier filed
on January 8, 1986,4had already been provisionally dismissed by the
Municipal Trial Court of Tuba, Benguet on March 23, 1987, due to
petitioner’s lack of interest;5 and that the dismissal was with respect to
both criminal and civil liabilities of respondent.6
After trial, the Regional Trial Court rendered a decision, dated December
18, 1991, ruling that the civil case was not barred by the dismissal of the
criminal case, and that petitioner is entitled to damages. The dispositive
portion of the RTC decision reads:
WHEREFORE, Judgment is hereby rendered, sentencing
defendant Valentino Cerantes to pay plaintiff George Hambon
the sum of P60,000.00 for hospitalization and medical
expenses and P10,000.00 for native rituals, as Actual Damages;
the sum of P10,000.00 as Moral Damages, P5,000.00 as
Exemplary Damages and P5,000.00 as Attorney’s fees and
costs.
SO ORDERED.7
On appeal,8 the Court of Appeals, in its decision promulgated on March 8,
1995,9 reversed and set aside the decision of the trial court, and
dismissed petitioner’s complaint for damages.
According to the appellate court, since the petitioner did not make any
reservation to institute a separate civil action for damages, it was
impliedly instituted with the criminal case, and the dismissal of the
criminal case carried with it the dismissal of the suit for damages,
notwithstanding the fact that the dismissal was provisional as it
amounted to an acquittal and had the effect of an adjudication on the
merits. 10
Hence, herein petition for review on certiorari under Rule 45 of the Rules
of Court.
Petitioner argues that the ruling in the case of Abellana v.
Marave11 should be observed, i.e., a civil action for damages may be filed
and proceed independently of the criminal action even without
reservation to file the same has been made;12 and that the requirement
of reservation, as provided in Rule 111 of the Rules of Court, practically
diminished/amended/modified his substantial right.13
The petition must be denied.
Petitioner filed the complaint for damages on June 6, 1989. Hence,
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure, as amended
in 1988,14 is the prevailing and governing law in this case, viz.:
SECTION 1. Institution of criminal and civil actions. – When a
criminal action is instituted, the civil action for the recovery of
civil liability is impliedly instituted with the criminal action,
unless the offended party waives the civil action, reserves his
right to institute it separately, or institutes the civil action
prior to the criminal action.
Such civil action includes recovery of indemnity under the
Revised Penal Code, and damages under Article 32, 33, 34 and
2176 of the Civil Code of the Philippines arising from the same
act or omission of the accused.
...
Under the foregoing rule, civil actions to recover liability arising from
crime (ex delicto) and under Articles 32, 33, 34 and 2176 of the Civil Code
(quasi-delict) are deemed impliedly instituted with the criminal action
unless waived, reserved or previously instituted.
Thus, in Maniago v. Court of Appeals,15 the Court ruled that the right to
bring an action for damages under the Civil Code must be reserved, as
required by Section 1, Rule 111, otherwise it should be dismissed;16 and
that the reservation requirement does not impair, diminish or defeat
substantive rights, but only regulates their exercise in the general interest
of orderly procedure.17
In the Maniago case, petitioner Ruben Maniago was the owner of the bus
driven by Herminio Andaya that figured in a vehicular accident with the
jeepney owned by respondent Alfredo Boado. The petitioner therein
initially sought for the suspension of the civil case for damages filed
against him in view of the pendency of the criminal case for reckless
imprudence resulting in damage to property and multiple physical
injuries filed against his driver. The respondent, in the criminal case, did
not reserve the right to bring the separate civil action against the
petitioner or his driver. The criminal case was later dismissed for the
failure of the prosecution to prosecute its case. On appeal, the Court
identified the issues as (1) whether the respondent can file a civil action
for damages despite the absence of reservation; (2) whether the
dismissal of the criminal case brought with it the dismissal of the civil
action; and (3) whether the reservation requirement is substantive in
character and beyond the rule-making power of the Court.18
The Court expounded:
. . . §1quite clearly requires that a reservation must be made to
institute separately all civil actions for the recovery of civil
liability, otherwise they will de deemed to have been
instituted with the criminal case. … In other words the right of
the injured party to sue separately for the recovery of the civil
liability whether arising from crimes (ex delicto) or from quasi-
delict under Art. 2176 of the Civil Code must be reserved
otherwise they will de deemed instituted with the criminal
action.
...
Contrary to private respondent’s contention, the requirement
that before a separate civil action may be brought it must be
reserved does not impair, diminish or defeat substantive
rights, but only regulates their exercise in the general interest
of procedure. The requirement is merely procedural in nature.
For that matter the Revised Penal Code, by providing in Art.
100 that any person criminally liable is also civilly liable, gives
the offended party the right to bring a separate civil action, yet
no one has ever questioned the rule that such action must be
reserved before it may be brought separately.19
While the Abellana case ruled that a reservation is not necessary, the
1988 amendment of the rule explicitly requires reservation of the civil
action.
x x x Prior reservation is a condition sine qua non before any of
these independent civil actions can be instituted and
thereafter have a continuous determination apart from or
simultaneous with the criminal action.
 . . . Far from altering substantive rights, the primary purpose of
the reservation is, to borrow the words of the Court in "Caños
v. Peralta":

‘. . . to avoid multiplicity of suits, to guard against

oppression and abuse, to prevent delays, to clear
congested dockets, to simplify the work of the trial
court; in short, the attainment of justice with the
least expense and vexation to the parties-
litigants.’20

Thus, herein petitioner Hambon should have reserved his right to

separately institute the civil action for damages in Criminal Case No.
2049. Having failed to do so, Civil Case No. 1761-R for damages
subsequently filed by him without prior reservation should be dismissed.
With the dismissal of Criminal Case No. 2049, whatever civil action for the
recovery of civil liability that was impliedly instituted therein was likewise
dismissed.

WHEREFORE, the instant petition for review on certiorari is hereby

DENIED for lack of merit, and the decision of the Court of Appeals dated
March 8, 1995, is AFFIRMED in toto.

SO ORDERED.
G.R. No. 192861 June 30, 2014
LINDA RANA, Petitioner,
vs.
TERESITA LEE WONG, SPS. SHIRLEY LEE ONG and RUBEN ANG ONG,
represented by their Attorney-in-fact WILSON UY, and SPS. ROSARIO
and.WILSON UY, Respondents.
x-----------------------x
G.R. No. 192862
SPS. ROSARIO and WILSON UY, WILSON UY as attorney-in-fact of TERESITA
LEE WONG, and SPS. SHIRLEY LEE ONG and RUBEN ANG ONG, Petitioners,
vs.
SPS. REYNALDO. and LINDA RANA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in these consolidated petitions for review on certiorari1 are the
Decision2 dated July 13, 2005 and the Resolution3 dated June 18, 2010 of
the Court of Appeals (CA) in CA-G.R. CV No. 78463 which affirmed the
Decision4 dated December 20, 2002 of the Regional Trial Court of Cebu City,
7th Judicial Region, Branch 22 (RTC) in Civil Case Nos. CEB-20893 and CEB-
21296.
The Facts
Teresita Lee Wong (Wong) and Spouses Shirley and Ruben Ang Ong (Sps.
Ong) are co-owners pro-indivisoof a residential land situated in Peace
Valley Subdivision, Lahug, Cebu City, covered by Transfer Certificate of
Title (TCT) No. 1391605 (Wong-Ong property), abutting6 a 10-meter7 wide
subdivision road (subject road).
On the opposite side of the subject road, across the Wong-Ong property,
are the adjacent lots of Spouses Wilson and Rosario Uy (Sps. Uy) and
Spouses Reynaldo and Linda Rana (Sps. Rana), respectively covered by TCT
Nos. 1240958 (Uy property) and T-1155699 (Rana property). The said lots
follow a rolling terrain10 with the Rana property standing about two (2)
meters11 higher than and overlooking the Uy property, while the Wong-
Ong property is at the same level with the subject road.12
Sometime in 1997, Sps. Rana elevated and cemented a portion of the
subject road that runs between the Rana and Wong-Ong properties
(subject portion) in order to level the said portion with their gate. 13 Sps.
Rana likewise backfilled a portion (subject backfilling) of the perimeter
fence separating the Rana and Uyproperties without erecting a retaining
wall that would hold the weight of the added filling materials. The matter
was referred to the Office of the Barangay Captain of Lahug14 as well as the
Office of the Building Official of Cebu City (OBO),15 but to no avail.16
The RTC Proceedings
On September 19, 1997, Wong, Sps. Ong, and Sps. Uy (Wong, et al.) filed a
Complaint17 for Abatement of Nuisance with Damages against Sps. Rana
before the RTC, docketed as Civil Case No. CEB-20893, seeking to: (a)
declare the subject portion as a nuisance which affected the ingress and
egress of Wong and Sps. Ong to their lot "in the usual and [normal]
manner, such that they now have to practically jump from the elevated
road to gain access to their lot and scale the same elevation in order to get
out";18 (b) declare the subject backfilling as a nuisance considering that it
poses a clear and present danger to the life and limb of the Uy family
arising from the premature weakening of Sps. Uy’s perimeter fence due to
the seeping of rain water from the Rana property that could cause its
sudden collapse;19 (c) compel Sps. Rana to restore the subject portion to its
original condition; (d) compel Sps. Rana to remove the backfilling materials
along Sps. Uy’s perimeter fence and repair the damage to the fence; and
(e) pay moral and exemplary damages, attorney’s fees, litigation expenses,
and costs of suit.20
In their Answer dated October 23, 1997,21 Sps. Rana countered that prior
to the construction of their residence, there was no existing road and they
merely developed the subject portion which abuts their gate in view of the
rolling terrain. They claimed thatWong and Sps. Ong do not have any need
for the subject portion because their property is facing an existing road,
i.e., Justice Street. They likewise denied having undertaken any backfilling
along the boundary of the Uy property considering the natural elevation of
their own property, which renders backfilling unnecessary.22
After the filing of Sps. Rana’s Answer, Wong, et al., in turn, filed a Motion
for Leave to be Allowed to Bring in Heavy Equipment23 for the intermediate
development of the Wong-Ong property with a view to the use of the
subject road as access to their lot. Notwithstanding Sps. Rana’s opposition,
the RTC granted Wong,et al.’s motion in an Order24dated November 27,
1997 (November 27, 1997 Order), the dispositive portion of which reads as
follows: WHEREFORE, as prayed for, the motion is hereby GRANTED.
Consequently, the plaintiffs are hereby allowed to use heavy
equipments/machineries in order to develop the area and make use of the
right of way which is located between the [Wong-Ong and Rana
properties]. (Emphasis supplied)
Despite the limited tenor of the November 27, 1997 Order, Wong, et al.,
on May 23 and 24, 1998, proceeded to level the subject portion, which, in
the process, hampered Sps. Rana’s ingress and egress to their residence,
resulting too to the entrapment of their vehicle inside their
garage.25 Feeling aggrieved, Sps. Rana, on June 19, 1998, filed a
Supplemental Answer,26 praying for: (a) the restoration of the soil,
boulders, grade, contour, and level of the subject portion; and (b) payment
of moral damages, actual and consequential damages, and exemplary
damages.
Meanwhile, on December 8, 1997, Sps. Rana filed with another branch of
the same trial court a Complaint27 for Recovery of Property and Damages
against Sps. Uy, docketed as Civil Case No. CEB-21296. They alleged that in
October 1997, theycaused a resurvey of their property which purportedly
showed that Sps. Uyencroached upon an11-square meter (sq. m.) portion
along the common boundary of their properties. Their demands for
rectification as well as barangay conciliation efforts were, however,
ignored. Thus, they prayed that Sps. Uy be ordered to remove their fence
along the common boundary and return the encroached portion, as well
as to pay moral damages, attorney’s fees, and litigation expenses. After
the filing of Sps. Rana’s complaint, Civil Case No. CEB-21296 was
consolidated with Civil Case No. CEB-20893.28
In response thereto, Sps. Uy filed an Answer with Counterclaim,29 averring
that prior to putting up their fence, they caused a relocation survey of their
property and were, thus, confident that their fence did not encroach upon
the Rana property. In view of Sps.Rana’s complaint, they then caused
another relocation survey which allegedly showed, however, that while
they encroached around 3 sq. m. of the Rana property, Sps. Rana intruded
into 7 sq. m. of their property. Hence, theyposited that they had "a bigger
cause than that of [Sps. Rana] in [so] far as encroachment is
concerned."30 Accordingly, they prayed for the dismissal of Sps. Rana’s
complaint with counterclaim for damages, attorney’s fees, and litigation
expenses.
In light of the foregoing, the RTC appointed three (3) commissioners to
conduct a resurvey of the Uy and Rana properties for the purpose of
determining if any encroachment occurred whatsoever.31
The RTC Ruling
On December 20, 2002, the RTC rendered a Decision32 in the consolidated
cases.
In Civil Case No. CEB-20893, the RTC found that: (a) Sps. Rana, without prior
consultation with the subdivision owner or their neighbors, developed to
their sole advantage the subject portion consisting of one-half of the width
of the 10-meter subject road by introducing filling materials, and rip
rapping the side of the road; (b) the said act denied Wong and Sps. Ong the
use of the subject portion and affected the market value of their property;
(c) Sps. Uy have no intention of using the subject portion for ingress or
egress considering that theybuilt a wall fronting the same; and (d) Wong,
et al.’s manner of enforcing the November 27, 1997 Order caused damage
and injury to Sps. Rana and amounted to bad faith. In view of these
findings, the RTC declared that the parties all acted in bad faith, and,
therefore, no relief can be granted to them against each other.33
Separately, however, the RTC found that the backfilling done by Sps. Rana
on their property exerted pressure on the perimeter fence of the Uy
property, thereby constituting a nuisance. As such, the former were
directed to construct a retaining wall at their own expense. 34 Meanwhile,
in Civil Case No. CEB-21296, the RTC, despite having adopted the findings
of Atty. Reuel T. Pintor (Atty. Pintor) – a court-appointed commissioner
who determined that Sps. Uy encroached the Rana property by 2 sq. m35 –
dismissed both the complaint and counterclaim for damages because of
the failure ofboth parties to substantiate their respective claims of bad
faith against each other.36
Dissatisfied with the RTC’s verdict, the parties filed separate appeals with
the CA.
The CA Ruling
On July 13, 2005, the CA rendered a Decision37 affirming the RTC.
With respect to Civil Case No. CEB-20893, the CA found that (a) Sps. Rana’s
act of elevating and cementing the subject portion curtailed the use and
enjoyment by Wong and Sps. Ong of their properties; (b) the undue
demolition of the subject portion by Wong, et al.hampered Sps. Rana’s
ingress and egress to their residence and deprived them of the use of their
vehicle which was entrapped in their garage; and (c) both parties were
equally at fault in causingdamage and injury to each other and, thus, are
not entitled to the reliefs sought for.38
On the other hand, the CA found that the backfilling done by Sps. Rana on
their property requires necessary works to prevent it from jeopardizing
someone’s life or limb.39
As for Civil Case No. CEB-21296, the CA sustained the dismissal of the
complaint as well as the parties’ respective claims for damages for lack of
legal and factual bases.40
The parties filed separate motions for reconsideration41 which were,
however, denied in the Resolution42 dated June 18, 2010, hence, the
instant petitions.
The Issues Before the Court
In G.R. No. 192861, petitioner Linda Rana (Linda Rana)43 faults the RTC in
(a) not finding Wong and Sps. Uyguilty of malice and bad faith both in
instituting Civil Case No. CEB-20893 and in erroneously implementing the
November 27, 1997 Order, and (b) failing or refusing to grant the reliefs
initially prayed for,among others, the reconveyance of the encroached
property.44
On the other hand, in G.R. No. 192862, petitioners Wong, et al. fault the
RTC in (a) applying the in pari delictodoctrine against them and failing to
abate the nuisance45 which still continues and actually exists as Sps. Rana
caused the same to be reconstructed and restored to their prejudice, 46 and
(b) not finding Sps. Rana guilty of bad faith in instituting Civil Case No. CEB-
21296 and ordering them to pay damages to petitioners Wong, et al.47
The Court’s Ruling
The petitions are partly meritorious.
As both petitions traverse the issues intersectingly, the Court deems it apt
to proceed with its disquisition according to the subject matters of the
cases as originally filed before the RTC.
A. Civil Case No. CEB-20893
For Abatement of Nuisance and Damages.
Under Article 694 of the Civil Code, a nuisance is defined as "any act,
omission, establishment, business, condition of property, or anything else
which: (1) Injures or endangers the healthor safety of others; or (2) Annoys
or offends the senses; or(3) Shocks, defies or disregards decency or
morality; or (4) Obstructs or interferes with the free passage of any public
highway or street, or any body of water;or (5) Hinders or impairs the use
of property." Based on case law, however, the term "nuisance" is deemed
to be "so comprehensive that it has been applied to almost all ways which
have interfered with the rights of the citizens, either in person, property,
the enjoyment of his property, or his comfort."48
Article 695 of the Civil Code classifies nuisances with respect to the object
or objects that they affect. In this regard, a nuisance may either be: (a) a
public nuisance (or one which "affects a community or neighborhood or
any considerable number of persons, although the extent of the
annoyance, danger or damage upon individuals may be unequal"); or (b) a
private nuisance (or one "that is not included in the foregoing definition"
[or, as case law puts it, one which "violates only private rights and
produces damages to but one or a few persons"]).49
Jurisprudence further classifies nuisances in relation to their legal
susceptibility to summary abatement (that is, corrective action without
prior judicial permission). In this regard, a nuisance may either be: (a) a
nuisance per se(or one which "affects the immediate safety of persons and
property and may be summarily abated under the undefined law of
necessity");50 or (b) a nuisance per accidens(or that which "depends upon
certain conditions and circumstances, and its existence being a question of
fact, it cannot be abated without due hearing thereon ina tribunal
authorized to decide whether such a thing does in law constitute a
nuisance.")51
It is a standing jurisprudentialrule that unless a nuisance is a nuisance per
se, it may not be summarily abated. In Lucena Grand Central Terminal, Inc.
v. Jac Liner, Inc.,52 the Court, citing other cases on the matter, emphasized
the need for judicial intervention when the nuisance is not a nuisance per
se, to wit:
In Estate of Gregoria Francisco v. Court of Appeals, this Court held:
Respondents can not seek cover under the general welfare clause
authorizing the abatement of nuisances without judicial proceedings. That
tenet applies to a nuisance per se, or one which affects the immediate
safety of persons and property and may be summarily abated under the
undefined law of necessity. The storage of copra in the quonset building is
a legitimate business. By its nature, it can not be said to be injurious to
rights of property, of health or of comfort of the community. If it be a
nuisance per accidensit may be so proven in a hearing conducted for
thatpurpose. It is not per sea nuisance warranting its summary abatement
without judicial intervention.
In Pampanga Bus Co., Inc. v. Municipality of Tarlacwhere the appellant-
municipality similarly argued that the terminal involved therein is a
nuisance that may be abated by the Municipal Council viaan ordinance,
this Court held: "Suffice it to say that in the abatement of nuisances the
provisions of the Civil Code (Articles 694-707) must be observed and
followed. This appellant failed to do."53 (Emphases supplied; citations
omitted)
Aside from the remedy of summary abatement which should be taken
under the parameters stated in Articles 704 54(for public nuisances) and
70655 (for private nuisances) of the Civil Code, a private person whose
property right was invaded or unreasonably interfered with by the act,
omission, establishment, business or condition of the property of another
may file a civil action to recover personal damages.56 Abatement may be
judicially sought through a civil action therefor57 if the pertinent
requirements under the Civil Code for summary abatement, or the
requisite that the nuisance is a nuisance per se, do not concur. To note, the
remedies of abatement and damages are cumulative; hence, both may be
demanded.58
In the present cases, Wong, et al. availed of the remedy of judicial
abatement and damages against Sps.Rana, claiming that both the elevated
and cemented subject portionand the subject backfillingare "nuisances"
caused/created by the latter which curtailed their use and enjoyment of
their properties.
With respect to the elevated and cemented subject portion, the Court finds
that the same is not a nuisance per se. By its nature, it is not injurious to
the health or comfort of the community. It was built primarily to facilitate
the ingress and egress of Sps. Rana from their house which was admittedly
located on a higher elevation than the subject road and the adjoining Uy
and Wong-Ong properties.Since the subject portion is not a nuisance per
se(but actually a nuisance per accidensas will be later discussed) it cannot
be summarily abated. As such, Wong, et al.’s demolition of Sps. Rana’s
subject portion, which was not sanctioned under the RTC’s November 27,
1997 Order,remains unwarranted. Resultantly, damages ought to be
awarded in favor of Sps. Rana particularly that of (a) nominal damages59 –
for the vindication and recognition of Sps. Rana’s right to be heard before
the court prior to Wong, et al.’sabatement of the subject portion
(erroneously perceived as a nuisance per se) – and (b) temperate
damages60 – for the pecuniary loss owing to the demolition of the subject
portion, which had been established albeit uncertain as to the actual
amount of loss.
Sps. Rana’s entitlement to the above-mentioned damages, however, only
stands in theory.1âwphi1 This is because the actual award thereof is
precluded by the damage they themselves have caused Wong, et al. in view
of their construction of the subject portion. As the records establish, Sps.
Rana, without prior consultation with Wong, et al. and to their sole
advantage, elevated and cemented almost half61 of the 10-meter wide
subject road. As homeowners of Peace Valley Subdivision, Wong, et al.
maintain the rights to the unobstructed use of and free passage over the
subject road. By constructing the subject portion, Sps. Rana introduced a
nuisance per accidensthat particularly transgressed the aforesaid rights.
Thus, for the vindication and recognition of Wong, et al.’srights, Sps. Rana
should be similarly held liable for nominal damages. Under Article 2216 of
the Civil Code,62courts have the discretion to determine awards of nominal
and temperate damages without actual proof of pecuniary loss, as in this
case. Assessing the respective infractions of the parties herein, the Court
finds it prudent to sustain the CA’s verdict offsetting the damage caused
by said parties against each other. The Court can, however, only concur
with the CA in result since the latter inaccurately applied,63 as basis for its
ruling, the in pari delictoprinciple enunciated in the case of Yu Bun Guan v.
Ong64 (Yu Guan).In said case, the Court discussed the in pari delicto
principle with respect to the subject matter ofinexistent and void
contracts, viz.:
Inapplicability of the in Pari Delicto Principle
The principle of in pari delictoprovides that when two parties are equally
at fault, the law leaves them as they are and denies recovery by either one
of them. However, this principle does not apply with respect to inexistent
and void contracts. Said this Court in Modina v. Court of Appeals:
"The principle of in pari delicto non oritur actio denies all recovery to the
guilty parties inter se. It applies to cases where the nullity arises from the
illegality of the consideration orthe purpose of the contract. When two
persons are equally at fault, the law does not relieve them. The exception
to this general rule is when the principle is invoked with respect to
inexistent contracts."65 (emphasis supplied; citations omitted)
Clearly, no void or inexistent contract is hereinat issue, hence, the Court’s
disagreement with the CA’s invocation of Yu Guanin this respect.
As for the subject backfillingtouching the perimeter fence of the Uy
property, records show that the said fence was not designed to act as a
retaining wall66 but merely to withhold windload and its own load.67 Both
the RTC and the CA found the subject backfilling to have added pressure
on the fence,68 consequently endangering the safety of the occupants of
the Uy property, especially considering the higher elevation of the Rana
property. With these findings, the Court thus agrees with the courts a
quothat there is a need for Linda Rana to construct a retaining wall69 which
would bear the weight and pressure of the filling materials introduced on
their property. The Court, however, observed that neither the RTC nor the
CA specified in their respective decisions the backfilled areas which would
require the retaining wall. Due to the technicality of the matter, and
considering that the due authenticity and genuineness of the
findings/recommendation70 of the OBO and the accompanying
sketch71 thereto were not specifically denied by Sps. Rana,72 the required
retaining wall shall beconstructed in accordance with the said sketch which
showed the area backfilled.
B. Civil Case No. CEB-21296
For Recovery of Property.
Now, with respect to Civil Case No. CEB-21296, the Court finds that the CA
erred in affirming the RTC’s dismissal thereof considering that it was
determined that Sps. Uy had actually encroached upon the Rana property
to the extent of 2 sq. m.
Settled is the rule that in order that an action for the recovery of property
may prosper, the party prosecuting the same need only prove the identity
of the thing and his ownership thereof.73 In the present cases, the
Report74 of the court-appointed commissioner, Atty. Pintor, who
conducted a relocation survey75 of the Rana and Uy properties identified
and delineated the boundaries of the two properties and showed that Sps.
Uy’s perimeter fence intruded on 2 sq. m.of the Rana property.76 Both the
RTC and the CA relied upon the said report; thus, absent any competent
showing that the said finding was erroneous, the Court sees no reason to
deviate from the conclusions reached by the courts a quo. Having
sufficiently proven their claim, Sps. Rana are, therefore entitled to the
return of the 2 sq.m. encroached portion. Corollary thereto, compliance by
Linda Rana with the directive in Civil Case No. CEB-20893to build a
retaining wall on their property shall be held in abeyance pending return
of the encroached portion.
C. Claims Common to Both Civil Case No. CEB-20893 and Civil Case No. CEB-
21296: Malicious Prosecution of Both Cases, Moral and Exemplary
Damages, Attorney’s Fees, and Litigation
Expenses.
As a final matter, the Court resolvesthe claims common to both Civil Case
No. CEB-20893 and Civil Case No. CEB-21296, particularly those on
malicious prosecution, as well asmoral and exemplary damages, attorney’s
fees, and litigation expenses.
As the Court sees it, the filing bythe parties of their respective complaints
against each other was notclearly and convincingly shown to have been
precipitated by any maliceor bad faith, sufficient enough to warrant the
payment of damages in favor of either party. As correctly pointed out by
the CA, malicious prosecution, both in criminal and civil cases, requires the
presence oftwo (2) elements, namely: (a) malice; and (b) absence of
probable cause. Moreover, there must be proof that the prosecution was
prompted by a sinister design to vex and humiliate a person; and that it
was initiated deliberately knowing that the charge was false and
baseless.77 Hence, the mere filing of a suitwhich subsequently turns out to
be unsuccessful does not render a person liable for malicious prosecution,
for the law could not have meant toimpose a penalty on the right to
litigate.78 As the aforementioned elements were not duly proven, the
claims for malicious prosecution are hereby denied.
With respect to the claims for moral damages, although the Court found
the parties to have sustained nominal damages as a result of the other
parties’ acts, an award of moral damages would nonetheless be improper
in this case. Article 2217 of the Civil Code states that "[m]oral 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 for omission." Corollary thereto, Article 2219 of
the same code (Article 2219) states that "[m]oral 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; [and] (10) Actsand actions
referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35."
Here, it was not proven thatthe damage caused by (a) Sps. Rana against
Wong, et al., arising from the elevation and cementing of the subject
portion and the subject backfilling, and (b) Sps. Uy against Sps. Rana, by
virtue of their 2 sq. m. encroachment, could be characterized as a form of
or had resulted in physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, or any other similar injury. Neitherwas it convincingly shown
that the present controversies fall within the class of cases enumerated
under Article 2219. Therefore, no moral damages should be awarded.
Similarly, the Court deems that an award of exemplary damages would be
inappropriate since these damages are imposed only "by way of example
or correction for the publicgood, in addition to the moral, temperate,
liquidated or compensatory damages."79 Bluntly placed, the Court does
not view the present matters of such caliber. Hence, there is no reason to
grant the parties’ claims for the same.
Lastly, considering that neither of the parties was able to successfully
prove (a) their claims for malicious prosecution,80 (b) their entitlement to
moral and exemplary damages,81 and (c) the attendance of any of the
circumstances under Article 220882 of the Civil Code, their respective claims
for attorney’s fees and litigation expensesagainst each other are also
denied. WHEREFORE, the Decision dated July 13, 2005 and the Resolution
dated June 18, 2010 in CA-G.R. CV No. 78463 are SET ASIDE and a new one
is entered as follows:
In Civil Case No. CEB-20893:
(a) The awards of damages in favor of each party are
OFFSETagainst each other as herein discussed;
(b) Linda Rana is hereby ORDEREDto build, at her own expense,
a retaining wall on the property covered by TCT No. 124095 in
accordance with the sketch of the Office of the Building Official
of Cebu City attached to the records of the case, subject to the
condition as shall be hereunder set; and
(c) All other claims and counterclaims are DISMISSED for lack of
legal and factual bases.
In Civil Case No. CEB-21296:
(a) Spouses Rosario and Wilson Uy are DIRECTED to return to
Linda Rana the 2-square meter encroached portion as reflected
in the relocation survey conducted by court-appointed
commissioner Atty. Reuel T. Pintor, after which Linda Rana shall
be OBLIGED to build the retaining wall as directed by the Court;
and
(b) All other claims and counterclaims are DISMISSED for lack of
merit.
SO ORDERED.
G.R. No. 177807 October 11, 2011
EMILIO GANCAYCO, Petitioner,
vs.
CITY GOVERNMENT OF QUEZON CITY AND METRO MANILA
DEVELOPMENT AUTHORITY, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 177933
METRO MANILA DEVELOPMENT AUTHORITY, Petitioner,
vs.
JUSTICE EMILIO A. GANCAYCO (Retired), Respondent,
DECISION
SERENO, J.:
Before us are consolidated Petitions for Review under Rule 45 of the Rules
of Court assailing the Decision1promulgated on 18 July 2006 and the
Resolution2 dated 10 May 2007 of the Court of Appeals in CA-G.R. SP No.
84648.
The Facts
In the early 1950s, retired Justice Emilio A. Gancayco bought a parcel of
land located at 746 Epifanio delos Santos Avenue (EDSA),3 Quezon City
with an area of 375 square meters and covered by Transfer Certificate of
Title (TCT) No. RT114558.
On 27 March 1956, the Quezon City Council issued Ordinance No. 2904,
entitled "An Ordinance Requiring the Construction of Arcades, for
Commercial Buildings to be Constructed in Zones Designated as Business
Zones in the Zoning Plan of Quezon City, and Providing Penalties in
Violation Thereof."4
An arcade is defined as any portion of a building above the first floor
projecting over the sidewalk beyond the first storey wall used as
protection for pedestrians against rain or sun.5
Ordinance No. 2904 required the relevant property owner to construct an
arcade with a width of 4.50 meters and height of 5.00 meters along EDSA,
from the north side of Santolan Road to one lot after Liberty Avenue, and
from one lot before Central Boulevard to the Botocan transmission line.
At the outset, it bears emphasis that at the time Ordinance No. 2904 was
passed by the city council, there was yet no building code passed by the
national legislature. Thus, the regulation of the construction of buildings
was left to the discretion of local government units. Under this particular
ordinance, the city council required that the arcade is to be created by
constructing the wall of the ground floor facing the sidewalk a few meters
away from the property line. Thus, the building owner is not allowed to
construct his wall up to the edge of the property line, thereby creating a
space or shelter under the first floor. In effect, property owners relinquish
the use of the space for use as an arcade for pedestrians, instead of using
it for their own purposes.
The ordinance was amended several times. On 8 August 1960, properties
located at the Quezon City-San Juan boundary were exempted by
Ordinance No. 60-4477 from the construction of arcades. This ordinance
was further amended by Ordinance No. 60-4513, extending the exemption
to commercial buildings from Balete Street to Seattle Street. Ordinance
No. 6603 dated 1 March 1966 meanwhile reduced the width of the arcades
to three meters for buildings along V. Luna Road, Central District, Quezon
City.
The ordinance covered the property of Justice Gancayco. Subsequently,
sometime in 1965, Justice Gancayco sought the exemption of a two-storey
building being constructed on his property from the application of
Ordinance No. 2904 that he be exempted from constructing an arcade on
his property.
On 2 February 1966, the City Council acted favorably on Justice Gancayco’s
request and issued Resolution No. 7161, S-66, "subject to the condition
that upon notice by the City Engineer, the owner shall, within reasonable
time, demolish the enclosure of said arcade at his own expense when
public interest so demands."6
Decades after, in March 2003, the Metropolitan Manila Development
Authority (MMDA) conducted operations to clear obstructions along the
sidewalk of EDSA in Quezon City pursuant to Metro Manila Council’s
(MMC) Resolution No. 02-28, Series of 2002.7 The resolution authorized
the MMDA and local government units to "clear the sidewalks, streets,
avenues, alleys, bridges, parks and other public places in Metro Manila of
all illegal structures and obstructions."8
On 28 April 2003, the MMDA sent a notice of demolition to Justice
Gancayco alleging that a portion of his building violated the National
Building Code of the Philippines (Building Code)9 in relation to Ordinance
No. 2904. The MMDA gave Justice Gancayco fifteen (15) days to clear the
portion of the building that was supposed to be an arcade along EDSA.10
Justice Gancayco did not comply with the notice. Soon after the lapse of
the fifteen (15) days, the MMDA proceeded to demolish the party wall, or
what was referred to as the "wing walls," of the ground floor structure.
The records of the present case are not entirely clear on the extent of the
demolition; nevertheless, the fact of demolition was not disputed. At the
time of the demolition, the affected portion of the building was being used
as a restaurant.
On 29 May 2003, Justice Gancayco filed a Petition11 with prayer for a
temporary restraining order and/or writ of preliminary injunction before
the Regional Trial Court (RTC) of Quezon City, docketed as Civil Case No.
Q03-49693, seeking to prohibit the MMDA and the City Government of
Quezon City from demolishing his property. In his Petition,12 he alleged
that the ordinance authorized the taking of private property without due
process of law and just compensation, because the construction of an
arcade will require 67.5 square meters from the 375 square meter
property. In addition, he claimed that the ordinance was selective and
discriminatory in its scope and application when it allowed the owners of
the buildings located in the Quezon City-San Juan boundary to Cubao
Rotonda, and Balete to Seattle Streets to construct arcades at their option.
He thus sought the declaration of nullity of Ordinance No. 2904 and the
payment of damages. Alternately, he prayed for the payment of just
compensation should the court hold the ordinance valid.
The City Government of Quezon City claimed that the ordinance was a valid
exercise of police power, regulating the use of property in a business zone.
In addition, it pointed out that Justice Gancayco was already barred by
estoppel, laches and prescription.
Similarly, the MMDA alleged that Justice Gancayco could not seek the
nullification of an ordinance that he had already violated, and that the
ordinance enjoyed the presumption of constitutionality. It further stated
that the questioned property was a public nuisance impeding the safe
passage of pedestrians. Finally, the MMDA claimed that it was merely
implementing the legal easement established by Ordinance No. 2904.13
The RTC rendered its Decision on 30 September 2003 in favor of Justice
Gancayco.14 It held that the questioned ordinance was unconstitutional,
ruling that it allowed the taking of private property for public use without
just compensation. The RTC said that because 67.5 square meters out of
Justice Gancayco’s 375 square meters of property were being taken
without compensation for the public’s benefit, the ordinance was
confiscatory and oppressive. It likewise held that the ordinance violated
owners’ right to equal protection of laws. The dispositive portion thus
states:
WHEREFORE, the petition is hereby granted and the Court hereby declares
Quezon City Ordinance No. 2094,15Series of 1956 to be unconstitutional,
invalid and void ab initio. The respondents are hereby permanently
enjoined from enforcing and implementing the said ordinance, and the
respondent MMDA is hereby directed to immediately restore the portion
of the party wall or wing wall of the building of the petitioner it destroyed
to its original condition.
IT IS SO ORDERED.
The MMDA thereafter appealed from the Decision of the trial court. On 18
July 2006, the Court of Appeals (CA) partly granted the appeal. 16 The CA
upheld the validity of Ordinance No. 2904 and lifted the injunction against
the enforcement and implementation of the ordinance. In so doing, it held
that the ordinance was a valid exercise of the right of the local government
unit to promote the general welfare of its constituents pursuant to its
police powers. The CA also ruled that the ordinance established a valid
classification of property owners with regard to the construction of
arcades in their respective properties depending on the location. The CA
further stated that there was no taking of private property, since the
owner still enjoyed the beneficial ownership of the property, to wit:
Even with the requirement of the construction of arcaded sidewalks within
his commercial lot, appellee still retains the beneficial ownership of the
said property. Thus, there is no "taking" for public use which must be
subject to just compensation. While the arcaded sidewalks contribute to
the public good, for providing safety and comfort to passersby, the
ultimate benefit from the same still redounds to appellee, his commercial
establishment being at the forefront of a busy thoroughfare like EDSA. The
arcaded sidewalks, by their nature, assure clients of the commercial
establishments thereat some kind of protection from accidents and other
hazards. Without doubt, this sense of protection can be a boon to the
business activity therein engaged. 17
Nevertheless, the CA held that the MMDA went beyond its powers when
it demolished the subject property. It further found that Resolution No. 02-
28 only refers to sidewalks, streets, avenues, alleys, bridges, parks and
other public places in Metro Manila, thus excluding Justice Gancayco’s
private property. Lastly, the CA stated that the MMDA is not clothed with
the authority to declare, prevent or abate nuisances. Thus, the dispositive
portion stated:
WHEREFORE, the appeals are PARTLY GRANTED. The Decision dated
September 30, 2003 of the Regional Trial Court, Branch 224, Quezon City,
is MODIFIED, as follows:
1) The validity and constitutionality of Ordinance No.
2094,18 Series of 1956, issued by the City Council of Quezon City,
is UPHELD; and
2) The injunction against the enforcement and implementation
of the said Ordinance is LIFTED.
SO ORDERED.
This ruling prompted the MMDA and Justice Gancayco to file their
respective Motions for Partial Reconsideration.19
On 10 May 2007, the CA denied the motions stating that the parties did not
present new issues nor offer grounds that would merit the reconsideration
of the Court.20
Dissatisfied with the ruling of the CA, Justice Gancayco and the MMDA filed
their respective Petitions for Review before this Court. The issues raised by
the parties are summarized as follows:
I. WHETHER OR NOT JUSTICE GANCAYCO WAS ESTOPPED FROM
ASSAILING THE VALIDITY OF ORDINANCE NO. 2904.
II. WHETHER OR NOT ORDINANCE NO. 2904 IS
CONSTITUTIONAL.
III. WHETHER OR NOT THE WING WALL OF JUSTICE GANCAYCO’S
BUILDING IS A PUBLIC NUISANCE.
IV. WHETHER OR NOT THE MMDA LEGALLY DEMOLISHED THE
PROPERTY OF JUSTICE GANCAYCO.
The Court’s Ruling
Estoppel
The MMDA and the City Government of Quezon City both claim that Justice
Gancayco was estopped from challenging the ordinance, because, in 1965,
he asked for an exemption from the application of the ordinance.
According to them, Justice Gancayco thereby recognized the power of the
city government to regulate the construction of buildings.
To recall, Justice Gancayco questioned the constitutionality of the
ordinance on two grounds: (1) whether the ordinance "takes" private
property without due process of law and just compensation; and (2)
whether the ordinance violates the equal protection of rights because it
allowed exemptions from its application.
On the first ground, we find that Justice Gancayco may still question the
constitutionality of the ordinance to determine whether or not the
ordinance constitutes a "taking" of private property without due process
of law and just compensation. It was only in 2003 when he was allegedly
deprived of his property when the MMDA demolished a portion of the
building. Because he was granted an exemption in 1966, there was no
"taking" yet to speak of.
Moreover, in Acebedo Optical Company, Inc. v. Court of Appeals,21 we
held:
It is therefore decisively clear that estoppel cannot apply in this case. The
fact that petitioner acquiesced in the special conditions imposed by the
City Mayor in subject business permit does not preclude it from challenging
the said imposition, which is ultra vires or beyond the ambit of authority
of respondent City Mayor. Ultra vires acts or acts which are clearly beyond
the scope of one's authority are null and void and cannot be given any
effect. The doctrine of estoppel cannot operate to give effect to an act
which is otherwise null and void or ultra vires. (Emphasis supplied.)
Recently, in British American Tobacco v. Camacho,22 we likewise held:
We find that petitioner was not guilty of estoppel. When it made the
undertaking to comply with all issuances of the BIR, which at that time it
considered as valid, petitioner did not commit any false misrepresentation
or misleading act. Indeed, petitioner cannot be faulted for initially
undertaking to comply with, and subjecting itself to the operation of
Section 145(C), and only later on filing the subject case praying for the
declaration of its unconstitutionality when the circumstances change and
the law results in what it perceives to be unlawful discrimination. The mere
fact that a law has been relied upon in the past and all that time has not
been attacked as unconstitutional is not a ground for considering
petitioner estopped from assailing its validity. For courts will pass upon a
constitutional question only when presented before it in bona fide cases
for determination, and the fact that the question has not been raised
before is not a valid reason for refusing to allow it to be raised later.
(Emphasis supplied.)
Anent the second ground, we find that Justice Gancayco may not question
the ordinance on the ground of equal protection when he also benefited
from the exemption. It bears emphasis that Justice Gancayco himself
requested for an exemption from the application of the ordinance in 1965
and was eventually granted one. Moreover, he was still enjoying the
exemption at the time of the demolition as there was yet no valid notice
from the city engineer. Thus, while the ordinance may be attacked with
regard to its different treatment of properties that appears to be similarly
situated, Justice Gancayco is not the proper person to do so.
Zoning and the regulation of the
construction of buildings are valid
exercises of police power .
In MMDA v. Bel-Air Village Association,23 we discussed the nature of police
powers exercised by local government units, to wit:
Police power is an inherent attribute of sovereignty. It has been defined as
the power vested by the Constitution in the legislature to make, ordain,
and establish all manner of wholesome and reasonable laws, statutes and
ordinances, either with penalties or without, not repugnant to the
Constitution, as they shall judge to be for the good and welfare of the
commonwealth, and for the subjects of the same. The power is plenary and
its scope is vast and pervasive, reaching and justifying measures for public
health, public safety, public morals, and the general welfare.
It bears stressing that police power is lodged primarily in the National
Legislature. It cannot be exercised by any group or body of individuals not
possessing legislative power. The National Legislature, however, may
delegate this power to the President and administrative boards as well as
the lawmaking bodies of municipal corporations or local government units.
Once delegated, the agents can exercise only such legislative powers as are
conferred on them by the national lawmaking body.
To resolve the issue on the constitutionality of the ordinance, we must first
determine whether there was a valid delegation of police power. Then we
can determine whether the City Government of Quezon City acted within
the limits of the delegation.
It is clear that Congress expressly granted the city government, through the
city council, police power by virtue of Section 12(oo) of Republic Act No.
537, or the Revised Charter of Quezon City,24 which states:
To make such further ordinances and regulations not repugnant to law as
may be necessary to carry into effect and discharge the powers and duties
conferred by this Act and such as it shall deem necessary and proper to
provide for the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort, and convenience of the city and the
inhabitants thereof, and for the protection of property therein; and
enforce obedience thereto with such lawful fines or penalties as the City
Council may prescribe under the provisions of subsection (jj) of this
section.
Specifically, on the powers of the city government to regulate the
construction of buildings, the Charter also expressly provided that the city
government had the power to regulate the kinds of buildings and
structures that may be erected within fire limits and the manner of
constructing and repairing them.25
With regard meanwhile to the power of the local government units to issue
zoning ordinances, we apply Social Justice Society v. Atienza.26 In that case,
the Sangguniang Panlungsod of Manila City enacted an ordinance on 28
November 2001 reclassifying certain areas of the city from industrial to
commercial. As a result of the zoning ordinance, the oil terminals located
in those areas were no longer allowed. Though the oil companies
contended that they stood to lose billions of pesos, this Court upheld the
power of the city government to pass the assailed ordinance, stating:
In the exercise of police power, property rights of individuals may be
subjected to restraints and burdens in order to fulfil the objectives of the
government. Otherwise stated, the government may enact legislation that
may interfere with personal liberty, property, lawful businesses and
occupations to promote the general welfare. However, the interference
must be reasonable and not arbitrary. And to forestall arbitrariness, the
methods or means used to protect public health, morals, safety or welfare
must have a reasonable relation to the end in view.
The means adopted by the Sanggunian was the enactment of a zoning
ordinance which reclassified the area where the depot is situated from
industrial to commercial. A zoning ordinance is defined as a local city or
municipal legislation which logically arranges, prescribes, defines and
apportions a given political subdivision into specific land uses as present
and future projection of needs. As a result of the zoning, the continued
operation of the businesses of the oil companies in their present location
will no longer be permitted. The power to establish zones for industrial,
commercial and residential uses is derived from the police power itself and
is exercised for the protection and benefit of the residents of a locality.
Consequently, the enactment of Ordinance No. 8027 is within the power
of the Sangguniang Panlungsod of the City of Manila and any resulting
burden on those affected cannot be said to be unjust... (Emphasis supplied)
In Carlos Superdrug v. Department of Social Welfare and
Development,27 we also held:
For this reason, when the conditions so demand as determined by the
legislature, property rights must bow to the primacy of police power
because property rights, though sheltered by due process, must yield to
general welfare.
Police power as an attribute to promote the common good would be
diluted considerably if on the mere plea of petitioners that they will suffer
loss of earnings and capital, the questioned provision is invalidated.
Moreover, in the absence of evidence demonstrating the alleged
confiscatory effect of the provision in question, there is no basis for its
nullification in view of the presumption of validity which every law has in
its favor. (Emphasis supplied.)
In the case at bar, it is clear that the primary objectives of the city council
of Quezon City when it issued the questioned ordinance ordering the
construction of arcades were the health and safety of the city and its
inhabitants; the promotion of their prosperity; and the improvement of
their morals, peace, good order, comfort, and the convenience. These
arcades provide safe and convenient passage along the sidewalk for
commuters and pedestrians, not just the residents of Quezon City. More
especially so because the contested portion of the building is located on a
busy segment of the city, in a business zone along EDSA.
Corollarily, the policy of the Building Code,28 which was passed after the
Quezon City Ordinance, supports the purpose for the enactment of
Ordinance No. 2904. The Building Code states:
Section 102. Declaration of Policy. – It is hereby declared to be the policy
of the State to safeguard life, health, property, and public welfare,
consistent with the principles of sound environmental management and
control; and to this end, make it the purpose of this Code to provide for all
buildings and structures, a framework of minimum standards and
requirements to regulate and control their location, site, design quality of
materials, construction, occupancy, and maintenance.
Section 1004 likewise requires the construction of arcades whenever
existing or zoning ordinances require it. Apparently, the law allows the
local government units to determine whether arcades are necessary within
their respective jurisdictions.
Justice Gancayco argues that there is a three-meter sidewalk in front of his
property line, and the arcade should be constructed above that sidewalk
rather than within his property line. We do not need to address this
argument inasmuch as it raises the issue of the wisdom of the city
ordinance, a matter we will not and need not delve into.
To reiterate, at the time that the ordinance was passed, there was no
national building code enforced to guide the city council; thus, there was
no law of national application that prohibited the city council from
regulating the construction of buildings, arcades and sidewalks in their
jurisdiction.
The "wing walls" of the building are not
nuisances per se.
The MMDA claims that the portion of the building in question is a nuisance
per se.
We disagree.
The fact that in 1966 the City Council gave Justice Gancayco an exemption
from constructing an arcade is an indication that the wing walls of the
building are not nuisances per se. The wing walls do not per se immediately
and adversely affect the safety of persons and property. The fact that an
ordinance may declare a structure illegal does not necessarily make that
structure a nuisance.
Article 694 of the Civil Code defines nuisance as any act, omission,
establishment, business, condition or property, or anything else that (1)
injures or endangers the health or safety of others; (2) annoys or offends
the senses; (3) shocks, defies or disregards decency or morality; (4)
obstructs or interferes with the free passage of any public highway or
street, or any body of water; or, (5) hinders or impairs the use of property.
A nuisance may be per se or per accidens. A nuisance per se is that which
affects the immediate safety of persons and property and may summarily
be abated under the undefined law of necessity.29
Clearly, when Justice Gancayco was given a permit to construct the
building, the city council or the city engineer did not consider the building,
or its demolished portion, to be a threat to the safety of persons and
property. This fact alone should have warned the MMDA against
summarily demolishing the structure.
Neither does the MMDA have the power to declare a thing a nuisance. Only
courts of law have the power to determine whether a thing is a nuisance.
In AC Enterprises v. Frabelle Properties Corp.,30 we held:
We agree with petitioner's contention that, under Section 447(a)(3)(i) of
R.A. No. 7160, otherwise known as the Local Government Code,
the Sangguniang Panglungsod is empowered to enact ordinances
declaring, preventing or abating noise and other forms of nuisance. It bears
stressing, however, that the Sangguniang Bayan cannot declare a
particular thing as a nuisance per se and order its condemnation. It does
not have the power to find, as a fact, that a particular thing is a nuisance
when such thing is not a nuisance per se; nor can it authorize the
extrajudicial condemnation and destruction of that as a nuisance which in
its nature, situation or use is not such. Those things must be determined
and resolved in the ordinary courts of law. If a thing be in fact, a nuisance
due to the manner of its operation, that question cannot be determined by
a mere resolution of the Sangguniang Bayan. (Emphasis supplied.)
MMDA illegally demolished
the property of Justice Gancayco.
MMDA alleges that by virtue of MMDA Resolution No. 02-28, Series of
2002, it is empowered to demolish Justice Gancayco’s property. It insists
that the Metro Manila Council authorized the MMDA and the local
government units to clear the sidewalks, streets, avenues, alleys, bridges,
parks and other public places in Metro Manila of all illegal structures and
obstructions. It further alleges that it demolished the property pursuant to
the Building Code in relation to Ordinance No. 2904 as amended.
However, the Building Code clearly provides the process by which a
building may be demolished. The authority to order the demolition of any
structure lies with the Building Official. The pertinent provisions of the
Building Code provide:
SECTION 205. Building Officials. — Except as otherwise provided herein,
the Building Official shall be responsible for carrying out the provisions of
this Code in the field as well as the enforcement of orders and decisions
made pursuant thereto.
Due to the exigencies of the service, the Secretary may designate
incumbent Public Works District Engineers, City Engineers and Municipal
Engineers act as Building Officials in their respective areas of jurisdiction.
The designation made by the Secretary under this Section shall continue
until regular positions of Building Official are provided or unless sooner
terminated for causes provided by law or decree.
xxx xxx xxx
SECTION 207. Duties of a Building Official. — In his respective territorial
jurisdiction, the Building Official shall be primarily responsible for the
enforcement of the provisions of this Code as well as of the implementing
rules and regulations issued therefor. He is the official charged with the
duties of issuing building permits.
In the performance of his duties, a Building Official may enter any building
or its premises at all reasonable times to inspect and determine
compliance with the requirements of this Code, and the terms and
conditions provided for in the building permit as issued.
Moreover, MMC Memorandum Circular No. 88-09 did not apply to
Trackworks' billboards, signages and other advertising media in MRT3,
because it did not specifically cover MRT3, and because it was issued a year
prior to the construction of MRT3 on the center island of EDSA. Clearly,
MMC Memorandum Circular No. 88-09 could not have included MRT3 in
its prohibition.
MMDA's insistence that it was only implementing Presidential Decree No.
1096 (Building Code) and its implementing rules and regulations is not
persuasive. The power to enforce the provisions of the Building Code was
lodged in the Department of Public Works and Highways (DPWH), not in
MMDA, considering the law's following provision, thus:
Sec. 201. Responsibility for Administration and Enforcement. -
The administration and enforcement of the provisions of this Code
including the imposition of penalties for administrative violations thereof
is hereby vested in the Secretary of Public Works, Transportation and
Communications, hereinafter referred to as the "Secretary."
There is also no evidence showing that MMDA had been delegated by
DPWH to implement the Building Code. (Emphasis supplied.)

When any building work is found to be contrary to the provisions of this

Code, the Building Official may order the work stopped and prescribe the
terms and/or conditions when the work will be allowed to resume.
Likewise, the Building Official is authorized to order the discontinuance of
the occupancy or use of any building or structure or portion thereof found
to be occupied or used contrary to the provisions of this Code.
xxx xxx xxx
SECTION 215. Abatement of Dangerous Buildings. — When any building or
structure is found or declared to be dangerous or ruinous, the Building
Official shall order its repair, vacation or demolition depending upon the
degree of danger to life, health, or safety. This is without prejudice to
further action that may be taken under the provisions of Articles 482 and
694 to 707 of the Civil Code of the Philippines. (Emphasis supplied.)
Additionally, the penalty prescribed by Ordinance No. 2904 itself does not
include the demolition of illegally constructed buildings in case of
violations. Instead, it merely prescribes a punishment of "a fine of not
more than two hundred pesos (₱200.00) or by imprisonment of not more
than thirty (30) days, or by both such fine and imprisonment at the
discretion of the Court, Provided, that if the violation is committed by a
corporation, partnership, or any juridical entity, the Manager, managing
partner, or any person charged with the management thereof shall be held
responsible therefor." The ordinance itself also clearly states that it is the
regular courts that will determine whether there was a violation of the
ordinance.
As pointed out in Trackworks, the MMDA does not have the power to enact
ordinances. Thus, it cannot supplement the provisions of Quezon City
Ordinance No. 2904 merely through its Resolution No. 02-28.

MMDA v. Trackworks Rail Transit Advertising, Vending and Promotions,
Inc.31 is applicable to the case at bar. In that case, MMDA, invoking its
charter and the Building Code, summarily dismantled the advertising
media installed on the Metro Rail Transit (MRT) 3. This Court held:
It is futile for MMDA to simply invoke its legal mandate to justify the
dismantling of Trackworks' billboards, signages and other advertising
media. MMDA simply had no power on its own to dismantle, remove, or
destroy the billboards, signages and other advertising media installed on
the MRT3 structure by Trackworks. In Metropolitan Manila Development
Authority v. Bel-Air Village Association, Inc., Metropolitan Manila
Development Authority v. Viron Transportation Co., Inc., and Metropolitan
Manila Development Authority v. Garin, the Court had the occasion to rule
that MMDA's powers were limited to the formulation, coordination,
regulation, implementation, preparation, management, monitoring,
setting of policies, installing a system, and administration. Nothing in
Republic Act No. 7924 granted MMDA police power, let alone legislative
power.
Clarifying the real nature of MMDA, the Court held:
Lastly, the MMDA claims that the City Government of Quezon City may be
considered to have approved the demolition of the structure, simply
because then Quezon City Mayor Feliciano R. Belmonte signed MMDA
Resolution No. 02-28. In effect, the city government delegated these
powers to the MMDA. The powers referred to are those that include the
power to declare, prevent and abate a nuisance32 and to further impose
the penalty of removal or demolition of the building or structure by the
owner or by the city at the expense of the owner.33
MMDA’s argument does not hold water. There was no valid delegation of
powers to the MMDA. Contrary to the claim of the MMDA, the City
Government of Quezon City washed its hands off the acts of the former. In
its Answer,34 the city government stated that "the demolition was
undertaken by the MMDA only, without the participation and/or consent
of Quezon City." Therefore, the MMDA acted on its own and should be held
solely liable for the destruction of the portion of Justice Gancayco’s
building.
WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals
in CA-G.R. SP No. 84648 is AFFIRMED.

...The MMDA is, as termed in the charter itself, a "development authority". SO ORDERED.
It is an agency created for the purpose of laying down policies and
coordinating with the various national government agencies, people's
organizations, non-governmental organizations and the private sector for
the efficient and expeditious delivery of basic services in the vast
metropolitan area. All its functions are administrative in nature and these
are actually summed up in the charter itself, viz:

Sec.2. Creation of the Metropolitan Manila Development Authority.- xxx.

The MMDA shall perform planning, monitoring and coordinative functions,

and in the process exercise regulatory and supervisory authority over the
delivery of metro-wide services within Metro Manila, without diminution
of the autonomy of local government units concerning purely local
matters.

The Court also agrees with the CA's ruling that MMDA Regulation No. 96-
009 and MMC Memorandum Circular No. 88-09 did not apply to
Trackworks' billboards, signages and other advertising media. The
prohibition against posting, installation and display of billboards, signages
and other advertising media applied only to public areas, but MRT3, being
private property pursuant to the BLT agreement between the Government
and MRTC, was not one of the areas as to which the prohibition applied.
G.R. No. 190755 November 24, 2010
LAND BANK OF THE PHILIPPINES, Petitioner,
vs.
ALFREDO ONG, Respondent.
DECISION
VELASCO, JR., J.:
This is an appeal from the October 20, 2009 Decision of the Court of
Appeals (CA) in CA-G.R. CR-CV No. 84445 entitled Alfredo Ong v. Land Bank
of the Philippines, which affirmed the Decision of the Regional Trial Court
(RTC), Branch 17 in Tabaco City.
The Facts
On March 18, 1996, spouses Johnson and Evangeline Sy secured a loan
from Land Bank Legazpi City in the amount of PhP 16 million. The loan was
secured by three (3) residential lots, five (5) cargo trucks, and a warehouse.
Under the loan agreement, PhP 6 million of the loan would be short-term
and would mature on February 28, 1997, while the balance of PhP 10
million would be payable in seven (7) years. The Notice of Loan Approval
dated February 22, 1996 contained an acceleration clause wherein any
default in payment of amortizations or other charges would accelerate the
maturity of the loan.1
Subsequently, however, the Spouses Sy found they could no longer pay
their loan. On December 9, 1996, they sold three (3) of their mortgaged
parcels of land for PhP 150,000 to Angelina Gloria Ong, Evangeline’s
mother, under a Deed of Sale with Assumption of Mortgage. The relevant
portion of the document2 is quoted as follows:
WHEREAS, we are no longer in a position to settle our obligation with the
bank;
NOW THEREFORE, for and in consideration of the sum of ONE HUNDRED
FIFTY THOUSAND PESOS (P150,000.00) Philippine Currency, we hereby
these presents SELL, CEDE, TRANSFER and CONVEY, by way of sale unto
ANGELINA GLORIA ONG, also of legal age, Filipino citizen, married to
Alfredo Ong, and also a resident of Tabaco, Albay, Philippines, their heirs
and assigns, the above-mentioned debt with the said LAND BANK OF THE
PHILIPPINES, and by reason hereof they can make the necessary
representation with the bank for the proper restructuring of the loan with
the said bank in their favor;
That as soon as our obligation has been duly settled, the bank is authorized
to release the mortgage in favor of the vendees and for this purpose
VENDEES can register this instrument with the Register of Deeds for the
issuance of the titles already in their names.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this 9th
day of December 1996 at Tabaco, Albay, Philippines.
(signed) (signed)
EVANGELINE O. SY JOHNSON B. SY
Vendor Vendor
Evangeline’s father, petitioner Alfredo Ong, later went to Land Bank to
inform it about the sale and assumption of mortgage.3 Atty. Edna Hingco,
the Legazpi City Land Bank Branch Head, told Alfredo and his counsel Atty.
Ireneo de Lumen that there was nothing wrong with the agreement with
the Spouses Sy but provided them with requirements for the assumption
of mortgage. They were also told that Alfredo should pay part of the
principal which was computed at PhP 750,000 and to update due or
accrued interests on the promissory notes so that Atty. Hingco could easily
approve the assumption of mortgage. Two weeks later, Alfredo issued a
check for PhP 750,000 and personally gave it to Atty. Hingco. A receipt was
issued for his payment. He also submitted the other documents required
by Land Bank, such as financial statements for 1994 and 1995. Atty. Hingco
then informed Alfredo that the certificate of title of the Spouses Sy would
be transferred in his name but this never materialized. No notice of
transfer was sent to him.4
Alfredo later found out that his application for assumption of mortgage
was not approved by Land Bank. The bank learned from its credit
investigation report that the Ongs had a real estate mortgage in the
amount of PhP 18,300,000 with another bank that was past due. Alfredo
claimed that this was fully paid later on. Nonetheless, Land Bank
foreclosed the mortgage of the Spouses Sy after several months. Alfredo
only learned of the foreclosure when he saw the subject mortgage
properties included in a Notice of Foreclosure of Mortgage and Auction
Sale at the RTC in Tabaco, Albay. Alfredo’s other counsel, Atty. Madrilejos,
subsequently talked to Land Bank’s lawyer and was told that the PhP
750,000 he paid would be returned to him.5
On December 12, 1997, Alfredo initiated an action for recovery of sum of
money with damages against Land Bank in Civil Case No. T-1941, as
Alfredo’s payment was not returned by Land Bank. Alfredo maintained
that Land Bank’s foreclosure without informing him of the denial of his
assumption of the mortgage was done in bad faith. He argued that he was
lured into believing that his payment of PhP 750,000 would cause Land
Bank to approve his assumption of the loan of the Spouses Sy and the
transfer of the mortgaged properties in his and his wife’s name.6 He also
claimed incurring expenses for attorney’s fees of PhP 150,000, filing fee of
PhP 15,000, and PhP 250,000 in moral damages.7
Testifying for Land Bank, Atty. Hingco claimed during trial that as branch
manager she had no authority to approve loans and could not assure
anybody that their assumption of mortgage would be approved. She
testified that the breakdown of Alfredo’s payment was as follows:
PhP 101,409.59 applied to principal
216,246.56 accrued interests receivable
396,571.77 interests
18,766.10 penalties
16,805.98 accounts receivable
----------------
Total: 750,000.00
According to Atty. Hingco, the bank processes an assumption of mortgage
as a new loan, since the new borrower is considered a new client. They
used character, capacity, capital, collateral, and conditions in determining
who can qualify to assume a loan. Alfredo’s proposal to assume the loan,
she explained, was referred to a separate office, the Lending Center. 8
During cross-examination, Atty. Hingco testified that several months after
Alfredo made the tender of payment, she received word that the Lending
Center rejected Alfredo’s loan application. She stated that it was the
Lending Center and not her that should have informed Alfredo about the
denial of his and his wife’s assumption of mortgage. She added that
although she told Alfredo that the agreement between the spouses Sy and
Alfredo was valid between them and that the bank would accept payments
from him, Alfredo did not pay any further amount so the foreclosure of the
loan collaterals ensued. She admitted that Alfredo demanded the return
of the PhP 750,000 but said that there was no written demand before the
case against the bank was filed in court. She said that Alfredo had made
the payment of PhP 750,000 even before he applied for the assumption of
mortgage and that the bank received the said amount because the subject
account was past due and demandable; and the Deed of Assumption of
Mortgage was not used as the basis for the payment. 9
The Ruling of the Trial Court
The RTC held that the contract approving the assumption of mortgage was
not perfected as a result of the credit investigation conducted on Alfredo.
It noted that Alfredo was not even informed of the disapproval of the
assumption of mortgage but was just told that the accounts of the spouses
Sy had matured and gone unpaid. It ruled that under the principle of equity
and justice, the bank should return the amount Alfredo had paid with
interest at 12% per annum computed from the filing of the complaint. The
RTC further held that Alfredo was entitled to attorney’s fees and litigation
expenses for being compelled to litigate.10
The dispositive portion of the RTC Decision reads:
WHEREFORE, premises considered, a decision is rendered, ordering
defendant bank to pay plaintiff, Alfredo Ong the amount of P750,000.00
with interest at 12% per annum computed from Dec. 12, 1997 and
attorney’s fees and litigation expenses of P50,000.00.
Costs against defendant bank.
SO ORDERED.11
The Ruling of the Appellate Court
On appeal, Land Bank faulted the trial court for (1) holding that the
payment of PhP 750,000 made by Ong was one of the requirements for the
approval of his proposal to assume the mortgage of the Sy spouses; (2)
erroneously ordering Land Bank to return the amount of PhP 750,000 to
Ong on the ground of its failure to effect novation; and (3) erroneously
affirming the award of PhP 50,000 to Ong as attorney’s fees and litigation
expenses.
The CA affirmed the RTC Decision.12 It held that Alfredo’s recourse is not
against the Sy spouses. According to the appellate court, the payment of
PhP 750,000 was for the approval of his assumption of mortgage and not
for payment of arrears incurred by the Sy spouses. As such, it ruled that it
would be incorrect to consider Alfredo a third person with no interest in
the fulfillment of the obligation under Article 1236 of the Civil Code.
Although Land Bank was not bound by the Deed between Alfredo and the
Spouses Sy, the appellate court found that Alfredo and Land Bank’s active
preparations for Alfredo’s assumption of mortgage essentially novated the
agreement.
On January 5, 2010, the CA denied Land Bank’s motion for reconsideration
for lack of merit. Hence, Land Bank appealed to us.
The Issues
I when the old obligation subsists to the extent it remains compatible with
Whether the Court of Appeals erred in holding that Art. 1236 of
the Civil Code does not apply and in finding that there is no
novation.
II
Whether the Court of Appeals misconstrued the evidence and
the law when it affirmed the trial court decision’s ordering Land
Bank to pay Ong the amount of Php750,000.00 with interest at
12% annum.
III
Whether the Court of Appeals committed reversible error when
it affirmed the award of Php50,000.00 to Ong as attorney’s fees
and expenses of litigation.
The Ruling of this Court
We affirm with modification the appealed decision.
Recourse is against Land Bank
Land Bank contends that Art. 1236 of the Civil Code backs their claim that
Alfredo should have sought recourse against the Spouses Sy instead of
Land Bank. Art. 1236 provides:
The creditor is not bound to accept payment or performance by a third
person who has no interest in the fulfillment of the obligation, unless there
is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid,
except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to
the debtor.1avvphi1
We agree with Land Bank on this point as to the first part of paragraph 1
of Art. 1236. Land Bank was not bound to accept Alfredo’s payment, since
as far as the former was concerned, he did not have an interest in the
payment of the loan of the Spouses Sy. However, in the context of the
second part of said paragraph, Alfredo was not making payment to fulfill
the obligation of the Spouses Sy. Alfredo made a conditional payment so
that the properties subject of the Deed of Sale with Assumption of
Mortgage would be titled in his name. It is clear from the records that Land
Bank required Alfredo to make payment before his assumption of
mortgage would be approved. He was informed that the certificate of title
would be transferred accordingly. He, thus, made payment not as a debtor
but as a prospective mortgagor. But the trial court stated:
[T]he contract was not perfected or consummated because of the adverse
finding in the credit investigation which led to the disapproval of the
proposed assumption. There was no evidence presented that plaintiff was
informed of the disapproval. What he received was a letter dated May 22,
1997 informing him that the account of spouses Sy had matured but there
[were] no payments. This was sent even before the conduct of the credit
investigation on June 20, 1997 which led to the disapproval of the
proposed assumption of the loans of spouses Sy.13
Alfredo, as a third person, did not, therefore, have an interest in the
fulfillment of the obligation of the Spouses Sy, since his interest hinged on
Land Bank’s approval of his application, which was denied. The
circumstances of the instant case show that the second paragraph of Art.
1236 does not apply. As Alfredo made the payment for his own interest
and not on behalf of the Spouses Sy, recourse is not against the latter. And
as Alfredo was not paying for another, he cannot demand from the
debtors, the Spouses Sy, what he has paid.
Novation of the loan agreement
Land Bank also faults the CA for finding that novation applies to the instant
case. It reasons that a substitution of debtors was made without its
consent; thus, it was not bound to recognize the substitution under the
rules on novation.
On the matter of novation, Spouses Benjamin and Agrifina Lim v. M.B.
Finance Corporation14 provides the following discussion:
Novation, in its broad concept, may either be extinctive or modificatory. It
is extinctive when an old obligation is terminated by the creation of a new
obligation that takes the place of the former; it is merely modificatory
the amendatory agreement. An extinctive novation results either by
changing the object or principal conditions (objective or real), or by
substituting the person of the debtor or subrogating a third person in the
rights of the creditor (subjective or personal). Under this mode, novation
would have dual functions ─ one to extinguish an existing obligation, the
other to substitute a new one in its place ─ requiring a conflux of four
essential requisites: (1) a previous valid obligation; (2) an agreement of all
parties concerned to a new contract; (3) the extinguishment of the old
obligation; and (4) the birth of a valid new obligation. x x x
In order that an obligation may be extinguished by another which
substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point
incompatible with each other. The test of incompatibility is whether or not
the two obligations can stand together, each one having its independent
existence. x x x (Emphasis supplied.)
Furthermore, Art. 1293 of the Civil Code states:
Novation which consists in substituting a new debtor in the place of the
original one, may be made even without the knowledge or against the will
of the latter, but not without the consent of the creditor. Payment by the
new debtor gives him rights mentioned in articles 1236 and 1237.
We do not agree, then, with the CA in holding that there was a novation in
the contract between the parties. Not all the elements of novation were
present. Novation must be expressly consented to. Moreover, the
conflicting intention and acts of the parties underscore the absence of any
express disclosure or circumstances with which to deduce a clear and
unequivocal intent by the parties to novate the old agreement.15 Land
Bank is thus correct when it argues that there was no novation in the
following:
[W]hether or not Alfredo Ong has an interest in the obligation and
payment was made with the knowledge or consent of Spouses Sy, he may
still pay the obligation for the reason that even before he paid the amount
of P750,000.00 on January 31, 1997, the substitution of debtors was
already perfected by and between Spouses Sy and Spouses Ong as
evidenced by a Deed of Sale with Assumption of Mortgage executed by
them on December 9, 1996. And since the substitution of debtors was
made without the consent of Land Bank – a requirement which is
indispensable in order to effect a novation of the obligation, it is therefore
not bound to recognize the substitution of debtors. Land Bank did not
intervene in the contract between Spouses Sy and Spouses Ong and did not
expressly give its consent to this substitution.16
Unjust enrichment
Land Bank maintains that the trial court erroneously applied the principle
of equity and justice in ordering it to return the PhP 750,000 paid by
Alfredo. Alfredo was allegedly in bad faith and in estoppel. Land Bank
contends that it enjoyed the presumption of regularity and was in good
faith when it accepted Alfredo’s tender of PhP 750,000. It reasons that it
did not unduly enrich itself at Alfredo’s expense during the foreclosure of
the mortgaged properties, since it tendered its bid by subtracting PhP
750,000 from the Spouses Sy’s outstanding loan obligation. Alfredo’s
recourse then, according to Land Bank, is to have his payment reimbursed
by the Spouses Sy.
We rule that Land Bank is still liable for the return of the PhP 750,000 based
on the principle of unjust enrichment. Land Bank is correct in arguing that
it has no obligation as creditor to recognize Alfredo as a person with
interest in the fulfillment of the obligation. But while Land Bank is not
bound to accept the substitution of debtors in the subject real estate
mortgage, it is estopped by its action of accepting Alfredo’s payment from
arguing that it does not have to recognize Alfredo as the new debtor. The
elements of estoppel are:
First, the actor who usually must have knowledge, notice or suspicion of
the true facts, communicates something to another in a misleading way,
either by words, conduct or silence; second, the other in fact relies, and
relies reasonably or justifiably, upon that communication; third, the other
would be harmed materially if the actor is later permitted to assert any
claim inconsistent with his earlier conduct; and fourth, the actor knows,
expects or foresees that the other would act upon the information given
or that a reasonable person in the actor’s position would expect or foresee
such action.17
By accepting Alfredo’s payment and keeping silent on the status of
Alfredo’s application, Land Bank misled Alfredo to believe that he had for
all intents and purposes stepped into the shoes of the Spouses Sy.
The defense of Land Bank Legazpi City Branch Manager Atty. Hingco that it
was the bank’s Lending Center that should have notified Alfredo of his
assumption of mortgage disapproval is unavailing. The Lending Center’s
lack of notice of disapproval, the Tabaco Branch’s silence on the
disapproval, and the bank’s subsequent actions show a failure of the bank
as a whole, first, to notify Alfredo that he is not a recognized debtor in the
eyes of the bank; and second, to apprise him of how and when he could
collect on the payment that the bank no longer had a right to keep.
We turn then on the principle upon which Land Bank must return Alfredo’s
payment. Unjust enrichment exists "when a person unjustly retains a
benefit to the loss of another, or when a person retains money or property
of another against the fundamental principles of justice, equity and good
conscience."18 There is unjust enrichment under Art. 22 of the Civil Code
when (1) a person is unjustly benefited, and (2) such benefit is derived at
the expense of or with damages to another.19
Additionally, unjust enrichment has been applied to actions called accion
in rem verso. In order that the accion in rem verso may prosper, the
following conditions must concur: (1) that the defendant has been
enriched; (2) that the plaintiff has suffered a loss; (3) that the enrichment
of the defendant is without just or legal ground; and (4) that the plaintiff
has no other action based on contract, quasi-contract, crime, or quasi-
delict.20 The principle of unjust enrichment essentially contemplates
payment when there is no duty to pay, and the person who receives the
payment has no right to receive it.21
The principle applies to the parties in the instant case, as, Alfredo, having
been deemed disqualified from assuming the loan, had no duty to pay
petitioner bank and the latter had no right to receive it.
Moreover, the Civil Code likewise requires under Art. 19 that "[e]very
person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and
good faith." Land Bank, however, did not even bother to inform Alfredo
that it was no longer approving his assumption of the Spouses Sy’s
mortgage. Yet it acknowledged his interest in the loan when the branch
head of the bank wrote to tell him that his daughter’s loan had not been
paid.22 Land Bank made Alfredo believe that with the payment of PhP
750,000, he would be able to assume the mortgage of the Spouses Sy. The
act of receiving payment without returning it when demanded is contrary
to the adage of giving someone what is due to him. The outcome of the
application would have been different had Land Bank first conducted the
credit investigation before accepting Alfredo’s payment. He would have
been notified that his assumption of mortgage had been disapproved; and
he would not have taken the futile action of paying PhP 750,000. The
procedure Land Bank took in acting on Alfredo’s application cannot be said
to have been fair and proper.
As to the claim that the trial court erred in applying equity to Alfredo’s
case, we hold that Alfredo had no other remedy to recover from Land Bank
and the lower court properly exercised its equity jurisdiction in resolving
the collection suit. As we have held in one case:
Equity, as the complement of legal jurisdiction, seeks to reach and
complete justice where courts of law, through the inflexibility of their rules
and want of power to adapt their judgments to the special circumstances
of cases, are incompetent to do so. Equity regards the spirit and not the
letter, the intent and not the form, the substance rather than the
circumstance, as it is variously expressed by different courts.23
Another claim made by Land Bank is the presumption of regularity it enjoys
and that it was in good faith when it accepted Alfredo’s tender of PhP
750,000.
The defense of good faith fails to convince given Land Bank’s actions.
Alfredo was not treated as a mere prospective borrower. After he had paid
PhP 750,000, he was made to sign bank documents including a promissory
note and real estate mortgage. He was assured by Atty. Hingco that the
titles to the properties covered by the Spouses Sy’s real estate mortgage
would be transferred in his name, and upon payment of the PhP 750,000,
the account would be considered current and renewed in his name.24
Land Bank posits as a defense that it did not unduly enrich itself at
Alfredo’s expense during the foreclosure of the mortgaged properties,
since it tendered its bid by subtracting PhP 750,000 from the Spouses Sy’s
outstanding loan obligation. It is observed that this is the first time Land
Bank is revealing this defense. However, issues, arguments, theories, and
causes not raised below may no longer be posed on appeal. 25 Land Bank’s
contention, thus, cannot be entertained at this point.1avvphi1
Land Bank further questions the lower court’s decision on the basis of the
inconsistencies made by Alfredo on the witness stand. It argues that
Alfredo was not a credible witness and his testimony failed to overcome
the presumption of regularity in the performance of regular duties on the
part of Land Bank.
This claim, however, touches on factual findings by the trial court, and we
defer to these findings of the trial court as sustained by the appellate court.
These are generally binding on us. While there are exceptions to this rule,
Land Bank has not satisfactorily shown that any of them is applicable to
this issue.26 Hence, the rule that the trial court is in a unique position to
observe the demeanor of witnesses should be applied and respected 27 in
the instant case.
In sum, we hold that Land Bank may not keep the PhP 750,000 paid by
Alfredo as it had already foreclosed on the mortgaged lands.
Interest and attorney’s fees
As to the applicable interest rate, we reiterate the guidelines found in
Eastern Shipping Lines, Inc. v. Court of Appeals:28
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.
No evidence was presented by Alfredo that he had sent a written demand
to Land Bank before he filed the collection suit. Only the verbal agreement
between the lawyers of the parties on the return of the payment was
mentioned.29Consequently, the obligation of Land Bank to return the
payment made by Alfredo upon the former’s denial of the latter’s
application for assumption of mortgage must be reckoned from the date
of judicial demand on December 12, 1997, as correctly determined by the
trial court and affirmed by the appellate court.
The next question is the propriety of the imposition of interest and the
proper imposable rate of applicable interest. The RTC granted the rate of
12% per annum which was affirmed by the CA. From the above-quoted
guidelines, however, the proper imposable interest rate is 6% per annum
pursuant to Art. 2209 of the Civil Code. Sunga-Chan v. Court of Appeals is
illuminating in this regard:
should be remembered that the business of a bank is affected with public
interest and it should observe a higher standard of diligence when dealing
with the public.32
WHEREFORE, the appeal is DENIED. The CA Decision in CA-G.R. CR-CV No.
84445 is AFFIRMED with MODIFICATION in that the amount of PhP
750,000 will earn interest at 6% per annum reckoned from December 12,
1997, and the total aggregate monetary awards will in turn earn 12% per
annum from the finality of this Decision until fully paid.
SO ORDERED.

In Reformina v. Tomol, Jr., the Court held that the legal interest at 12% per
annum under Central Bank (CB) Circular No. 416 shall be adjudged only in
cases involving the loan or forbearance of money. And for transactions
involving payment of indemnities in the concept of damages arising from
default in the performance of obligations in general and/or for money
judgment not involving a loan or forbearance of money, goods, or credit,
the governing provision is Art. 2209 of the Civil Code prescribing a yearly
6% interest. Art. 2209 pertinently provides:

Art. 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, which is six per
cent per annum.

The term "forbearance," within the context of usury law, has been
described as a contractual obligation of a lender or creditor to refrain,
during a given period of time, from requiring the borrower or debtor to
repay the loan or debt then due and payable.

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of

interest, if proper, and the applicable rate, as follows: The 12% per annum
rate under CB Circular No. 416 shall apply only to loans or forbearance of
money, goods, or credits, as well as to judgments involving such loan or
forbearance of money, goods, or credit, while the 6% per annum under Art.
2209 of the Civil Code applies "when the transaction involves the payment
of indemnities in the concept of damage arising from the breach or a delay
in the performance of obligations in general," with the application of both
rates reckoned "from the time the complaint was filed until the [adjudged]
amount is fully paid." In either instance, the reckoning period for the
commencement of the running of the legal interest shall be subject to the
condition "that the courts are vested with discretion, depending on the
equities of each case, on the award of interest."30 (Emphasis supplied.)

Based on our ruling above, forbearance of money refers to the contractual

obligation of the lender or creditor to desist for a fixed period from
requiring the borrower or debtor to repay the loan or debt then due and
for which 12% per annum is imposed as interest in the absence of a
stipulated rate. In the instant case, Alfredo’s conditional payment to Land
Bank does not constitute forbearance of money, since there was no
agreement or obligation for Alfredo to pay Land Bank the amount of PhP
750,000, and the obligation of Land Bank to return what Alfredo has
conditionally paid is still in dispute and has not yet been determined. Thus,
it cannot be said that Land Bank’s alleged obligation has become a
forbearance of money.

On the award of attorney’s fees, attorney’s fees and expenses of litigation

were awarded because Alfredo was compelled to litigate due to the unjust
refusal of Land Bank to refund the amount he paid. There are instances
when it is just and equitable to award attorney’s fees and expenses of
litigation.31 Art. 2208 of the Civil Code pertinently states:

In the absence of stipulation, attorney’s fees and expenses of litigation,

other than judicial costs, cannot be recovered, except:

xxxx

(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.

Given that Alfredo was indeed compelled to litigate against Land Bank and
incur expenses to protect his interest, we find that the award falls under
the exception above and is, thus, proper given the circumstances.

On a final note. The instant case would not have been litigated had Land
Bank been more circumspect in dealing with Alfredo. The bank chose to
accept payment from Alfredo even before a credit investigation was
underway, a procedure worsened by the failure to even inform him of his
credit standing’s impact on his assumption of mortgage. It was, therefore,
negligent to a certain degree in handling the transaction with Alfredo. It