Moral Damages

1. ABS-CBN BROADCASTING CORPORATION, petitioners, vs. HONORABLE COURT

OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA PRODUCTIONS, INC.,
and VICENTE DEL ROSARIO, respondents.
[G.R. No. 128690. January 21, 1999]

DECISION
DAVIDE, JR., C.J.:

In this petition for review on certiorari, petitioners ABS-CBN Broadcasting Corp.

(hereinafter ABS-CBN) seeks to reverse and set aside the decision[1] of 31 October 1996 and the
resolution[2] of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The former
affirmed with modification the decision[3] of 28 April 1993 of the Regional Trial Court (RTC) of
Quezon City, Branch 80, in Civil Case No. Q-12309. The latter denied the motion to reconsider
the decision of 31 October 1996.
The antecedents, as found by the RTC and adopted by the Court of Appeals, are as follows:

In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement (Exh. A) whereby Viva
gave ABS-CBN an exclusive right to exhibit some Viva films. Sometime in December 1991, in
accordance with paragraph 2.4 [sic] of said agreement stating that-

1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) Viva films for TV
telecast under such terms as may be agreed upon by the parties hereto, provided, however, that
such right shall be exercised by ABS-CBN from the actual offer in writing.

Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo Santos-
Concio, a list of three (3) film packages (36 title) from which ABS-CBN may exercise its right of
first refusal under the afore-said agreement (Exhs. 1 par. 2, 2, 2-A and 2-B Viva). ABS-CBN,
however through Mrs. Concio, can tick off only ten (10) titles (from the list) we can purchase (Exh.
3 Viva) and therefore did not accept said list (TSN, June 8, 1992, pp. 9-10). The titles ticked off
by Mrs. Concio are not the subject of the case at bar except the film Maging Sino Ka Man.

For further enlightenment, this rejection letter dated January 06, 1992 (Exh 3 Viva) is hereby
quoted:

6 January 1992

Dear Vic,

This is not a very formal business letter I am writing to you as I would like to express my difficulty
in recommending the purchase of the three film packages you are offering ABS-CBN.
From among the three packages I can only tick off 10 titles we can purchase. Please see attached. I
hope you will understand my position. Most of the action pictures in the list do not have big action
stars in the cast. They are not for primetime. In line with this I wish to mention that I have not
scheduled for telecast several action pictures in our very first contract because of the cheap
production value of these movies as well as the lack of big action stars. As a film producer, I am
sure you understand what I am trying to say as Viva produces only big action pictures.

In fact, I would like to request two (2) additional runs for these movies as I can only schedule them
in out non-primetime slots. We have to cover the amount that was paid for these movies because
as you very well know that non-primetime advertising rates are very low. These are the unaired
titles in the first contract.

1. Kontra Persa [sic]

2. Raider Platoon
3. Underground guerillas
4. Tiger Command
5. Boy de Sabog
6. lady Commando
7. Batang Matadero
8. Rebelyon

I hope you will consider this request of mine.

The other dramatic films have been offered to us before and have been rejected because of the
ruling of MTRCB to have them aired at 9:00 p.m. due to their very adult themes.

As for the 10 titles I have choosen [sic] from the 3 packages please consider including all the other
Viva movies produced last year, I have quite an attractive offer to make.

Thanking you and with my warmest regards.

(Signed)
Charo Santos-Concio

On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms. Concio, with a list
consisting of 52 original movie titles (i.e., not yet aired on television) including the 14 titles subject
of the present case, as well as 104 re-runs (previously aired on television) from which ABS-CBN
may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing rights
over this package of 52 originals and 52 re-runs for P60,000,000.00 of which P30,000,000.00 will
be in cash and P30,000,000.00 worth of television spots (Exh. 4 to 4-C Viva; 9 Viva).

On April 2, 1992, defendant Del Rosario and ABS-CBNs general manager, Eugenio Lopez III,
met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal of
VIVA. What transpired in that lunch meeting is the subject of conflicting versions. Mr. Lopez
testified that he and Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive film
rights to fourteen (14) films for a total consideration of P36 million; that he allegedly put this
agreement as to the price and number of films in a napkin and signed it and gave it to Mr. Del
Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8, 1992). On the other hand. Del Rosario denied
having made any agreement with Lopez regarding the 14 Viva films; denied the existence of a
napkin in which Lopez wrote something; and insisted that what he and Lopez discussed at the
lunch meeting was Vivas film package offer of 104 films (52 originals and 52 re-runs) for a total
price of P60 million. Mr. Lopez promising [sic]to make a counter proposal which came in the form
of a proposal contract Annex C of the complaint (Exh. 1 Viva; Exh C ABS-CBN).

On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance
discussed the terms and conditions of Vivas offer to sell the 104 films, after the rejection of the
same package by ABS-CBN.

On April 07, 1992, defendant Del Rosario received through his secretary , a handwritten note from
Ms. Concio, (Exh. 5 Viva), which reads: Heres the draft of the contract. I hope you find everything
in order, to which was attached a draft exhibition agreement (Exh. C ABS-CBN; Exh. 9 Viva p.
3) a counter-proposal covering 53 films, 52 of which came from the list sent by defendant Del
Rosario and one film was added by Ms. Concio, for a consideration of P35 million. Exhibit C
provides that ABS-CBN is granted film rights to 53 films and contains a right of first refusal to
1992 Viva Films. The said counter proposal was however rejected by Vivas Board of Directors [in
the] evening of the same day, April 7, 1992, as Viva would not sell anything less than the package
of 104 films for P60 million pesos (Exh. 9 Viva), and such rejection was relayed to Ms. Concio.

On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and
meetings defendant Del Rosario and Vivas President Teresita Cruz, in consideration of P60
million, signed a letter of agreement dated April 24, 1992, granting RBS the exclusive right to air
104 Viva-produced and/or acquired films (Exh. 7-A - RBS; Exh. 4 RBS) including the fourteen
(14) films subject of the present case.[4]

On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with
a prayer for a writ of preliminary injunction and/or temporary restraining order against private
respondents Republic Broadcasting Corporation[5] (hereafter RBS), Viva Production (hereafter
VIVA), and Vicente del Rosario. The complaint was docketed as Civil Case No. Q-92-12309.
On 28 May 1992, the RTC issued a temporary restraining order[6] enjoining private
respondents from proceeding with the airing, broadcasting, and televising of the fourteen VIVA
films subject of the controversy, starting with the film Maging Sino Ka Man, which was scheduled
to be shown on private respondent RBS channel 7 at seven oclock in the evening of said date.
On 17 June 1992, after appropriate proceedings, the RTC issued an order[7] directing the
issuance of a writ of preliminary injunction upon ABS-CBNs posting of a P35 million bond. ABS-
CBN moved for the reduction of the bond,[8] while private respondents moved for reconsideration
of the order and offered to put up a counterbond.[9]
In the meantime, private respondents filed separate answer with counterclaim.[10] RBS also
set up a cross-claim against VIVA.
On 3 August 1992, the RTC issued an order[11] dissolving the writ of preliminary injunction
upon the posting by RBS of a P30 million counterbond to answer for whatever damages ABS-
CBN might suffer by virtue of such dissolution. However, it reduced petitioners injunction bond
to P15 million as a condition precedent for the reinstatement of the writ of preliminary injunction
should private respondents be unable to post a counterbond.
At the pre-trial[12] on 6 August 1992, the parties upon suggestion of the court, agreed to
explore the possibility of an amicable settlement. In the meantime, RBS prayed for and was
granted reasonable time within which to put up a P30 million counterbond in the event that no
settlement would be reached.
As the parties failed to enter into an amicable settlement, RBS posted on 1 October 1992 a
counterbond, which the RTC approved in its Order of 15 October 1992.[13]
On 19 October 1992, ABS-CBN filed a motion for reconsideration[14] of the 3 August and 15
October 1992 Orders, which RBS opposed.[15]
On 29 October, the RTC conducted a pre-trial.[16]
Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of
Appeals a petition[17] challenging the RTCs Order of 3 August and 15 October 1992 and praying
for the issuance of a writ of preliminary injunction to enjoin the RTC from enforcing said
orders. The case was docketed as CA-G.R. SP No. 29300.
On 3 November 1992, the Court of Appeals issued a temporary restraining order[18] to enjoin
the airing, broadcasting, and televising of any or all of the films involved in the controversy.
On 18 December 1992, the Court of Appeals promulgated a decision[19] dismissing the petition
in CA-G.R. SP No. 29300 for being premature. ABS-CBN challenged the dismissal in a petition
for review filed with this Court on 19 January 1993, which was docketed s G.R. No. 108363.
In the meantime the RTC received the evidence for the parties in Civil Case No. Q-92-
12309. Thereafter, on 28 April 1993, it rendered a decision[20] in favor of RBS and VIVA and
against ABS-CBN disposing as follows:

WHEREFORE, under cool reflection and prescinding from the foregoing, judgment is rendered in
favor of defendants and against the plaintiff.

(1) The complaint is hereby dismissed;

(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following:
a) P107,727.00 the amount of premium paid by RBS to the surety which issued
defendants RBSs bond to lift the injunction;
b) P191,843.00 for the amount of print advertisement for Maging Sino Ka Man in
various newspapers;
c) Attorneys fees in the amount of P1 million;
d) P5 million as and by way of moral damages;
e) P5 million as and by way of exemplary damages;
(3) For the defendant VIVA, plaintiff ABS-CBN is ordered to pay P212,000.00 by way
of reasonable attorneys fees.
 (4) The cross-claim of defendant RBS against defendant VIVA is dismissed.
(5) Plaintiff to pay the costs.
According to the RTC, there was no meeting of minds on the price and terms of the offer. The
alleged agreement between Lopez III and Del Rosario was subject to the approval of the VIVA
Board of Directors, and said agreement was disapproved during the meeting of the Board on 7
April 1992. Hence, there was no basis for ABS-CBNs demand that VIVA signed the 1992 Film
Exhibition Agreement. Furthermore, the right of first refusal under the 1990 Film Exhibition
Agreement had previously been exercised per Ms. Concios letter to Del Rosario ticking off ten
titles acceptable to them, which would have made the 1992 agreement an entirely new contract.
On 21 June 1993, this Court denied[21] ABS-CBNs petition for review in G.R. No. 108363, as
no reversible error was committed by the Court of Appeals in its challenged decision and the case
had become moot and academic in view of the dismissal of the main action by the court a quo in
its decision of 28 April 1993.
Aggrieved by the RTCs decision, ABS-CBN appealed to the Court of Appeals claiming that
there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the exclusive
right to exhibit the subject films.Private respondents VIVA and Del Rosario also appealed seeking
moral and exemplary damages and additional attorneys fees.
In its decision of 31 October 1996, the Court of Appeals agreed with the RTC that the contract
between ABS-CBN and VIVA had not been perfected, absent the approval by the VIVA Board of
Directors of whatever Del Rosario, its agent, might have agreed with Lopez III. The appellate court
did not even believe ABS-CBNs evidence that Lopez III actually wrote down such an agreement
on a napkin, as the same was never produced in court. It likewise rejected ABS-CBNs insistence
on its right of first refusal and ratiocinated as follows:

As regards the matter of right of first refusal, it may be true that a Film Exhibition Agreement was
entered into between Appellant ABS-CBN and appellant VIVA under Exhibit A in 1990 and that
parag. 1.4 thereof provides:

1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) VIVA films for TV
telecast under such terms as may be agreed upon by the parties hereto, provided, however, that
such right shall be exercised by ABS-CBN within a period of fifteen (15) days from the actual
offer in writing (Records, p. 14).

[H]owever, it is very clear that said right of first refusal in favor of ABS-CBN shall still be
subjected to such terms as may be agreed upon by the parties thereto, and that the said right shall
be exercised by ABS-CBN within fifteen (15) days from the actual offer in writing.

Said parag. 1.4 of the agreement Exhibit A on the right of first refusal did not fix the price of the
film right to the twenty-four (24) films, nor did it specify the terms thereof. The same are still left
to be agreed upon by the parties.

In the instant case, ABS-CBNs letter of rejection Exhibit 3 (Records, p. 89) stated that it can only
tick off ten (10) films, and the draft contract Exhibit C accepted only fourteen (14) films, while
parag. 1.4 of Exhibit A speaks of the next twenty-four (24) films.
The offer of VIVA was sometime in December 1991, (Exhibits 2, 2-A, 2-B; Records, pp. 86-88;
Decision, p. 11, Records, p. 1150), when the first list of VIVA films was sent by Mr. Del Rosario
to ABS-CBN. The Vice President of ABS-CBN, Mrs. Charo Santos-Concio, sent a letter dated
January 6, 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its right of refusal by
rejecting the offer of VIVA. As aptly observed by the trial court, with the said letter of Mrs. Concio
of January 6, 1992, ABS-CBN had lost its right of first refusal. And even if We reckon the fifteen
(15) day period from February 27, 1992 (Exhibit 4 to 4-C) when another list was sent to ABS-
CBN after the letter of Mrs. Concio, still the fifteen (15) day period within which ABS-CBN shall
exercise its right of first refusal has already expired.[22]

Accordingly, respondent court sustained the award factual damages consisting in the cost of
print advertisements and the premium payments for the counterbond, there being adequate proof
of the pecuniary loss which RBS has suffered as a result of the filing of the complaint by ABS-
CBN. As to the award of moral damages, the Court of Appeals found reasonable basis therefor,
holding that RBSs reputation was debased by the filing of the complaint in Civil Case No. Q-92-
12309 and by the non-showing of the film Maging Sino Ka Man. Respondent court also held that
exemplary damages were correctly imposed by way of example or correction for the public good
in view of the filing of the complaint despite petitioners knowledge that the contract with VIVA
had not been perfected. It also upheld the award of attorneys fees, reasoning that with ABS-CBNs
act of instituting Civil Case No. Q-92-12309, RBS was unnecessarily forced to litigate. The
appellate court, however, reduced the awards of moral damages to P 2 million, exemplary damages
to P2 million, and attorneys fees to P500,000.00.
On the other hand, respondent Court of Appeals denied VIVA and Del Rosarios appeal
because it was RBS and not VIVA which was actually prejudiced when the complaint was filed
by ABS-CBN.
Its motion for reconsideration having been denied, ABS-CBN filed the petition in this case,
contending that the Court of Appeals gravely erred in
I
RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN
PETITIONER AND PRIVATE RESPONDENT VIVA
NOTWITHSTANDING PREPONFERANCE OF EVIDENCE ADDUCED BY
PETITIONER TO THE CONTRARY.
II
IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR OF
PRIVATE RESPONDENT RBS.
III
IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF
PRIVATE RESPONDENT RBS.
IV
IN AWARDING ATORNEYS FEES OF RBS.
 ABS-CBN claims that it had yet to fully exercise its right of first refusal over twenty-four
titles under the 1990 Film Exhibition Agreement, as it had chosen only ten titles from the first
list. It insists that we give credence to Lopezs testimony that he and Del Rosario met at the
Tamarind Grill Restaurant, discussed the terms and conditions of the second list (the 1992 Film
Exhibition Agreement) and upon agreement thereon, wrote the same on a paper napkin. It also
asserts that the contract has already been effective, as the elements thereof, namely, consent,
object, and consideration were established. It then concludes that the Court of Appeals
pronouncements were not supported by law and jurisprudence, as per our decision of 1 December
1995 in Limketkai Sons Milling, Inc. v. Court of Appeals,[23] which cited Toyota Shaw, Inc. v.
Court of Appeals;[24] Ang Yu Asuncion v. Court of Appeals,[25] and Villonco Realty Company v.
Bormaheco, Inc.[26]
Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor. RBS spent
for the premium on the counterbond of its own volition in order to negate the injunction issued by
the trial court after the parties had ventilated their respective positions during the hearings for the
purpose. The filing of the counterbond was an option available to RBS, but it can hardly be argued
that ABS-CBN compelled RBS to incur such expense. Besides, RBS had another available
option, i.e., move for the dissolution of the injunction; or if it was determined to put up a
counterbond, it could have presented a cash bond. Furthermore under Article 2203 of the Civil
Code, the party suffering loss injury is also required to exercise the diligence of a good father of a
family to minimize the damages resulting from the act or omission. As regards the cost of print
advertisements, RBS had not convincingly established that this was a loss attributable to the non-
showing of Maging Sino Ka Man; on the contrary, it was brought out during trial that with or
without the case or injunction, RBS would have spent such an amount to generate interest in the
film.
ABS-CBN further contends that there was no other clear basis for the awards of moral and
exemplary damages. The controversy involving ABS-CBN and RBS did not in any way originate
from business transaction between them. The claims for such damages did not arise from any
contractual dealings or from specific acts committed by ABS-CBN against RBS that may be
characterized as wanton, fraudulent, or reckless; they arose by virtue only of the filing of the
complaint. An award of moral and exemplary damages is not warranted where the record is bereft
of any proof that a party acted maliciously or in bad faith in filing an action.[27] In any case, free
resort to courts for redress of wrongs is a matter of public policy. The law recognizes the right of
every one to sue for that which he honestly believes to be his right without fear of standing trial
for damages where by lack of sufficient evidence, legal technicalities, or a different interpretation
of the laws on the matter, the case would lose ground.[28] One who, makes use of his own legal
right does no injury.[29] If damage results from filing of the complaint, it is damnum absque
injuria.[30] Besides, moral damages are generally not awarded in favor of a juridical person, unless
it enjoys a good reputation that was debased by the offending party resulting in social
humiliation.[31]
As regards the award of attorneys fees, ABS-CBN maintains that the same had no factual,
legal, or equitable justification. In sustaining the trial courts award, the Court of Appeals acted in
clear disregard of the doctrine laid down in Buan v. Camaganacan[32] that the text of the decision
should state the reason why attorneys fees are being awarded; otherwise, the award should be
disallowed. Besides, no bad faith has been imputed on, much less proved as having been
committed by, ABS-CBN. It has been held that where no sufficient showing of bad faith would be
reflected in a partys persistence in a case other than an erroneous conviction of the righteousness
of his cause, attorneys fees shall not be recovered as cost.[33]
On the other hand, RBS asserts that there was no perfected contract between ABS-CBN and
VIVA absent meeting of minds between them regarding the object and consideration of the alleged
contract. It affirms that ABS-CBNs claim of a right of first refusal was correctly rejected by the
trial court. RBS insists the premium it had paid for the counterbond constituted a pecuniary loss
upon which it may recover. It was obliged to put up the counterbond due to the injunction procured
by ABS-CBN. Since the trial court found that ABS-CBN had no cause of action or valid claim
against RBS and, therefore not entitled to the writ of injunction, RBS could recover from ABS-
CBN the premium paid on the counterbond. Contrary to the claim of ABS-CBN, the cash bond
would prove to be more expensive, as the loss would be equivalent to the cost of money RBS
would forego in case the P30 million came from its funds or was borrowed from banks.
RBS likewise asserts that it was entitled to the cost of advertisements for the cancelled
showing of the film Maging Sino Ka Man because the print advertisements were out to announce
the showing on a particular day and hour on Channel 7, i.e., in its entirety at one time, not as series
to be shown on a periodic basis. Hence, the print advertisements were good and relevant for the
particular date of showing, and since the film could not be shown on that particular date and hour
because of the injunction, the expenses for the advertisements had gone to waste.
As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the case and
secured injunctions purely for the purpose of harassing and prejudicing RBS. Pursuant then to
Articles 19 and 21 of the Civil Code, ABS-CBN must be held liable for such
damages. Citing Tolentino,[34] damages may be awarded in cases of abuse of rights even if the done
is not illicit, and there is abuse of rights where a plaintiff institutes an action purely for the purpose
of harassing or prejudicing the defendant.
In support of its stand that a juridical entity can recover moral and exemplary damages, private
respondent RBS cited People v. Manero,[35] where it was stated that such entity may recover moral
and exemplary damages if it has a good reputation that is debased resulting in social humiliation. It
then ratiocinates; thus:

There can be no doubt that RBS reputation has been debased by ABS-CBNs acts in this case. When
RBS was not able to fulfill its commitment to the viewing public to show the film Maging Sino
Ka Man on the scheduled dates and times (and on two occasions that RBS advertised), it
suffered serious embarrassment and social humiliation. When the showing was cancelled, irate
viewers called up RBS offices and subjected RBS to verbal abuse (Announce kayo ng announce,
hindi ninyo naman ilalabas, nanloloko yata kayo) (Exh. 3-RBS, par.3). This alone was not
something RBS brought upon itself. It was exactly what ABS-CBN had planted to happen.

The amount of moral and exemplary damages cannot be said to be excessive. Two reasons justify
the amount of the award.

The first is that the humiliation suffered by RBS, is national in extent. RBS operations as a
broadcasting company is [sic] nationwide. Its clientele, like that of ABS-CBN, consists of those
who own and watch television. It is not an exaggeration to state, and it is a matter of judicial notice
that almost every other person in the country watches television. The humiliation suffered by RBS
is multiplied by the number of televiewers who had anticipated the showing of the film, Maging
Sino Ka Man on May 28 and November 3, 1992 but did not see it owing to the cancellation. Added
to this are the advertisers who had placed commercial spots for the telecast and to whom RBS had
a commitment in consideration of the placement to show the film in the dates and times specified.

The second is that it is a competitor that caused RBS suffer the humiliation. The humiliation and
injury are far greater in degree when caused by an entity whose ultimate business objective is to
lure customers (viewers in this case) away from the competition.[36]

For their part, VIVA and Vicente del Rosario contend that the findings of fact of the trial court
and the Court of Appeals do not support ABS-CBNs claim that there was a perfected
contract. Such factual findings can no longer be disturbed in this petition for review under Rule
45, as only questions of law can be raised, not questions of fact. On the issue of damages and
attorneys fees, they adopted the arguments of RBS.
The key issues for our consideration are (1) whether there was a perfected contract between
VIVA and ABS-CBN, and (2) whether RBS is entitled to damages and attorneys fees. It may be
noted that that award of attorneys fees of P212,000 in favor of VIVA is not assigned as another
error.
I
The first issue should be resolved against ABS-CBN. A contract is a meeting of minds
between two persons whereby one binds himself to give something or render some service to
another[37] for a consideration. There is no contract unless the following requisites concur: (1)
consent of the contracting parties; (2) object certain which is the subject of the contract; and (3)
cause of the obligation, which is established.[38] A contract undergoes three stages:
(a) preparation, conception, or generation, which is the period of negotiation and
bargaining, ending at the moment of agreement of the parties;
(b) perfection or birth of the contract, which is the moment when the parties come to agree
on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the terms agreed
upon in the contract.[39]
Contracts that are consensual in nature are perfected upon mere meeting of the minds. Once
there is concurrence between the offer and the acceptance upon the subject matter, consideration,
and terms of payment a contract is produced. The offer must be certain. To convert the offer into
a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be
plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified
acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of
the original offer. Consequently, when something is desired which is not exactly what is proposed
in the offer, such acceptance is not sufficient to generate consent because any modification or
variation from the terms of the offer annuls the offer.[40]
When Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the Tamarind Grill on 2 April
1992 to discuss the package of films, said package of 104 VIVA films was VIVAs offer to ABS-
CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent through Ms. Concio,
counter-proposal in the form a draft contract proposing exhibition of 53 films for a consideration
of P35 million. This counter-proposal could be nothing less than the counter-offer of Mr. Lopez
during his conference with Del Rosario at Tamarind Grill Restaurant. Clearly, there was no
acceptance of VIVAs offer, for it was met by a counter-offer which substantially varied the terms
of the offer.
ABS-CBNs reliance in Limketkai Sons Milling, Inc. v. Court of Appeals [41] and Villonco
Realty Company v. Bormaheco, Inc.,[42] is misplaced. In these cases, it was held that an acceptance
may contain a request for certain changes in the terms of the offer and yet be a binding acceptance
as long as it is clear that the meaning of the acceptance is positively and unequivocally to accept
the offer, whether such request is granted or not. This ruling was, however, reversed in the
resolution of 29 March 1996,[43] which ruled that the acceptance of an offer must be unqualified
and absolute, i.e., it must be identical in all respects with that of the offer so as to produce consent
or meetings of the minds.
On the other hand, in Villonco, cited in Limketkai, the alleged changes in the revised counter-
offer were not material but merely clarificatory of what had previously been agreed upon. It cited
the statement in Stuart v. Franklin Life Insurance Co.[44] that a vendors change in a phrase of the
offer to purchase, which change does not essentially change the terms of the offer, does not amount
to a rejection of the offer and the tender of a counter-offer.[45]However, when any of the elements
of the contract is modified upon acceptance, such alteration amounts to a counter-offer.
In the case at bar, ABS-CBN made no unqualified acceptance of VIVAs offer hence, they
underwent period of bargaining. ABS-CBN then formalized its counter-proposals or counter-offer
in a draft contract. VIVA through its Board of Directors, rejected such counter-offer. Even if it be
conceded arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bind
VIVA, as there was no proof whatsoever that Del Rosario had the specific authority to do so.
Under the Corporation Code,[46] unless otherwise provided by said Code, corporate powers,
such as the power to enter into contracts, are exercised by the Board of Directors. However, the
Board may delegate such powers to either an executive committee or officials or contracted
managers. The delegation, except for the executive committee, must be for specific
purposes.[47] Delegation to officers makes the latter agents of the corporation; accordingly, the
general rules of agency as to the binding effects of their acts would apply.[48] For such officers to
be deemed fully clothed by the corporation to exercise a power of the Board, the latter must
specially authorize them to do so. that Del Rosario did not have the authority to accept ABS-CBNs
counter-offer was best evidenced by his submission of the draft contract to VIVAs Board of
Directors for the latters approval. In any event, there was between Del Rosario and Lopez III no
meeting of minds. The following findings of the trial court are instructive:

A number of considerations militate against ABS-CBNs claim that a contract was perfected at that
lunch meeting on April 02, 1992 at the Tamarind Grill.

FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind Grill referred to the price
and the number of films, which he wrote on a napkin. However, Exhibit C contains numerous
provisions which were not discussed at the Tamarind Grill, if Lopez testimony was to be believed
nor could they have been physically written on a napkin. There was even doubt as to whether it
was a paper napkin or cloth napkin. In short what were written in Exhibit C were not discussed,
and therefore could not have been agreed upon, by the parties. How then could this court compel
the parties to sign Exhibit C when the provisions thereof were not previously agreed upon?

SECOND, Mr. Lopez claimed that what was agreed upon as the subject matter of the contract was
14 films. The complaint in fact prays for delivery of 14 films. But Exhibit C mentions 53 films as
its subject matter. Which is which?If Exhibit C reflected the true intent of the parties, then ABS-
CBNs claim for 14 films in its complaint is false or if what it alleged in the complaint is true, then
Exhibit C did not reflect what was agreed upon by the parties. This underscores the fact that there
was no meeting of the minds as to the subject matter of the contract, so as to preclude perfection
thereof. For settled is the rule that there can be no contract where there is no object certain which
is its subject matter (Art. 1318, NCC).

THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony (Exh. D) States:

We were able to reach an agreement. VIVA gave us the exclusive license to show these fourteen
(14) films, and we agreed to pay Viva the amount of P16,050,000.00 as well as grant Viva
commercial slots worth P19,950,000.00. We had already earmarked this P16,050,000.00.

which gives a total consideration of P36 million (P19,951,000.00 plus P16,050,000.00

equals P36,000,000.00).

On cross-examination Mr. Lopez testified:

Q What was written in this napkin?

A The total price, the breakdown the known Viva movies, the 7 blockbuster movies and the
other 7 Viva movies because the price was broken down accordingly. The none [sic] Viva
and the seven other Viva movies and the sharing between the cash portion and the
concerned spot portion in the total amount of P35 million pesos.

Now, which is which? P36 million or P35 million? This weakens ABS-CBNs claim.

FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she transmitted Exhibit C to Mr. Del
Rosario with a handwritten note, describing said Exhibit C as a draft. (Exh. 5 Viva; tsn pp. 23-24,
June 08, 1992). The said draft has a well defined meaning.

Since Exhibit C is only a draft, or a tentative, provisional or preparatory writing prepared for
discussion, the terms and conditions thereof could not have been previously agreed upon by ABS-
CBN and Viva. Exhibit C could not therefore legally bind Viva, not having agreed thereto. In fact,
Ms. Concio admitted that the terms and conditions embodied in Exhibit C were prepared by ABS-
CBNs lawyers and there was no discussion on said terms and conditions.

As the parties had not yet discussed the proposed terms and conditions in Exhibit C, and there was
no evidence whatsoever that Viva agreed to the terms and conditions thereof, said document cannot
be a binding contract. The fact that Viva refused to sign Exhibit C reveals only two [sic] well that
it did not agree on its terms and conditions, and this court has no authority to compel Viva to agree
thereto.
FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario agreed upon at the Tamarind
Grill was only provisional, in the sense that it was subject to approval by the Board of Directors
of Viva. He testified:

Q Now, Mr. Witness, and after that Tamarinf meeting the second meeting wherein you claimed
that you have the meeting of the minds between you and Mr. Vic del Rosario, what
happened?
A Vic Del Rosario was supposed to call us up and tell us specifically the result of the discussion
with the Board of Directors.
Q And you are referring to the so-called agreement which you wrote in [sic] a piece of paper?
A Yes, sir.
Q So, he was going to forward that to the board of Directors for approval?
A Yes, sir (Tsn, pp. 42-43, June 8, 1992)
Q Did Mr. Del Rosario tell you that he will submit it to his Board for approval?
A Yes, sir. (Tsn, p. 69, June 8, 1992).

The above testimony of Mr. Lopez shows beyond doubt that he knew Mr. Del Rosario had no
authority to bind Viva to a contract with ABS-CBN until and unless its Board of Directors
approved it. The complaint, in fact, alleges that Mr. Del Rosario is the Executive Producer of
defendant Viva which is a corporation. (par. 2, complaint). As a mere agent of Viva, Del Rosario
could not bind Viva unless what he did is ratified by its Directors. (Vicente vs.Geraldez, 52 SCRA
210; Arnold vs. Willets and Paterson, 44 Phil. 634). As a mere agent, recognized as such by
plaintiff, Del Rosario could not be held liable jointly and severally with Viva and his inclusion as
party defendant has no legal basis. (Salonga vs. Warner Barnes [sic],COLTA, 88 Phil. 125; Salmon
vs. Tan, 36 Phil. 556).

The testimony of Mr. Lopez and the allegations in the complaint are clear admissions that what
was supposed to have been agreed upon at the Tamarind Grill between Mr. Lopez and Del Rosario
was not a binding agreement. It is as it should be because corporate power to enter into a contract
is lodged in the Board of Directors. (Sec. 23, Corporation Code). Without such board approval by
the Viva board, whatever agreement Lopez and Del Rosario arrived at could not ripen into a valid
binding upon Viva (Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763). The evidence
adduced shows that the Board of Directors of Viva rejected Exhibit C and insisted that the film
package for 104 films be maintained (Exh. 7-1 Cica).[49]

The contention that ABS-CBN had yet to fully exercise its right of first refusal over twenty-
four films under the 1990 Film Exhibition Agreement and that the meeting between Lopez and
Del Rosario was a continuation of said previous contract is untenable. As observed by the trial
court, ABS-CBNs right of first refusal had already been exercised when Ms. Concio wrote to Viva
ticking off ten films. Thus:

[T]he subsequent negotiation with ABS-CBN two (2) months after this letter was sent, was
for an entirely different package. Ms. Concio herself admitted on cross-examination to having
 used or exercised the right of first refusal.She stated that the list was not acceptable and was
indeed not accepted by ABS-CBN, (Tsn, June 8, 1992, pp. 8-10). Even Mr. Lopez himself
admitted that the right of first refusal may have been already exercised by Ms. Concio (as she
had). (TSN, June 8, 1992, pp. 71-75). Del Rosario himself knew and understand [sic] that
ABS-CBN has lost its right of first refusal when his list of 36 titles were rejected (Tsn, June
9, 1992, pp. 10-11).[50]

II
However, we find for ABS-CBN on the issue of damages. We shall first take up actual
damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific law on actual or
compensatory damages. Except as provided by law or by stipulation, one is entitled to
compensation for actual damages only for such pecuniary loss suffered by him as he has duly
proved.[51] The indemnification shall comprehend not only the value of the loss suffered, but also
that of the profits that the obligee failed to obtain.[52] In contracts and quasi-contracts the damages
which may be awarded are dependent on whether the obligor acted with good faith or otherwise. In
case of good faith, the damages recoverable are those which are the natural and probable
consequences of the breach of the obligation and which the parties have foreseen or could have
reasonably foreseen at the time of the constitution of the obligation. If the obligor acted with fraud,
bad faith, malice, or wanton attitude, he shall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation.[53] In crimes and quasi-delicts, the
defendants shall be liable for all damages which are the natural and probable consequences of the
act or omission complained of, whether or not such damages have been foreseen or could have
reasonably been foreseen by the defendant.[54]
Actual damages may likewise be recovered for loss or impairment of earning capacity in cases
of temporary or permanent personal injury, or for injury to the plaintiffs business standing or
commercial credit.[55]
The claim of RBS for actual damages did not arise from contract, quasi-contract, delict, or
quasi-delict. It arose from the fact of filing of the complaint despite ABS-CBNs alleged knowledge
of lack of cause of action. Thus paragraph 12 of RBSs Answer with Counterclaim and Cross-claim
under the heading COUNTERCLAIM specifically alleges:
12. ABS-CBN filed the complaint knowing fully well that it has no cause of action against
RBS. As a result thereof, RBS suffered actual damages in the amount
of P6,621,195.32.[56]
Needless to state the award of actual damages cannot be comprehended under the above law on
actual damages. RBS could only probably take refuge under Articles 19, 20, and 21 of the Civil
Code, which read as follows:

ART. 19. Every person must, in the exercise of hid rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith.

ART. 20. Every person who, contrary to law, wilfully or negligently causes damage to another
shall indemnify the latter for the same.
ART. 21. Any person who wilfully 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.

It may further be observed that in cases where a writ of preliminary injunction is issued, the
damages which the defendant may suffer by reason of the writ are recoverable from the injunctive
bond.[57] In this case, ABS-CBN had not yet filed the required bond; as a matter of fact, it asked
for reduction of the bond and even went to the Court of Appeals to challenge the order on the
matter. Clearly then, it was not necessary for RBS to file a counterbond. Hence, ABS-CBN cannot
be held responsible for the premium RBS paid for the counterbond.
Neither could ABS-CBN be liable for the print advertisements for Maging Sino Ka Man for
lack of sufficient legal basis. The RTC issued a temporary restraining order and later, a writ of
preliminary injunction on the basis of its determination that there existed sufficient ground for the
issuance thereof. Notably, the RTC did not dissolve the injunction on the ground of lack of legal
and factual basis, but because of the plea of RBS that it be allowed to put up a counterbond.
As regards attorneys fees, the law is clear that in the absence of stipulation, attorneys fees may
be recovered as actual or compensatory damages under any of the circumstances provided for in
Article 2208 of the Civil Code.[58]
The general rule is that attorneys fees cannot be recovered as part of damages because of the
policy that no premium should be placed on the right to litigate.[59] They are not to be awarded
every time a party wins a suit. The power of the court t award attorneys fees under Article 2208
demands factual, legal, and equitable justification.[60] Even when a claimant is compelled to litigate
with third persons or to incur expenses to protect his rights, still attorneys fees may not be awarded
where no sufficient showing of bad faith could be reflected in a partys persistence in a case other
than an erroneous conviction of the righteousness of his cause.[61]
As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil
Code. Article 2217 thereof defines what are included in moral damages, while Article 2219
enumerates the cases where they may be recovered. Article 2220 provides that moral damages may
be recovered in breaches of contract where the defendant acted fraudulently or in bad faith. RBSs
claim for moral damages could possibly fall only under item (10) of Article 2219, thereof which
reads:

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

Moral damages are in the category of an award designed to compensate the claimant for actual
injury suffered and not to impose a penalty on the wrongdoer.[62] The award is not meant to enrich
the complainant at the expense of the defendant, but to enable the injured party to obtain means,
diversion, or amusements that will serve to obviate the moral suffering he has undergone. It is
aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and
should be proportionate to the suffering inflicted.[63] Trial courts must then guard against the award
of exorbitant damages; they should exercise balanced restrained and measured objectivity to avoid
suspicion that it was due to passion, prejudice, or corruption or the part of the trial court.[64]
The award of moral damages cannot be granted in favor of a corporation because, being
an artificial person and having existence only in legal contemplation, it has no feelings, no
emotions, no senses. It cannot, therefore, experience physical suffering and mental anguish, which
can be experienced only by one having a nervous system.[65] The statement in People v.
Manero[66] and Mambulao Lumber Co. v. PNB[67] that a corporation may recover moral damages
if it has a good reputation that is debased, resulting in social humiliation is an obiter dictum. On
this score alone the award for damages must be set aside, since RBS is a corporation.
The basic law on exemplary damages is Section 5 Chapter 3, Title XVIII, Book IV of the Civil
Code. These are imposed by way of example or correction for the public good, in addition to moral,
temperate, liquidated, or compensatory damages.[68] They are recoverable in criminal cases as part
of the civil liability when the crime was committed with one or more aggravating
circumstances;[69] in quasi-delicts, if the defendant acted with gross negligence;[70] and in contracts
and quasi-contracts, if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.[71]
It may be reiterated that the claim of RBS against ABS-CBN is not based on contract, quasi-
contract, delict, or quasi-delict. Hence, the claims for moral and exemplary damages can only be
based on Articles 19, 20, and 21 of the Civil Code.
The elements of abuse of right under Article 19 are the following: (1) the existence of a legal
right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or injuring
another. Article 20 speaks of the general sanction for all provisions of law which do not especially
provide for their own sanction; while Article 21 deals with 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) and it is done with intent to injure.[72]
Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith
implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral
obliquity.[73] Such must be substantiated by evidence.[74]
There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was honestly
convinced of the merits of its cause after it had undergone serious negotiations culminating in its
formal submission of a draft contract. Settled is the rule that the adverse result of an action does
not per se make the action wrongful and subject the actor to damages, for the law could not have
meant impose a penalty on the right to litigate. If damages result from a persons exercise of a right,
it is damnum absque injuria.[75]
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV No. 44125 is hereby REVERSED except as to unappealed award of
attorneys fees in favor of VIVA Productions, Inc.
No pronouncement as to costs.
SO ORDERED.
 2. FILIPINAS BROADCASTING NETWORK, INC., petitioner, vs. AGO MEDICAL
AND EDUCATIONAL CENTER-BICOL CHRISTIAN COLLEGE OF MEDICINE,
(AMEC-BCCM) and ANGELITA F. AGO, respondents.

DECISION
CARPIO, J.:

The Case

This petition for review[1] assails the 4 January 1999 Decision[2] and 26 January 2000
Resolution of the Court of Appeals in CA-G.R. CV No. 40151. The Court of Appeals
affirmed with modification the 14 December 1992 Decision[3] of the Regional Trial Court
of Legazpi City, Branch 10, in Civil Case No. 8236. The Court of Appeals held Filipinas
Broadcasting Network, Inc. and its broadcasters Hermogenes Alegre and Carmelo Rima
liable for libel and ordered them to solidarily pay Ago Medical and Educational Center-
Bicol Christian College of Medicine moral damages, attorneys fees and costs of suit.

The Antecedents

Expos is a radio documentary[4] program hosted by Carmelo Mel Rima (Rima) and
Hermogenes Jun Alegre (Alegre).[5] Expos is aired every morning over DZRC-AM which
is owned by Filipinas Broadcasting Network, Inc. (FBNI). Expos is heard over Legazpi
City, the Albay municipalities and other Bicol areas.[6]
In the morning of 14 and 15 December 1989, Rima and Alegre exposed various
alleged complaints from students, teachers and parents against Ago Medical and
Educational Center-Bicol Christian College of Medicine (AMEC) and its administrators.
Claiming that the broadcasts were defamatory, AMEC and Angelita Ago (Ago), as Dean
of AMECs College of Medicine, filed a complaint for damages[7] against FBNI, Rima and
Alegre on 27 February 1990. Quoted are portions of the allegedly libelous broadcasts:

JUN ALEGRE:

Let us begin with the less burdensome: if you have children taking medical course at AMEC-
BCCM, advise them to pass all subjects because if they fail in any subject they will repeat
their year level, taking up all subjects including those they have passed already. Several
students had approached me stating that they had consulted with the DECS which told them that
there is no such regulation. If [there] is no such regulation why is AMEC doing the same?

xxx

Second: Earlier AMEC students in Physical Therapy had complained that the course is not
recognized by DECS. xxx
Third: Students are required to take and pay for the subject even if the subject does not have
an instructor - such greed for money on the part of AMECs administration. Take the subject
Anatomy: students would pay for the subject upon enrolment because it is offered by the school.
However there would be no instructor for such subject. Students would be informed that course
would be moved to a later date because the school is still searching for the appropriate instructor.

xxx

It is a public knowledge that the Ago Medical and Educational Center has survived and has been
surviving for the past few years since its inception because of funds support from foreign
foundations. If you will take a look at the AMEC premises youll find out that the names of the
buildings there are foreign soundings. There is a McDonald Hall. Why not Jose Rizal or Bonifacio
Hall? That is a very concrete and undeniable evidence that the support of foreign foundations for
AMEC is substantial, isnt it? With the report which is the basis of the expose in DZRC today, it
would be very easy for detractors and enemies of the Ago family to stop the flow of support of
foreign foundations who assist the medical school on the basis of the latters purpose. But if the
purpose of the institution (AMEC) is to deceive students at cross purpose with its reason for being
it is possible for these foreign foundations to lift or suspend their donations temporarily.[8]

xxx

On the other hand, the administrators of AMEC-BCCM, AMEC Science High School and
the AMEC-Institute of Mass Communication in their effort to minimize expenses in terms
of salary are absorbing or continues to accept rejects. For example how many teachers in
AMEC are former teachers of Aquinas University but were removed because of immorality? Does
it mean that the present administration of AMEC have the total definite moral foundation from
catholic administrator of Aquinas University. I will prove to you my friends, that AMEC is a
dumping ground, garbage, not merely of moral and physical misfits. Probably they only
qualify in terms of intellect. The Dean of Student Affairs of AMEC is Justita Lola, as the family
name implies. She is too old to work, being an old woman. Is the AMEC administration exploiting
the very [e]nterprising or compromising and undemanding Lola? Could it be that AMEC is just
patiently making use of Dean Justita Lola were if she is very old. As in atmospheric situation zero
visibility the plane cannot land, meaning she is very old, low pay follows. By the way, Dean Justita
Lola is also the chairman of the committee on scholarship in AMEC. She had retired from Bicol
University a long time ago but AMEC has patiently made use of her.

xxx

MEL RIMA:

xxx My friends based on the expose, AMEC is a dumping ground for moral and physically misfit
people. What does this mean? Immoral and physically misfits as teachers.

May I say Im sorry to Dean Justita Lola. But this is the truth. The truth is this, that your are no
longer fit to teach. You are too old. As an aviation, your case is zero visibility. Dont insist.
xxx Why did AMEC still absorb her as a teacher, a dean, and chairman of the scholarship
committee at that. The reason is practical cost saving in salaries, because an old person is not
fastidious, so long as she has money to buy the ingredient of beetle juice. The elderly can get by
thats why she (Lola) was taken in as Dean.

xxx

xxx On our end our task is to attend to the interests of students. It is likely that the students would
be influenced by evil. When they become members of society outside of campus will be
liabilities rather than assets. What do you expect from a doctor who while studying at AMEC is
so much burdened with unreasonable imposition? What do you expect from a student who aside
from peculiar problems because not all students are rich in their struggle to improve their social
status are even more burdened with false regulations. xxx[9] (Emphasis supplied)

The complaint further alleged that AMEC is a reputable learning institution. With the
supposed exposs, FBNI, Rima and Alegre transmitted malicious imputations, and as
such, destroyed plaintiffs (AMEC and Ago) reputation. AMEC and Ago included FBNI as
defendant for allegedly failing to exercise due diligence in the selection and supervision
of its employees, particularly Rima and Alegre.
On 18 June 1990, FBNI, Rima and Alegre, through Atty. Rozil Lozares, filed an
Answer[10] alleging that the broadcasts against AMEC were fair and true. FBNI, Rima and
Alegre claimed that they were plainly impelled by a sense of public duty to report the
goings-on in AMEC, [which is] an institution imbued with public interest.
Thereafter, trial ensued. During the presentation of the evidence for the defense, Atty.
Edmundo Cea, collaborating counsel of Atty. Lozares, filed a Motion to Dismiss [11] on
FBNIs behalf. The trial court denied the motion to dismiss. Consequently, FBNI filed a
separate Answer claiming that it exercised due diligence in the selection and supervision
of Rima and Alegre. FBNI claimed that before hiring a broadcaster, the broadcaster
should (1) file an application; (2) be interviewed; and (3) undergo an apprenticeship and
training program after passing the interview. FBNI likewise claimed that it always reminds
its broadcasters to observe truth, fairness and objectivity in their broadcasts and to refrain
from using libelous and indecent language. Moreover, FBNI requires all broadcasters to
pass the Kapisanan ng mga Brodkaster sa Pilipinas (KBP) accreditation test and to
secure a KBP permit.
On 14 December 1992, the trial court rendered a Decision[12] finding FBNI and Alegre
liable for libel except Rima. The trial court held that the broadcasts are libelous per se.
The trial court rejected the broadcasters claim that their utterances were the result of
straight reporting because it had no factual basis. The broadcasters did not even verify
their reports before airing them to show good faith. In holding FBNI liable for libel, the trial
court found that FBNI failed to exercise diligence in the selection and supervision of its
employees.
In absolving Rima from the charge, the trial court ruled that Rimas only participation
was when he agreed with Alegres expos. The trial court found Rimas statement within
the bounds of freedom of speech, expression, and of the press. The dispositive portion
of the decision reads:

WHEREFORE, premises considered, this court finds for the plaintiff. Considering the degree of
damages caused by the controversial utterances, which are not found by this court to be
really very serious and damaging, and there being no showing that indeed the enrollment of
plaintiff school dropped, defendants Hermogenes Jun Alegre, Jr. and Filipinas Broadcasting
Network (owner of the radio station DZRC), are hereby jointly and severally ordered to pay
plaintiff Ago Medical and Educational Center-Bicol Christian College of Medicine (AMEC-
BCCM) the amount of P300,000.00 moral damages, plus P30,000.00 reimbursement of attorneys
fees, and to pay the costs of suit.

SO ORDERED. [13] (Emphasis supplied)

Both parties, namely, FBNI, Rima and Alegre, on one hand, and AMEC and Ago, on
the other, appealed the decision to the Court of Appeals. The Court of Appeals affirmed
the trial courts judgment with modification. The appellate court made Rima solidarily liable
with FBNI and Alegre. The appellate court denied Agos claim for damages and attorneys
fees because the broadcasts were directed against AMEC, and not against her. The
dispositive portion of the Court of Appeals decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the modification
that broadcaster Mel Rima is SOLIDARILY ADJUDGED liable with FBN[I] and Hermo[g]enes
Alegre.

SO ORDERED.[14]

FBNI, Rima and Alegre filed a motion for reconsideration which the Court of Appeals
denied in its 26 January 2000 Resolution.
Hence, FBNI filed this petition.[15]

The Ruling of the Court of Appeals

The Court of Appeals upheld the trial courts ruling that the questioned broadcasts are
libelous per se and that FBNI, Rima and Alegre failed to overcome the legal presumption
of malice. The Court of Appeals found Rima and Alegres claim that they were actuated
by their moral and social duty to inform the public of the students gripes as insufficient to
justify the utterance of the defamatory remarks.
Finding no factual basis for the imputations against AMECs administrators, the Court
of Appeals ruled that the broadcasts were made with reckless disregard as to whether
they were true or false. The appellate court pointed out that FBNI, Rima and Alegre failed
to present in court any of the students who allegedly complained against AMEC. Rima
and Alegre merely gave a single name when asked to identify the students. According to
the Court of Appeals, these circumstances cast doubt on the veracity of the broadcasters
claim that they were impelled by their moral and social duty to inform the public about the
students gripes.
The Court of Appeals found Rima also liable for libel since he remarked that (1)
AMEC-BCCM is a dumping ground for morally and physically misfit teachers; (2) AMEC
obtained the services of Dean Justita Lola to minimize expenses on its employees
salaries; and (3) AMEC burdened the students with unreasonable imposition and false
regulations.[16]
The Court of Appeals held that FBNI failed to exercise due diligence in the selection
and supervision of its employees for allowing Rima and Alegre to make the radio
broadcasts without the proper KBP accreditation. The Court of Appeals denied Agos
claim for damages and attorneys fees because the libelous remarks were directed against
AMEC, and not against her. The Court of Appeals adjudged FBNI, Rima and Alegre
solidarily liable to pay AMEC moral damages, attorneys fees and costs of suit.

Issues

FBNI raises the following issues for resolution:

I. WHETHER THE BROADCASTS ARE LIBELOUS;

II. WHETHER AMEC IS ENTITLED TO MORAL DAMAGES;

III. WHETHER THE AWARD OF ATTORNEYS FEES IS PROPER; and

IV. WHETHER FBNI IS SOLIDARILY LIABLE WITH RIMA AND ALEGRE FOR
PAYMENT OF MORAL DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.

The Courts Ruling

We deny the petition.

This is a civil action for damages as a result of the allegedly defamatory remarks of
Rima and Alegre against AMEC.[17] While AMEC did not point out clearly the legal basis
for its complaint, a reading of the complaint reveals that AMECs cause of action is based
on Articles 30 and 33 of the Civil Code. Article 30 [18] authorizes a separate civil action to
recover civil liability arising from a criminal offense. On the other hand, Article
33[19] particularly provides that the injured party may bring a separate civil action for
damages in cases of defamation, fraud, and physical injuries. AMEC also invokes Article
19[20] of the Civil Code to justify its claim for damages. AMEC cites Articles 2176[21] and
2180[22] of the Civil Code to hold FBNI solidarily liable with Rima and Alegre.

I.
Whether the broadcasts are libelous
 A libel[23] is a public and malicious imputation of a crime, or of a vice or defect, real or
imaginary, or any act or omission, condition, status, or circumstance tending to cause the
dishonor, discredit, or contempt of a natural or juridical person, or to blacken the memory
of one who is dead.[24]
There is no question that the broadcasts were made public and imputed to AMEC
defects or circumstances tending to cause it dishonor, discredit and contempt. Rima and
Alegres remarks such as greed for money on the part of AMECs administrators; AMEC
is a dumping ground, garbage of xxx moral and physical misfits; and AMEC students who
graduate will be liabilities rather than assets of the society are libelous per se. Taken as
a whole, the broadcasts suggest that AMEC is a money-making institution where
physically and morally unfit teachers abound.
However, FBNI contends that the broadcasts are not malicious. FBNI claims that
Rima and Alegre were plainly impelled by their civic duty to air the students gripes. FBNI
alleges that there is no evidence that ill will or spite motivated Rima and Alegre in making
the broadcasts. FBNI further points out that Rima and Alegre exerted efforts to obtain
AMECs side and gave Ago the opportunity to defend AMEC and its administrators. FBNI
concludes that since there is no malice, there is no libel.
FBNIs contentions are untenable.
Every defamatory imputation is presumed malicious.[25] Rima and Alegre failed to
show adequately their good intention and justifiable motive in airing the supposed gripes
of the students. As hosts of a documentary or public affairs program, Rima and Alegre
should have presented the public issues free from inaccurate and misleading
information.[26] Hearing the students alleged complaints a month before the expos,[27] they
had sufficient time to verify their sources and information. However, Rima and Alegre
hardly made a thorough investigation of the students alleged gripes. Neither did they
inquire about nor confirm the purported irregularities in AMEC from the Department of
Education, Culture and Sports. Alegre testified that he merely went to AMEC to verify his
report from an alleged AMEC official who refused to disclose any information. Alegre
simply relied on the words of the students because they were many and not because
there is proof that what they are saying is true.[28] This plainly shows Rima and Alegres
reckless disregard of whether their report was true or not.
Contrary to FBNIs claim, the broadcasts were not the result of straight reporting.
Significantly, some courts in the United States apply the privilege of neutral reportage in
libel cases involving matters of public interest or public figures. Under this privilege, a
republisher who accurately and disinterestedly reports certain defamatory statements
made against public figures is shielded from liability, regardless of the republishers
subjective awareness of the truth or falsity of the accusation.[29] Rima and Alegre cannot
invoke the privilege of neutral reportage because unfounded comments abound in the
broadcasts. Moreover, there is no existing controversy involving AMEC when the
broadcasts were made. The privilege of neutral reportage applies where the defamed
person is a public figure who is involved in an existing controversy, and a party to that
controversy makes the defamatory statement.[30]
 However, FBNI argues vigorously that malice in law does not apply to this case.
Citing Borjal v. Court of Appeals,[31] FBNI contends that the broadcasts fall within the
coverage of qualifiedly privileged communications for being commentaries on matters of
public interest. Such being the case, AMEC should prove malice in fact or actual malice.
Since AMEC allegedly failed to prove actual malice, there is no libel.
FBNIs reliance on Borjal is misplaced. In Borjal, the Court elucidated on the doctrine
of fair comment, thus:

[F]air commentaries on matters of public interest are privileged and constitute a valid defense in
an action for libel or slander. The doctrine of fair comment means that while in general every
discreditable imputation publicly made is deemed false, because every man is presumed innocent
until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless,
when the discreditable imputation is directed against a public person in his public capacity, it is
not necessarily actionable. In order that such discreditable imputation to a public official may
be actionable, it must either be a false allegation of fact or a comment based on a false
supposition. If the comment is an expression of opinion, based on established facts, then it is
immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from
the facts.[32] (Emphasis supplied)

True, AMEC is a private learning institution whose business of educating students is

genuinely imbued with public interest. The welfare of the youth in general and AMECs
students in particular is a matter which the public has the right to know. Thus, similar to
the newspaper articles in Borjal, the subject broadcasts dealt with matters of public
interest. However, unlike in Borjal, the questioned broadcasts are notbased
on established facts. The record supports the following findings of the trial court:

xxx Although defendants claim that they were motivated by consistent reports of students and
parents against plaintiff, yet, defendants have not presented in court, nor even gave name of a
single student who made the complaint to them, much less present written complaint or petition to
that effect. To accept this defense of defendants is too dangerous because it could easily give
license to the media to malign people and establishments based on flimsy excuses that there were
reports to them although they could not satisfactorily establish it. Such laxity would encourage
careless and irresponsible broadcasting which is inimical to public interests.

Secondly, there is reason to believe that defendant radio broadcasters, contrary to the mandates of
their duties, did not verify and analyze the truth of the reports before they aired it, in order to prove
that they are in good faith.

Alegre contended that plaintiff school had no permit and is not accredited to offer Physical Therapy
courses. Yet, plaintiff produced a certificate coming from DECS that as of Sept. 22, 1987 or more
than 2 years before the controversial broadcast, accreditation to offer Physical Therapy course had
already been given the plaintiff, which certificate is signed by no less than the Secretary of
Education and Culture herself, Lourdes R. Quisumbing (Exh. C-rebuttal). Defendants could have
easily known this were they careful enough to verify. And yet, defendants were very categorical
and sounded too positive when they made the erroneous report that plaintiff had no permit to offer
Physical Therapy courses which they were offering.
The allegation that plaintiff was getting tremendous aids from foreign foundations like Mcdonald
Foundation prove not to be true also. The truth is there is no Mcdonald Foundation existing.
Although a big building of plaintiff school was given the name Mcdonald building, that was only
in order to honor the first missionary in Bicol of plaintiffs religion, as explained by Dr. Lita Ago.
Contrary to the claim of defendants over the air, not a single centavo appears to be received by
plaintiff school from the aforementioned McDonald Foundation which does not exist.

Defendants did not even also bother to prove their claim, though denied by Dra. Ago, that when
medical students fail in one subject, they are made to repeat all the other subject[s], even those
they have already passed, nor their claim that the school charges laboratory fees even if there are
no laboratories in the school. No evidence was presented to prove the bases for these claims, at
least in order to give semblance of good faith.

As for the allegation that plaintiff is the dumping ground for misfits, and immoral teachers,
defendant[s] singled out Dean Justita Lola who is said to be so old, with zero visibility already.
Dean Lola testified in court last Jan. 21, 1991, and was found to be 75 years old. xxx Even older
people prove to be effective teachers like Supreme Court Justices who are still very much in
demand as law professors in their late years. Counsel for defendants is past 75 but is found by this
court to be still very sharp and effective. So is plaintiffs counsel.

Dr. Lola was observed by this court not to be physically decrepit yet, nor mentally infirmed, but
is still alert and docile.

The contention that plaintiffs graduates become liabilities rather than assets of our society is a
mere conclusion. Being from the place himself, this court is aware that majority of the medical
graduates of plaintiffs pass the board examination easily and become prosperous and responsible
professionals.[33]

Had the comments been an expression of opinion based on established facts, it is

immaterial that the opinion happens to be mistaken, as long as it might reasonably be
inferred from the facts.[34] However, the comments of Rima and Alegre were not backed
up by facts. Therefore, the broadcasts are not privileged and remain libelous per se.
The broadcasts also violate the Radio Code[35] of the Kapisanan ng mga Brodkaster
sa Pilipinas, Ink. (Radio Code). Item I(B) of the Radio Code provides:

B. PUBLIC AFFAIRS, PUBLIC ISSUES AND COMMENTARIES

1. x x x

4. Public affairs program shall present public issues free from personal bias, prejudice
and inaccurate and misleading information. x x x Furthermore, the station shall
strive to present balanced discussion of issues. x x x.

xxx
 7. The station shall be responsible at all times in the supervision of public affairs, public
issues and commentary programs so that they conform to the provisions and standards
of this code.

8. It shall be the responsibility of the newscaster, commentator, host and announcer to

protect public interest, general welfare and good order in the presentation of public
affairs and public issues.[36] (Emphasis supplied)

The broadcasts fail to meet the standards prescribed in the Radio Code, which lays
down the code of ethical conduct governing practitioners in the radio broadcast industry.
The Radio Code is a voluntary code of conduct imposed by the radio broadcast industry
on its own members. The Radio Code is a public warranty by the radio broadcast industry
that radio broadcast practitioners are subject to a code by which their conduct are
measured for lapses, liability and sanctions.
The public has a right to expect and demand that radio broadcast practitioners live
up to the code of conduct of their profession, just like other professionals. A professional
code of conduct provides the standards for determining whether a person has acted justly,
honestly and with good faith in the exercise of his rights and performance of his duties as
required by Article 19[37] of the Civil Code. A professional code of conduct also provides
the standards for determining whether a person who willfully causes loss or injury to
another has acted in a manner contrary to morals or good customs under Article 21 [38] of
the Civil Code.
II.
Whether AMEC is entitled to moral damages

FBNI contends that AMEC is not entitled to moral damages because it is a

corporation.[39]
A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock.[40] The Court of Appeals cites Mambulao
Lumber Co. v. PNB, et al.[41] to justify the award of moral damages. However, the Courts
statement in Mambulao that a corporation may have a good reputation which, if
besmirched, may also be a ground for the award of moral damages is an obiter dictum.[42]
Nevertheless, AMECs claim for moral damages falls under item 7 of Article 2219 [43] of
the Civil Code. This provision expressly authorizes the recovery of moral damages in
cases of libel, slander or any other form of defamation. Article 2219(7) does not qualify
whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as
a corporation can validly complain for libel or any other form of defamation and claim for
moral damages.[44]
Moreover, where the broadcast is libelous per se, the law implies damages.[45] In such
a case, evidence of an honest mistake or the want of character or reputation of the party
libeled goes only in mitigation of damages.[46] Neither in such a case is the plaintiff
required to introduce evidence of actual damages as a condition precedent to the
recovery of some damages.[47] In this case, the broadcasts are libelous per se. Thus,
AMEC is entitled to moral damages.
However, we find the award of P300,000 moral damages unreasonable. The record
shows that even though the broadcasts were libelous per se, AMEC has not suffered any
substantial or material damage to its reputation. Therefore, we reduce the award of moral
damages from P300,000 to P150,000.

III.
Whether the award of attorneys fees is proper

FBNI contends that since AMEC is not entitled to moral damages, there is no basis
for the award of attorneys fees. FBNI adds that the instant case does not fall under the
enumeration in Article 2208[48] of the Civil Code.
The award of attorneys fees is not proper because AMEC failed to justify satisfactorily
its claim for attorneys fees. AMEC did not adduce evidence to warrant the award of
attorneys fees. Moreover, both the trial and appellate courts failed to explicitly state in
their respective decisions the rationale for the award of attorneys fees. [49] In Inter-Asia
Investment Industries, Inc. v. Court of Appeals,[50] we held that:

[I]t is an accepted doctrine that the award thereof as an item of damages is the exception rather
than the rule, and counsels fees are not to be awarded every time a party wins a suit. The power
of the court to award attorneys fees under Article 2208 of the Civil Code demands factual,
legal and equitable justification, without which the award is a conclusion without a premise,
its basis being improperly left to speculation and conjecture. In all events, the court must
explicitly state in the text of the decision, and not only in the decretal portion thereof, the legal
reason for the award of attorneys fees.[51] (Emphasis supplied)

While it mentioned about the award of attorneys fees by stating that it lies within the
discretion of the court and depends upon the circumstances of each case, the Court of
Appeals failed to point out any circumstance to justify the award.
IV.
Whether FBNI is solidarily liable with Rima and Alegre
for moral damages, attorneys fees
and costs of suit

FBNI contends that it is not solidarily liable with Rima and Alegre for the payment of
damages and attorneys fees because it exercised due diligence in the selection and
supervision of its employees, particularly Rima and Alegre. FBNI maintains that its
broadcasters, including Rima and Alegre, undergo a very regimented process before they
are allowed to go on air. Those who apply for broadcaster are subjected to interviews,
examinations and an apprenticeship program.
 FBNI further argues that Alegres age and lack of training are irrelevant to his
competence as a broadcaster. FBNI points out that the minor deficiencies in the KBP
accreditation of Rima and Alegre do not in any way prove that FBNI did not exercise the
diligence of a good father of a family in selecting and supervising them. Rimas
accreditation lapsed due to his non-payment of the KBP annual fees while Alegres
accreditation card was delayed allegedly for reasons attributable to the KBP Manila
Office. FBNI claims that membership in the KBP is merely voluntary and not required by
any law or government regulation.
FBNIs arguments do not persuade us.
The basis of the present action is a tort. Joint tort feasors are jointly and severally
liable for the tort which they commit.[52] 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.[53] Thus, AMEC correctly anchored its cause of action against FBNI on Articles
2176 and 2180 of the Civil Code.
As operator of DZRC-AM and employer of Rima and Alegre, FBNI is solidarily liable
to pay for damages arising from the libelous broadcasts. As stated by the Court of
Appeals, recovery for defamatory statements published by radio or television may be had
from the owner of the station, a licensee, the operator of the station, or a person who
procures, or participates in, the making of the defamatory statements.[54] An employer and
employee are solidarily liable for a defamatory statement by the employee within the
course and scope of his or her employment, at least when the employer authorizes or
ratifies the defamation.[55] In this case, Rima and Alegre were clearly performing their
official duties as hosts of FBNIs radio program Expos when they aired the broadcasts.
FBNI neither alleged nor proved that Rima and Alegre went beyond the scope of their
work at that time. There was likewise no showing that FBNI did not authorize and ratify
the defamatory broadcasts.
Moreover, there is insufficient evidence on record that FBNI exercised due diligence
in the selection and supervision of its employees, particularly Rima and Alegre. FBNI
merely showed that it exercised diligence in the selection of its broadcasters without
introducing any evidence to prove that it observed the same diligence in
the supervision of Rima and Alegre. FBNI did not show how it exercised diligence in
supervising its broadcasters. FBNIs alleged constant reminder to its broadcasters to
observe truth, fairness and objectivity and to refrain from using libelous and indecent
language is not enough to prove due diligence in the supervision of its broadcasters.
Adequate training of the broadcasters on the industrys code of conduct, sufficient
information on libel laws, and continuous evaluation of the broadcasters performance are
but a few of the many ways of showing diligence in the supervision of broadcasters.
FBNI claims that it has taken all the precaution in the selection of Rima and Alegre
as broadcasters, bearing in mind their qualifications. However, no clear and convincing
evidence shows that Rima and Alegre underwent FBNIs regimented process of
application. Furthermore, FBNI admits that Rima and Alegre had deficiencies in their KBP
accreditation,[56] which is one of FBNIs requirements before it hires a broadcaster.
Significantly, membership in the KBP, while voluntary, indicates the broadcasters strong
commitment to observe the broadcast industrys rules and regulations. Clearly, these
circumstances show FBNIs lack of diligence in selecting and supervising Rima and
Alegre. Hence, FBNI is solidarily liable to pay damages together with Rima and Alegre.
WHEREFORE, we DENY the instant petition. We AFFIRM the Decision of 4 January
1999 and Resolution of 26 January 2000 of the Court of Appeals in CA-G.R. CV No.
40151 with the MODIFICATION that the award of moral damages is reduced
from P300,000 to P150,000 and the award of attorneys fees is deleted. Costs against
petitioner.
SO ORDERED.

3. HERMAN C. CRYSTAL, LAMBERTO C. CRYSTAL, ANN GEORGIA C. SOLANTE,

and DORIS C. MAGLASANG, as Heirs of Deceased SPOUSES RAYMUNDO I.
CRYSTAL and DESAMPARADOS C. CRYSTAL, petitioners,
vs.
BANK OF THE PHILIPPINE ISLANDS, respondent.

DECISION

TINGA, J.:

Before us is a Petition for Review1 of the Decision2 and Resolution3 of the Court of
Appeals dated 24 October 2005 and 31 March 2006, respectively, in CA G.R. CV No.
72886, which affirmed the 8 June 2001 decision of the Regional Trial Court, Branch 5, of
Cebu City.4

The facts, as culled from the records, follow.

On 28 March 1978, spouses Raymundo and Desamparados Crystal obtained

a P300,000.00 loan in behalf of the Cebu Contractors Consortium Co. (CCCC) from the
Bank of the Philippine Islands-Butuan branch (BPI-Butuan). The loan was secured by a
chattel mortgage on heavy equipment and machinery of CCCC. On the same date, the
spouses executed in favor of BPI-Butuan a Continuing Suretyship5 where they bound
themselves as surety of CCCC in the aggregate principal sum of not
exceeding P300,000.00. Thereafter, or on 29 March 1979, Raymundo Crystal executed
a promissory note6 for the amount of P300,000.00, also in favor of BPI-Butuan.

Sometime in August 1979, CCCC renewed a previous loan, this time from BPI, Cebu City
branch (BPI-Cebu City). The renewal was evidenced by a promissory note7 dated 13
August 1979, signed by the spouses in their personal capacities and as managing
partners of CCCC. The promissory note states that the spouses are jointly and severally
liable with CCCC. It appears that before the original loan could be granted, BPI-Cebu City
required CCCC to put up a security.
However, CCCC had no real property to offer as security for the loan; hence, the spouses
executed a real estate mortgage8over their own real property on 22 September 1977.9 On
3 October 1977, they executed another real estate mortgage over the same lot in favor
of BPI-Cebu City, to secure an additional loan of P20,000.00 of CCCC.10

CCCC failed to pay its loans to both BPI-Butuan and BPI-Cebu City when they became
due. CCCC, as well as the spouses, failed to pay their obligations despite demands. Thus,
BPI resorted to the foreclosure of the chattel mortgage and the real estate mortgage. The
foreclosure sale on the chattel mortgage was initially stalled with the issuance of a
restraining order against BPI.11 However, following BPI’s compliance with the necessary
requisites of extrajudicial foreclosure, the foreclosure sale on the chattel mortgage was
consummated on 28 February 1988, with the proceeds amounting to P240,000.00
applied to the loan from BPI-Butuan which had then reached P707,393.90.12 Meanwhile,
on 7 July 1981, Insular Bank of Asia and America (IBAA), through its Vice-President for
Legal and Corporate Affairs, offered to buy the lot subject of the two (2) real

estate mortgages and to pay directly the spouses’ indebtedness in exchange for the
release of the mortgages. BPI rejected IBAA’s offer to pay.13

BPI filed a complaint for sum of money against CCCC and the spouses before the
Regional Trial Court of Butuan City (RTC Butuan), seeking to recover the deficiency of
the loan of CCCC and the spouses with BPI-Butuan. The trial court ruled in favor of BPI.
Pursuant to the decision, BPI instituted extrajudicial foreclosure of the spouses’
mortgaged property.14

On 10 April 1985, the spouses filed an action for Injunction With Damages, With A Prayer
For A Restraining Order and/ or Writ of Preliminary Injunction.15 The spouses claimed
that the foreclosure of the real estate mortgages is illegal because BPI should have
exhausted CCCC’s properties first, stressing that they are mere guarantors of the
renewed loans. They also prayed that they be awarded moral and exemplary damages,
attorney’s fees, litigation expenses and cost of suit. Subsequently, the spouses filed an
amended complaint,16 additionally alleging that CCCC had opened and maintained a
foreign currency savings account (FCSA-197) with bpi, Makati branch (BPI-Makati), and
that said FCSA was used as security for a P450,000.00 loan also extended by BPI-
Makati. The P450,000.00 loan was allegedly paid, and thereafter the spouses demanded
the return of the FCSA passbook. BPI rejected the demand; thus, the spouses were
unable to withdraw from the said account to pay for their other obligations to BPI.

The trial court dismissed the spouses’ complaint and ordered them to pay moral and
exemplary damages and attorney’s fees to BPI. 17 It ruled that since the spouses agreed
to bind themselves jointly and severally, they are solidarily liable for the loans; hence, BPI
can validly foreclose the two real estate mortgages. Moreover, being guarantors-
mortgagors, the spouses are not entitled to the benefit of exhaustion. Anent the FCSA,
the trial court found that CCCC originally had FCDU SA No. 197 with BPI, Dewey
Boulevard branch, which was transferred to BPI-Makati as FCDU SA 76/0035, at the
request of Desamparados Crystal. FCDU SA 76/0035 was thus closed, but
Desamparados Crystal failed to surrender the passbook because it was lost. The
transferred FCSA in BPI-Makati was the one used as security for CCCC’s P450,000.00
loan from BPI-Makati. CCCC was no longer allowed to withdraw from FCDU SA No. 197
because it was already closed.

The spouses appealed the decision of the trial court to the Court of Appeals, but their
appeal was dismissed.18 The spouses moved for the reconsideration of the decision, but
the Court of Appeals also denied their motion for reconsideration.19Hence, the present
petition.

Before the Court, petitioners who are the heirs of the spouses argue that the failure of the
spouses to pay the BPI-Cebu City loan of P120,000.00 was due to BPI’s illegal refusal to
accept payment for the loan unless the P300,000.00 loan from BPI-Butuan would also be
paid. Consequently, in view of BPI’s unjust refusal to accept payment of the BPI-Cebu
City loan, the loan obligation of the spouses was extinguished, petitioners contend.

The contention has no merit. Petitioners rely on IBAA’s offer to purchase the mortgaged
lot from them and to directly pay BPI out of the proceeds thereof to settle the loan. 20 BPI’s
refusal to agree to such payment scheme cannot extinguish the spouses’ loan obligation.
In the first place, IBAA is not privy to the loan agreement or the promissory note between
the spouses and BPI. Contracts, after all, take effect only between the parties, their
successors in interest, heirs

and assigns.21 Besides, under Art. 1236 of the Civil Code, 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. We see no stipulation in the
promissory note which states that a third person may fulfill the spouses’ obligation. Thus,
it is clear that the spouses alone bear responsibility for the same.

In any event, the promissory note is the controlling repository of the obligation of the
spouses. Under the promissory note, the spouses defined the parameters of their
obligation as follows:

On or before June 29, 1980 on demand, for value received, I/we promise to pay,
jointly and severally, to the BANK OF THE PHILIPPINE ISLANDS, at its office in
the city of Cebu Philippines, the sum of ONE HUNDRED TWENTY THOUSAND
PESOS (P120,0000.00), Philippine Currency, subject to periodic installments on
the principal as follows: P30,000.00 quarterly amortization starting September 28,
1979. x x x 22

A solidary obligation is one in which each of the debtors is liable for the entire obligation,
and each of the creditors is entitled to demand the satisfaction of the whole obligation
from any or all of the debtors. 23 A liability is solidary "only when the obligation expressly
so states, when the law so provides or when the nature of the
obligation so requires."24 Thus, when the obligor undertakes to be "jointly and severally"
liable, it means that the obligation is solidary,25 such as in this case. By stating "I/we
promise to pay, jointly and severally, to the BANK OF THE PHILIPPINE ISLANDS," the
spouses agreed to be sought out and be demanded payment from, by BPI. BPI did
demand payment from them, but they failed to comply with their obligation, prompting
BPI’s valid resort to the foreclosure of the chattel mortgage and the real estate mortgages.

More importantly, the promissory note, wherein the spouses undertook to be solidarily
liable for the principal loan, partakes the nature of a suretyship and therefore is an
additional security for the loan. Thus we held in one case that if solidary liability was
instituted to "guarantee" a principal obligation, the law deems the contract to be one of
suretyship.26 And while a contract of a surety is in essence secondary only to a valid
principal obligation, the surety’s liability to the creditor or promisee of the principal is said
to be direct, primary, and absolute; in other words, the surety is directly and equally bound
with the principal. The surety therefore becomes liable for the debt or duty of another
even if he possesses no direct or personal interest over the obligations nor does he
receive any benefit therefrom.27

Petitioners contend that the Court of Appeals erred in not granting their counterclaims,
considering that they suffered moral damages in view of the unjust refusal of BPI to accept
the payment scheme proposed by IBAA and the allegedly unjust and illegal foreclosure
of the real estate mortgages on their property.28 Conversely, they argue that the Court of
Appeals erred in awarding moral damages to BPI, which is a corporation, as well as
exemplary damages, attorney’s fees and expenses of litigation.29

We do not agree. Moral damages are meant to compensate the claimant for any physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation and similar injuries unjustly caused. 30 Such
damages, to be recoverable, must be the proximate result of a wrongful act or omission
the factual basis for which is satisfactorily established by the aggrieved party. 31 There
being no wrongful or unjust act on the part of BPI in demanding payment from them and
in seeking the foreclosure of the chattel and real estate mortgages, there is no lawful
basis for award of damages in favor of the spouses.

Neither is BPI entitled to moral damages. A juridical person is generally not entitled to
moral damages because, unlike a natural person, it cannot experience physical suffering
or such sentiments as wounded feelings, serious anxiety, mental anguish or moral
shock.32 The Court of Appeals found BPI as "being famous and having gained its
familiarity and respect not only in the Philippines but also in the whole world because of
its good will and good reputation must protect and defend the same against any
unwarranted suit such as the case at bench." 33 In holding that BPI is entitled to moral
damages, the Court of Appeals relied on the case of People v. Manero,34 wherein the
Court ruled that "[i]t is only when a juridical person has a good reputation that is debased,
resulting in social humiliation, that moral damages may be awarded."35
We do not agree with the Court of Appeals. A statement similar to that made by the Court
in Manero can be found in the case of Mambulao Lumber Co. v. PNB, et al.,36 thus:

x x x Obviously, an artificial person like herein appellant corporation cannot

experience physical sufferings, mental anguish, fright, serious anxiety, wounded
feelings, moral shock or social humiliation which are basis of moral damages. A
corporation may have good reputation which, if besmirched may also be a
ground for the award of moral damages. x x x (Emphasis supplied)

Nevertheless, in the more recent cases of ABS-CBN Corp. v. Court of Appeals, et

al.,37 and Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational Center-
Bicol Christian College of Medicine (AMEC-BCCM),38 the Court held that the statements
in Manero and Mambulao were mere obiter dicta, implying that the award of moral
damages to corporations is not a hard and fast rule. Indeed, while the Court may allow
the grant of moral damages to corporations, it is not automatically granted; there must
still be proof of the existence of the factual basis of the damage and its causal relation to
the defendant’s acts. This is so because moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to compensate the claimant
for actual injury suffered and not to impose a penalty on the wrongdoer.39

The spouses’ complaint against BPI proved to be unfounded, but it does not automatically
entitle BPI to moral damages. Although the institution of a clearly unfounded civil suit can
at times be a legal

justification for an award of attorney's fees, such filing, however, has almost invariably
been held not to be a ground for an award of moral damages. The rationale for the rule
is that the law could not have meant to impose a penalty on the right to litigate. Otherwise,
moral damages must every time be awarded in favor of the prevailing defendant against
an unsuccessful plaintiff.40 BPI may have been inconvenienced by the suit, but we do not
see how it could have possibly suffered besmirched reputation on account of the single
suit alone. Hence, the award of moral damages should be deleted.

The awards of exemplary damages and attorney’s fees, however, are proper. Exemplary
damages, on the other hand, are imposed by way of example or correction for the public
good, when the party to a contract acts in a wanton, fraudulent, oppressive or malevolent
manner, while attorney’s fees are allowed when exemplary damages are awarded and
when the party to a suit is compelled to incur expenses to protect his interest. 41 The
spouses instituted their complaint against BPI notwithstanding the fact that they were the
ones who failed to pay their obligations. Consequently, BPI was forced to litigate and
defend its interest. For these reasons, BPI is entitled to the awards of exemplary damages
and attorney’s fees.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of
Appeals dated 24 October 2005 and 31 March 2006, respectively, are hereby
AFFIRMED, with the MODIFICATION that the award of moral damages to Bank of the
Philippine Islands is DELETED.
Costs against the petitioners.

SO ORDERED.

PRACTICE OF PROFESSION
1. MAURICIO C. ULEP, petitioner,
vs.
THE LEGAL CLINIC, INC., respondent.

R E SO L U T I O N

REGALADO, J.:

Petitioner prays this Court "to order the respondent to cease and desist from issuing
advertisements similar to or of the same tenor as that of annexes "A" and "B" (of said
petition) and to perpetually prohibit persons or entities from making advertisements
pertaining to the exercise of the law profession other than those allowed by law."

The advertisements complained of by herein petitioner are as follows:

Annex A

SECRET MARRIAGE?
P560.00 for a valid marriage.
Info on DIVORCE. ABSENCE.
ANNULMENT. VISA.

THE Please call: 521-0767 LEGAL 5217232, 5222041 CLINIC, INC. 8:30
am— 6:00 pm 7-Flr. Victoria Bldg., UN Ave., Mla.

Annex B

GUAM DIVORCE.

DON PARKINSON

an Attorney in Guam, is giving FREE BOOKS on Guam Divorce through

The Legal Clinic beginning Monday to Friday during office hours.
 Guam divorce. Annulment of Marriage. Immigration Problems, Visa Ext.
Quota/Non-quota Res. & Special Retiree's Visa. Declaration of Absence.
Remarriage to Filipina Fiancees. Adoption. Investment in the Phil.
US/Foreign Visa for Filipina Spouse/Children. Call Marivic.

THE 7F Victoria Bldg. 429 UN Ave., LEGAL Ermita, Manila nr. US Embassy
CLINIC, INC.1 Tel. 521-7232; 521-7251; 522-2041; 521-0767

It is the submission of petitioner that the advertisements above reproduced are

champterous, unethical, demeaning of the law profession, and destructive of the
confidence of the community in the integrity of the members of the bar and that, as a
member of the legal profession, he is ashamed and offended by the said advertisements,
hence the reliefs sought in his petition as hereinbefore quoted.

In its answer to the petition, respondent admits the fact of publication of said
advertisement at its instance, but claims that it is not engaged in the practice of law but
in the rendering of "legal support services" through paralegals with the use of modern
computers and electronic machines. Respondent further argues that assuming that the
services advertised are legal services, the act of advertising these services should be
allowed supposedly
in the light of the case of John R. Bates and Van O'Steen vs. State Bar of
Arizona,2 reportedly decided by the United States Supreme Court on June 7, 1977.

Considering the critical implications on the legal profession of the issues raised herein,
we required the (1) Integrated Bar of the Philippines (IBP), (2) Philippine Bar Association
(PBA), (3) Philippine Lawyers' Association (PLA), (4) U.P. Womens Lawyers' Circle
(WILOCI), (5) Women Lawyers Association of the Philippines (WLAP), and (6)
Federacion International de Abogadas (FIDA) to submit their respective position papers
on the controversy and, thereafter, their memoranda. 3 The said bar associations readily
responded and extended their valuable services and cooperation of which this Court
takes note with appreciation and gratitude.

The main issues posed for resolution before the Court are whether or not the services
offered by respondent, The Legal Clinic, Inc., as advertised by it constitutes practice of
law and, in either case, whether the same can properly be the subject of the
advertisements herein complained of.

Before proceeding with an in-depth analysis of the merits of this case, we deem it proper
and enlightening to present hereunder excerpts from the respective position papers
adopted by the aforementioned bar associations and the memoranda submitted by them
on the issues involved in this bar matter.

1. Integrated Bar of the Philippines:

xxx xxx xxx

Notwithstanding the subtle manner by which respondent endeavored to
distinguish the two terms, i.e., "legal support services" vis-a-vis "legal
services", common sense would readily dictate that the same are
essentially without substantial distinction. For who could deny that
document search, evidence gathering, assistance to layman in need of
basic institutional services from government or non-government agencies
like birth, marriage, property, or business registration, obtaining documents
like clearance, passports, local or foreign visas, constitutes practice of law?

xxx xxx xxx

The Integrated Bar of the Philippines (IBP) does not wish to make issue with
respondent's foreign citations. Suffice it to state that the IBP has made its
position manifest, to wit, that it strongly opposes the view espoused by
respondent (to the effect that today it is alright to advertise one's legal
services).

The IBP accordingly declares in no uncertain terms its opposition to

respondent's act of establishing a "legal clinic" and of concomitantly
advertising the same through newspaper publications.

The IBP would therefore invoke the administrative supervision of this

Honorable Court to perpetually restrain respondent from undertaking highly
unethical activities in the field of law practice as aforedescribed.4

xxx xxx xxx

A. The use of the name "The Legal Clinic, Inc." gives the impression that
respondent corporation is being operated by lawyers and that it renders
legal services.

While the respondent repeatedly denies that it offers legal services to the
public, the advertisements in question give the impression that respondent
is offering legal services. The Petition in fact simply assumes this to be so,
as earlier mentioned, apparently because this (is) the effect that the
advertisements have on the reading public.

The impression created by the advertisements in question can be traced,

first of all, to the very name being used by respondent — "The Legal Clinic,
Inc." Such a name, it is respectfully submitted connotes the rendering of
legal services for legal problems, just like a medical clinic connotes medical
services for medical problems. More importantly, the term "Legal Clinic"
connotes lawyers, as the term medical clinic connotes doctors.

Furthermore, the respondent's name, as published in the advertisements

subject of the present case, appears with (the) scale(s) of justice, which all
the more reinforces the impression that it is being operated by members of
the bar and that it offers legal services. In addition, the advertisements in
question appear with a picture and name of a person being represented as
a lawyer from Guam, and this practically removes whatever doubt may still
remain as to the nature of the service or services being offered.

It thus becomes irrelevant whether respondent is merely offering "legal

support services" as claimed by it, or whether it offers legal services as any
lawyer actively engaged in law practice does. And it becomes unnecessary
to make a distinction between "legal services" and "legal support services,"
as the respondent would have it. The advertisements in question leave no
room for doubt in the minds of the reading public that legal services are
being offered by lawyers, whether true or not.

B. The advertisements in question are meant to induce the performance of

acts contrary to law, morals, public order and public policy.

It may be conceded that, as the respondent claims, the advertisements in

question are only meant to inform the general public of the services being
offered by it. Said advertisements, however, emphasize to Guam divorce,
and any law student ought to know that under the Family Code, there is only
one instance when a foreign divorce is recognized, and that is:

Article 26. . . .

Where a marriage between a Filipino citizen and a foreigner

is validly celebrated and a divorce is thereafter validly
obtained abroad by the alien spouse capacitating him or her
to remarry, the Filipino spouse shall have capacity to remarry
under Philippine Law.

It must not be forgotten, too, that the Family Code (defines) a marriage as
follows:

Article 1. Marriage is special contract of permanent

union between a man and woman entered into accordance
with law for the establishment of conjugal and family life. It is
the foundation of the family and an inviolable social
institution whose nature, consequences, and incidents are
governed by law and not subject to stipulation, except that
marriage settlements may fix the property relation during the
marriage within the limits provided by this Code.

By simply reading the questioned advertisements, it is obvious that the

message being conveyed is that Filipinos can avoid the legal consequences
of a marriage celebrated in accordance with our law, by simply going to
Guam for a divorce. This is not only misleading, but encourages, or serves
to induce, violation of Philippine law. At the very least, this can be
considered "the dark side" of legal practice, where certain defects in
Philippine laws are exploited for the sake of profit. At worst, this is outright
malpractice.

Rule 1.02. — A lawyer shall not counsel or abet activities

aimed at defiance of the law or at lessening confidence in the
legal system.

In addition, it may also be relevant to point out that advertisements such as

that shown in Annex "A" of the Petition, which contains a cartoon of a motor
vehicle with the words "Just Married" on its bumper and seems to address
those planning a "secret marriage," if not suggesting a "secret marriage,"
makes light of the "special contract of permanent union," the inviolable
social institution," which is how the Family Code describes marriage,
obviously to emphasize its sanctity and inviolability. Worse, this particular
advertisement appears to encourage marriages celebrated in secrecy,
which is suggestive of immoral publication of applications for a marriage
license.

If the article "Rx for Legal Problems" is to be reviewed, it can readily be

concluded that the above impressions one may gather from the
advertisements in question are accurate. The Sharon Cuneta-Gabby
Concepcion example alone confirms what the advertisements suggest.
Here it can be seen that criminal acts are being encouraged or committed
(a bigamous marriage in Hong Kong or Las Vegas) with impunity simply
because the jurisdiction of Philippine courts does not extend to the place
where the crime is committed.

Even if it be assumed, arguendo, (that) the "legal support services"

respondent offers do not constitute legal services as commonly understood,
the advertisements in question give the impression that respondent
corporation is being operated by lawyers and that it offers legal services, as
earlier discussed. Thus, the only logical consequence is that, in the eyes of
an ordinary newspaper reader, members of the bar themselves are
encouraging or inducing the performance of acts which are contrary to law,
morals, good customs and the public good, thereby destroying and
demeaning the integrity of the Bar.

xxx xxx xxx

It is respectfully submitted that respondent should be enjoined from causing

the publication of the advertisements in question, or any other
advertisements similar thereto. It is also submitted that respondent should
be prohibited from further performing or offering some of the services it
presently offers, or, at the very least, from offering such services to the
public in general.

The IBP is aware of the fact that providing computerized legal research,
electronic data gathering, storage and retrieval, standardized legal forms,
investigators for gathering of evidence, and like services will greatly benefit
the legal profession and should not be stifled but instead encouraged.
However, when the conduct of such business by non-members of the Bar
encroaches upon the practice of law, there can be no choice but to prohibit
such business.

Admittedly, many of the services involved in the case at bar can be better
performed by specialists in other fields, such as computer experts, who by
reason of their having devoted time and effort exclusively to such field
cannot fulfill the exacting requirements for admission to the Bar. To prohibit
them from "encroaching" upon the legal profession will deny the profession
of the great benefits and advantages of modern technology. Indeed, a
lawyer using a computer will be doing better than a lawyer using a
typewriter, even if both are (equal) in skill.

Both the Bench and the Bar, however, should be careful not to allow or
tolerate the illegal practice of law in any form, not only for the protection of
members of the Bar but also, and more importantly, for the protection of the
public. Technological development in the profession may be encouraged
without tolerating, but instead ensuring prevention of illegal practice.

There might be nothing objectionable if respondent is allowed to perform all

of its services, but only if such services are made available exclusively to
members of the Bench and Bar. Respondent would then be offering
technical assistance, not legal services. Alternatively, the more difficult task
of carefully distinguishing between which service may be offered to the
public in general and which should be made available exclusively to
members of the Bar may be undertaken. This, however, may require further
proceedings because of the factual considerations involved.

It must be emphasized, however, that some of respondent's services ought

to be prohibited outright, such as acts which tend to suggest or induce
celebration abroad of marriages which are bigamous or otherwise illegal
and void under Philippine law. While respondent may not be prohibited from
simply disseminating information regarding such matters, it must be
required to include, in the information given, a disclaimer that it is not
authorized to practice law, that certain course of action may be illegal under
Philippine law, that it is not authorized or capable of rendering a legal
opinion, that a lawyer should be consulted before deciding on which course
of action to take, and that it cannot recommend any particular lawyer without
subjecting itself to possible sanctions for illegal practice of law.
If respondent is allowed to advertise, advertising should be directed
exclusively at members of the Bar, with a clear and unmistakable disclaimer
that it is not authorized to practice law or perform legal services.

The benefits of being assisted by paralegals cannot be ignored. But nobody

should be allowed to represent himself as a "paralegal" for profit, without
such term being clearly defined by rule or regulation, and without any
adequate and effective means of regulating his activities. Also, law practice
in a corporate form may prove to be advantageous to the legal profession,
but before allowance of such practice may be considered, the corporation's
Article of Incorporation and By-laws must conform to each and every
provision of the Code of Professional Responsibility and the Rules of Court.5

2. Philippine Bar Association:

xxx xxx xxx.

Respondent asserts that it "is not engaged in the practice of law but
engaged in giving legal support services to lawyers and laymen, through
experienced paralegals, with the use of modern computers and electronic
machines" (pars. 2 and 3, Comment). This is absurd. Unquestionably,
respondent's acts of holding out itself to the public under the trade name
"The Legal Clinic, Inc.," and soliciting employment for its enumerated
services fall within the realm of a practice which thus yields itself to the
regulatory powers of the Supreme Court. For respondent to say that it is
merely engaged in paralegal work is to stretch credulity. Respondent's own
commercial advertisement which announces a certain Atty. Don
Parkinson to be handling the fields of law belies its pretense. From all
indications, respondent "The Legal Clinic, Inc." is offering and
rendering legal services through its reserve of lawyers. It has been held that
the practice of law is not limited to the conduct of cases in court, but includes
drawing of deeds, incorporation, rendering opinions, and advising clients as
to their legal right and then take them to an attorney and ask the latter to
look after their case in court See Martin, Legal and Judicial Ethics, 1984 ed.,
p. 39).

It is apt to recall that only natural persons can engage in the practice of law,
and such limitation cannot be evaded by a corporation employing
competent lawyers to practice for it. Obviously, this is the scheme or device
by which respondent "The Legal Clinic, Inc." holds out itself to the public
and solicits employment of its legal services. It is an odious vehicle for
deception, especially so when the public cannot ventilate any grievance
for malpractice against the business conduit. Precisely, the limitation of
practice of law to persons who have been duly admitted as members of the
Bar (Sec. 1, Rule 138, Revised Rules of Court) is to subject the members
to the discipline of the Supreme Court. Although respondent uses
its business name, the persons and the lawyers who act for it are subject to
court discipline. The practice of law is not a profession open to all who wish
to engage in it nor can it be assigned to another (See 5 Am. Jur. 270). It is
a personal right limited to persons who have qualified themselves under the
law. It follows that not only respondent but also all the persons who are
acting for respondent are the persons engaged in unethical law practice. 6

3. Philippine Lawyers' Association:

The Philippine Lawyers' Association's position, in answer to the issues

stated herein, are wit:

1. The Legal Clinic is engaged in the practice of law;

2. Such practice is unauthorized;

3. The advertisements complained of are not only unethical, but also

misleading and patently immoral; and

4. The Honorable Supreme Court has the power to supress and punish the
Legal Clinic and its corporate officers for its unauthorized practice of law
and for its unethical, misleading and immoral advertising.

xxx xxx xxx

Respondent posits that is it not engaged in the practice of law. It claims that
it merely renders "legal support services" to answers, litigants and the
general public as enunciated in the Primary Purpose Clause of its Article(s)
of Incorporation. (See pages 2 to 5 of Respondent's Comment). But its
advertised services, as enumerated above, clearly and convincingly show
that it is indeed engaged in law practice, albeit outside of court.

As advertised, it offers the general public its advisory services on Persons

and Family Relations Law, particularly regarding foreign divorces,
annulment of marriages, secret marriages, absence and adoption;
Immigration Laws, particularly on visa related problems, immigration
problems; the Investments Law of the Philippines and such other related
laws.

Its advertised services unmistakably require the application of the aforesaid

law, the legal principles and procedures related thereto, the legal advices
based thereon and which activities call for legal training, knowledge and
experience.
Applying the test laid down by the Court in the aforecited Agrava Case, the
activities of respondent fall squarely and are embraced in what lawyers and
laymen equally term as "the practice of law."7

4. U.P. Women Lawyers' Circle:

In resolving, the issues before this Honorable Court, paramount

consideration should be given to the protection of the general public from
the danger of being exploited by unqualified persons or entities who may be
engaged in the practice of law.

At present, becoming a lawyer requires one to take a rigorous four-year

course of study on top of a four-year bachelor of arts or sciences course
and then to take and pass the bar examinations. Only then, is a lawyer
qualified to practice law.

While the use of a paralegal is sanctioned in many jurisdiction as an aid to

the administration of justice, there are in those jurisdictions, courses of
study and/or standards which would qualify these paralegals to deal with
the general public as such. While it may now be the opportune time to
establish these courses of study and/or standards, the fact remains that at
present, these do not exist in the Philippines. In the meantime, this
Honorable Court may decide to make measures to protect the general
public from being exploited by those who may be dealing with the general
public in the guise of being "paralegals" without being qualified to do so.

In the same manner, the general public should also be protected from the
dangers which may be brought about by advertising of legal services. While
it appears that lawyers are prohibited under the present Code of
Professional Responsibility from advertising, it appears in the instant case
that legal services are being advertised not by lawyers but by an entity
staffed by "paralegals." Clearly, measures should be taken to protect the
general public from falling prey to those who advertise legal services without
being qualified to offer such services. 8

A perusal of the questioned advertisements of Respondent, however,

seems to give the impression that information regarding validity of
marriages, divorce, annulment of marriage, immigration, visa extensions,
declaration of absence, adoption and foreign investment, which are in
essence, legal matters , will be given to them if they avail of its services.
The Respondent's name — The Legal Clinic, Inc. — does not help matters.
It gives the impression again that Respondent will or can cure the legal
problems brought to them. Assuming that Respondent is, as claimed,
staffed purely by paralegals, it also gives the misleading impression that
there are lawyers involved in The Legal Clinic, Inc., as there are doctors in
any medical clinic, when only "paralegals" are involved in The Legal Clinic,
Inc.

Respondent's allegations are further belied by the very admissions of its

President and majority stockholder, Atty. Nogales, who gave an insight on
the structure and main purpose of Respondent corporation in the
aforementioned "Starweek" article."9

5. Women Lawyer's Association of the Philippines:

Annexes "A" and "B" of the petition are clearly advertisements to solicit
cases for the purpose of gain which, as provided for under the above cited
law, (are) illegal and against the Code of Professional Responsibility of
lawyers in this country.

Annex "A" of the petition is not only illegal in that it is an advertisement to

solicit cases, but it is illegal in that in bold letters it announces that the Legal
Clinic, Inc., could work out/cause the celebration of a secret marriage which
is not only illegal but immoral in this country. While it is advertised that one
has to go to said agency and pay P560 for a valid marriage it is certainly
fooling the public for valid marriages in the Philippines are solemnized only
by officers authorized to do so under the law. And to employ an agency for
said purpose of contracting marriage is not necessary.

No amount of reasoning that in the USA, Canada and other countries the
trend is towards allowing lawyers to advertise their special skills to enable
people to obtain from qualified practitioners legal services for their particular
needs can justify the use of advertisements such as are the subject matter
of the petition, for one (cannot) justify an illegal act even by whatever merit
the illegal act may serve. The law has yet to be amended so that such act
could become justifiable.

We submit further that these advertisements that seem to project that secret
marriages and divorce are possible in this country for a fee, when in fact it
is not so, are highly reprehensible.

It would encourage people to consult this clinic about how they could go
about having a secret marriage here, when it cannot nor should ever be
attempted, and seek advice on divorce, where in this country there is none,
except under the Code of Muslim Personal Laws in the Philippines. It is also
against good morals and is deceitful because it falsely represents to the
public to be able to do that which by our laws cannot be done (and) by our
Code of Morals should not be done.

In the case (of) In re Taguda, 53 Phil. 37, the Supreme Court held that
solicitation for clients by an attorney by circulars of advertisements, is
unprofessional, and offenses of this character justify permanent elimination
from the Bar. 10

6. Federacion Internacional de Abogados:

xxx xxx xxx

1.7 That entities admittedly not engaged in the practice of law, such as
management consultancy firms or travel agencies, whether run by lawyers
or not, perform the services rendered by Respondent does not necessarily
lead to the conclusion that Respondent is not unlawfully practicing law. In
the same vein, however, the fact that the business of respondent (assuming
it can be engaged in independently of the practice of law) involves
knowledge of the law does not necessarily make respondent guilty of
unlawful practice of law.

. . . . Of necessity, no one . . . . acting as a consultant can

render effective service unless he is familiar with such statutes
and regulations. He must be careful not to suggest a course
of conduct which the law forbids. It seems . . . .clear that (the
consultant's) knowledge of the law, and his use of that
knowledge as a factor in determining what measures he shall
recommend, do not constitute the practice of law . . . . It is not
only presumed that all men know the law, but it is a fact that
most men have considerable acquaintance with broad
features of the law . . . . Our knowledge of the law — accurate
or inaccurate — moulds our conduct not only when we are
acting for ourselves, but when we are serving others. Bankers,
liquor dealers and laymen generally possess rather precise
knowledge of the laws touching their particular business or
profession. A good example is the architect, who must be
familiar with zoning, building and fire prevention codes,
factory and tenement house statutes, and who draws plans
and specification in harmony with the law. This is not
practicing law.

But suppose the architect, asked by his client to omit a fire

tower, replies that it is required by the statute. Or the industrial
relations expert cites, in support of some measure that he
recommends, a decision of the National Labor Relations
Board. Are they practicing law? In my opinion, they are not,
provided no separate fee is charged for the legal advice or
information, and the legal question is subordinate and
incidental to a major non-legal problem.

It is largely a matter of degree and of custom.

If it were usual for one intending to erect a building on his land
to engage a lawyer to advise him and the architect in respect
to the building code and the like, then an architect who
performed this function would probably be considered to be
trespassing on territory reserved for licensed attorneys.
Likewise, if the industrial relations field had been pre-empted
by lawyers, or custom placed a lawyer always at the elbow of
the lay personnel man. But this is not the case. The most
important body of the industrial relations experts are the
officers and business agents of the labor unions and few of
them are lawyers. Among the larger corporate employers, it
has been the practice for some years to delegate special
responsibility in employee matters to a management group
chosen for their practical knowledge and skill in such matter,
and without regard to legal thinking or lack of it. More recently,
consultants like the defendants have the same service that
the larger employers get from their own specialized staff.

The handling of industrial relations is growing into a

recognized profession for which appropriate courses are
offered by our leading universities. The court should be very
cautious about declaring [that] a widespread, well-established
method of conducting business is unlawful, or that the
considerable class of men who customarily perform a certain
function have no right to do so, or that the technical education
given by our schools cannot be used by the graduates in their
business.

In determining whether a man is practicing law, we should

consider his work for any particular client or customer, as a
whole. I can imagine defendant being engaged primarily to
advise as to the law defining his client's obligations to his
employees, to guide his client's obligations to his employees,
to guide his client along the path charted by law. This, of
course, would be the practice of the law. But such is not the
fact in the case before me. Defendant's primarily efforts are
along economic and psychological lines. The law only
provides the frame within which he must work, just as the
zoning code limits the kind of building the limits the kind of
building the architect may plan. The incidental legal advice or
information defendant may give, does not transform his
activities into the practice of law. Let me add that if, even as a
minor feature of his work, he performed services which are
customarily reserved to members of the bar, he would be
practicing law. For instance, if as part of a welfare program,
he drew employees' wills.
 Another branch of defendant's work is the representations of
the employer in the adjustment of grievances and in collective
bargaining, with or without a mediator. This is not per se the
practice of law. Anyone may use an agent for negotiations and
may select an agent particularly skilled in the subject under
discussion, and the person appointed is free to accept the
employment whether or not he is a member of the bar. Here,
however, there may be an exception where the business turns
on a question of law. Most real estate sales are negotiated by
brokers who are not lawyers. But if the value of the land
depends on a disputed right-of-way and the principal role of
the negotiator is to assess the probable outcome of the
dispute and persuade the opposite party to the same opinion,
then it may be that only a lawyer can accept the assignment.
Or if a controversy between an employer and his men grows
from differing interpretations of a contract, or of a statute, it is
quite likely that defendant should not handle it. But I need not
reach a definite conclusion here, since the situation is not
presented by the proofs.

Defendant also appears to represent the employer before

administrative agencies of the federal government, especially
before trial examiners of the National Labor Relations Board.
An agency of the federal government, acting by virtue of an
authority granted by the Congress, may regulate the
representation of parties before such agency. The State of
New Jersey is without power to interfere with such
determination or to forbid representation before the agency by
one whom the agency admits. The rules of the National Labor
Relations Board give to a party the right to appear in person,
or by counsel, or by other representative. Rules and
Regulations, September 11th, 1946, S. 203.31. 'Counsel' here
means a licensed attorney, and ther representative' one not a
lawyer. In this phase of his work, defendant may lawfully do
whatever the Labor Board allows, even arguing questions
purely legal. (Auerbacher v. Wood, 53 A. 2d 800, cited in
Statsky, Introduction to Paralegalism [1974], at pp. 154-156.).

1.8 From the foregoing, it can be said that a person engaged in a lawful
calling (which may involve knowledge of the law) is not engaged in the
practice of law provided that:

(a) The legal question is subordinate and incidental to a major non-legal

problem;.
(b) The services performed are not customarily reserved to members of the
bar; .

(c) No separate fee is charged for the legal advice or information.

All these must be considered in relation to the work for any particular client
as a whole.

1.9. If the person involved is both lawyer and non-lawyer, the Code of
Professional Responsibility succintly states the rule of conduct:

Rule 15.08 — A lawyer who is engaged in another profession or occupation

concurrently with the practice of law shall make clear to his client whether
he is acting as a lawyer or in another capacity.

1.10. In the present case. the Legal Clinic appears to render wedding
services (See Annex "A" Petition). Services on routine, straightforward
marriages, like securing a marriage license, and making arrangements with
a priest or a judge, may not constitute practice of law. However, if the
problem is as complicated as that described in "Rx for Legal Problems" on
the Sharon Cuneta-Gabby Concepcion-Richard Gomez case, then what
may be involved is actually the practice of law. If a non-lawyer, such as the
Legal Clinic, renders such services then it is engaged in the unauthorized
practice of law.

1.11. The Legal Clinic also appears to give information on divorce, absence,
annulment of marriage and visas (See Annexes "A" and "B" Petition). Purely
giving informational materials may not constitute of law. The business is
similar to that of a bookstore where the customer buys materials on the
subject and determines on the subject and determines by himself what
courses of action to take.

It is not entirely improbable, however, that aside from purely giving

information, the Legal Clinic's paralegals may apply the law to the particular
problem of the client, and give legal advice. Such would constitute
unauthorized practice of law.

It cannot be claimed that the publication of a legal text which

publication of a legal text which purports to say what the law
is amount to legal practice. And the mere fact that the
principles or rules stated in the text may be accepted by a
particular reader as a solution to his problem does not affect
this. . . . . Apparently it is urged that the conjoining of these
two, that is, the text and the forms, with advice as to how the
forms should be filled out, constitutes the unlawful practice of
law. But that is the situation with many approved and accepted
 texts. Dacey's book is sold to the public at large. There is no
personal contact or relationship with a particular individual.
Nor does there exist that relation of confidence and trust so
necessary to the status of attorney and client. THIS IS THE
ESSENTIAL OF LEGAL PRACTICE — THE
REPRESENTATION AND ADVISING OF A PARTICULAR
PERSON IN A PARTICULAR SITUATION. At most the book
assumes to offer general advice on common problems, and
does not purport to give personal advice on a specific problem
peculiar to a designated or readily identified person. Similarly
the defendant's publication does not purport to give personal
advice on a specific problem peculiar to a designated or
readily identified person in a particular situation — in their
publication and sale of the kits, such publication and sale did
not constitutes the unlawful practice of law . . . . There being
no legal impediment under the statute to the sale of the kit,
there was no proper basis for the injunction against defendant
maintaining an office for the purpose of selling to persons
seeking a divorce, separation, annulment or separation
agreement any printed material or writings relating to
matrimonial law or the prohibition in the memorandum of
modification of the judgment against defendant having an
interest in any publishing house publishing his manuscript on
divorce and against his having any personal contact with any
prospective purchaser. The record does fully support,
however, the finding that for the change of $75 or $100 for the
kit, the defendant gave legal advice in the course of personal
contacts concerning particular problems which might arise in
the preparation and presentation of the purchaser's asserted
matrimonial cause of action or pursuit of other legal remedies
and assistance in the preparation of necessary documents
(The injunction therefore sought to) enjoin conduct
constituting the practice of law, particularly with reference to
the giving of advice and counsel by the defendant relating to
specific problems of particular individuals in connection with a
divorce, separation, annulment of separation agreement
sought and should be affirmed. (State v. Winder, 348, NYS
2D 270 [1973], cited in Statsky, supra at p. 101.).

1.12. Respondent, of course, states that its services are "strictly non-
diagnostic, non-advisory. "It is not controverted, however, that if the
services "involve giving legal advice or counselling," such would constitute
practice of law (Comment, par. 6.2). It is in this light that FIDA submits that
a factual inquiry may be necessary for the judicious disposition of this case.

xxx xxx xxx

 2.10. Annex "A" may be ethically objectionable in that it can give the
impression (or perpetuate the wrong notion) that there is a secret marriage.
With all the solemnities, formalities and other requisites of marriages (See
Articles 2, et seq., Family Code), no Philippine marriage can be secret.

2.11. Annex "B" may likewise be ethically objectionable. The second

paragraph thereof (which is not necessarily related to the first paragraph)
fails to state the limitation that only "paralegal services?" or "legal support
services", and not legal services, are available." 11

A prefatory discussion on the meaning of the phrase "practice of law" becomes exigent
for the proper determination of the issues raised by the petition at bar. On this score, we
note that the clause "practice of law" has long been the subject of judicial construction
and interpretation. The courts have laid down general principles and doctrines explaining
the meaning and scope of the term, some of which we now take into account.

Practice of law means any activity, in or out of court, which requires the application of law,
legal procedures, knowledge, training and experience. To engage in the practice of law
is to perform those acts which are characteristic of the profession. Generally, to practice
law is to give advice or render any kind of service that involves legal knowledge or skill. 12

The practice of law is not limited to the conduct of cases in court. It includes legal advice
and counsel, and the preparation of legal instruments and contract by which legal rights
are secured, although such matter may or may not be pending in a court. 13

In the practice of his profession, a licensed attorney at law generally engages in three
principal types of professional activity: legal advice and instructions to clients to inform
them of their rights and obligations, preparation for clients of documents requiring
knowledge of legal principles not possessed by ordinary layman, and appearance for
clients before public tribunals which possess power and authority to determine rights of
life, liberty, and property according to law, in order to assist in proper interpretation and
enforcement of law. 14

When a person participates in the a trial and advertises himself as a lawyer, he is in the
practice of law. 15 One who confers with clients, advises them as to their legal rights and
then takes the business to an attorney and asks the latter to look after the case in court,
is also practicing law. 16 Giving advice for compensation regarding the legal status and
rights of another and the conduct with respect thereto constitutes a practice of law. 17 One
who renders an opinion as to the proper interpretation of a statute, and receives pay for
it, is, to that extent, practicing law. 18

In the recent case of Cayetano vs. Monsod, 19 after citing the doctrines in several cases,
we laid down the test to determine whether certain acts constitute "practice of law," thus:

Black defines "practice of law" as:

 The rendition of services requiring the knowledge and the application of
legal principles and technique to serve the interest of another with his
consent. It is not limited to appearing in court, or advising and assisting in
the conduct of litigation, but embraces the preparation of pleadings, and
other papers incident to actions and special proceedings, conveyancing, the
preparation of legal instruments of all kinds, and the giving of all legal advice
to clients. It embraces all advice to clients and all actions taken for them in
matters connected with the law.

The practice of law is not limited to the conduct of cases on court.(Land Title Abstract and
Trust Co. v. Dworken , 129 Ohio St. 23, 193N. E. 650). A person is also considered to be
in the practice of law when he:

. . . . for valuable consideration engages in the business of advising person,

firms, associations or corporations as to their right under the law, or appears
in a representative capacity as an advocate in proceedings, pending or
prospective, before any court, commissioner, referee, board, body,
committee, or commission constituted by law or authorized to settle
controversies and there, in such representative capacity, performs any act
or acts for the purpose of obtaining or defending the rights of their clients
under the law. Otherwise stated, one who, in a representative capacity,
engages in the business of advising clients as to their rights under the law,
or while so engaged performs any act or acts either in court or outside of
court for that purpose, is engaged in the practice of law. (State ex. rel.
Mckittrick v. C.S. Dudley and Co., 102 S. W. 2d 895, 340 Mo. 852).

This Court, in the case of Philippines Lawyers Association v. Agrava (105 Phil. 173, 176-
177),stated:

The practice of law is not limited to the conduct of cases or litigation in court;
it embraces the preparation of pleadings and other papers incident to
actions and special proceedings, the management of such actions and
proceedings on behalf of clients before judges and courts, and in addition,
conveying. In general, all advice to clients, and all action taken for them in
matters connected with the law incorporation services, assessment and
condemnation services contemplating an appearance before a judicial
body, the foreclosure of a mortgage, enforcement of a creditor's claim in
bankruptcy and insolvency proceedings, and conducting proceedings in
attachment, and in matters or estate and guardianship have been held to
constitute law practice, as do the preparation and drafting of legal
instruments, where the work done involves the determination by the trained
legal mind of the legal effect of facts and conditions. (5 Am. Jr. p. 262, 263).

Practice of law under modern conditions consists in no small part of work

performed outside of any court and having no immediate relation to
proceedings in court. It embraces conveyancing, the giving of legal advice
 on a large variety of subjects and the preparation and execution of legal
instruments covering an extensive field of business and trust relations and
other affairs. Although these transactions may have no direct connection
with court proceedings, they are always subject to become involved in
litigation. They require in many aspects a high degree of legal skill, a wide
experience with men and affairs, and great capacity for adaptation to difficult
and complex situations. These customary functions of an attorney or
counselor at law bear an intimate relation to the administration of justice by
the courts. No valid distinction, so far as concerns the question set forth in
the order, can be drawn between that part of the work of the lawyer which
involves appearance in court and that part which involves advice and
drafting of instruments in his office. It is of importance to the welfare of the
public that these manifold customary functions be performed by persons
possessed of adequate learning and skill, of sound moral character, and
acting at all times under the heavy trust obligations to clients which rests
upon all attorneys. (Moran, Comments on the Rules o Court, Vol. 3 [1973
ed.], pp. 665-666, citing In Re Opinion of the Justices [Mass], 194 N. E. 313,
quoted in Rhode Is. Bar Assoc. v. Automobile Service Assoc. [R.I.] 197 A.
139, 144).

The practice of law, therefore, covers a wide range of activities in and out of court.
Applying the aforementioned criteria to the case at bar, we agree with the perceptive
findings and observations of the aforestated bar associations that the activities of
respondent, as advertised, constitute "practice of law."

The contention of respondent that it merely offers legal support services can neither be
seriously considered nor sustained. Said proposition is belied by respondent's own
description of the services it has been offering, to wit:

Legal support services basically consists of giving ready information by

trained paralegals to laymen and lawyers, which are strictly non-diagnostic,
non-advisory, through the extensive use of computers and modern
information technology in the gathering, processing, storage, transmission
and reproduction of information and communication, such as computerized
legal research; encoding and reproduction of documents and pleadings
prepared by laymen or lawyers; document search; evidence gathering;
locating parties or witnesses to a case; fact finding investigations; and
assistance to laymen in need of basic institutional services from government
or non-government agencies, like birth, marriage, property, or business
registrations; educational or employment records or certifications, obtaining
documentation like clearances, passports, local or foreign visas; giving
information about laws of other countries that they may find useful, like
foreign divorce, marriage or adoption laws that they can avail of preparatory
to emigration to the foreign country, and other matters that do not involve
representation of clients in court; designing and installing computer
systems, programs, or software for the efficient management of law offices,
 corporate legal departments, courts and other entities engaged in
dispensing or administering legal services. 20

While some of the services being offered by respondent corporation merely involve
mechanical and technical knowhow, such as the installation of computer systems and
programs for the efficient management of law offices, or the computerization of research
aids and materials, these will not suffice to justify an exception to the general rule.

What is palpably clear is that respondent corporation gives out legal information to laymen
and lawyers. Its contention that such function is non-advisory and non-diagnostic is more
apparent than real. In providing information, for example, about foreign laws on marriage,
divorce and adoption, it strains the credulity of this Court that all the respondent
corporation will simply do is look for the law, furnish a copy thereof to the client, and stop
there as if it were merely a bookstore. With its attorneys and so called paralegals, it will
necessarily have to explain to the client the intricacies of the law and advise him or her
on the proper course of action to be taken as may be provided for by said law. That is
what its advertisements represent and for the which services it will consequently charge
and be paid. That activity falls squarely within the jurisprudential definition of "practice of
law." Such a conclusion will not be altered by the fact that respondent corporation does
not represent clients in court since law practice, as the weight of authority holds, is not
limited merely giving legal advice, contract drafting and so forth.

The aforesaid conclusion is further strengthened by an article published in the January

13, 1991 issue of the Starweek/The Sunday Magazine of the Philippines Star, entitled
"Rx for Legal Problems," where an insight into the structure, main purpose and operations
of respondent corporation was given by its own "proprietor," Atty. Rogelio P. Nogales:

This is the kind of business that is transacted everyday at The Legal Clinic,
with offices on the seventh floor of the Victoria Building along U. N. Avenue
in Manila. No matter what the client's problem, and even if it is as
complicated as the Cuneta-Concepcion domestic situation, Atty. Nogales
and his staff of lawyers, who, like doctors are "specialists" in various fields
can take care of it. The Legal Clinic, Inc. has specialists in taxation and
criminal law, medico-legal problems, labor, litigation, and family law. These
specialist are backed up by a battery of paralegals, counsellors and
attorneys.

Atty. Nogales set up The Legal Clinic in 1984. Inspired by the trend in the
medical field toward specialization, it caters to clients who cannot afford the
services of the big law firms.

The Legal Clinic has regular and walk-in clients. "when they come, we start
by analyzing the problem. That's what doctors do also. They ask you how
you contracted what's bothering you, they take your temperature, they
observe you for the symptoms and so on. That's how we operate, too. And
 once the problem has been categorized, then it's referred to one of our
specialists.

There are cases which do not, in medical terms, require surgery or follow-
up treatment. These The Legal Clinic disposes of in a matter of minutes.
"Things like preparing a simple deed of sale or an affidavit of loss can be
taken care of by our staff or, if this were a hospital the residents or the
interns. We can take care of these matters on a while you wait basis. Again,
kung baga sa hospital, out-patient, hindi kailangang ma-confine. It's just like
a common cold or diarrhea," explains Atty. Nogales.

Those cases which requires more extensive "treatment" are dealt with
accordingly. "If you had a rich relative who died and named you her sole
heir, and you stand to inherit millions of pesos of property, we would refer
you to a specialist in taxation. There would be real estate taxes and arrears
which would need to be put in order, and your relative is even taxed by the
state for the right to transfer her property, and only a specialist in taxation
would be properly trained to deal with the problem. Now, if there were other
heirs contesting your rich relatives will, then you would need a litigator, who
knows how to arrange the problem for presentation in court, and gather
evidence to support the case. 21

That fact that the corporation employs paralegals to carry out its services is not controlling.
What is important is that it is engaged in the practice of law by virtue of the nature of the
services it renders which thereby brings it within the ambit of the statutory prohibitions
against the advertisements which it has caused to be published and are now assailed in
this proceeding.

Further, as correctly and appropriately pointed out by the U.P. WILOCI, said reported
facts sufficiently establish that the main purpose of respondent is to serve as a one-stop-
shop of sorts for various legal problems wherein a client may avail of legal services from
simple documentation to complex litigation and corporate undertakings. Most of these
services are undoubtedly beyond the domain of paralegals, but rather, are exclusive
functions of lawyers engaged in the practice of law. 22

It should be noted that in our jurisdiction the services being offered by private respondent
which constitute practice of law cannot be performed by paralegals. Only a person duly
admitted as a member of the bar, or hereafter admitted as such in accordance with the
provisions of the Rules of Court, and who is in good and regular standing, is entitled to
practice law. 23

Public policy requires that the practice of law be limited to those individuals found duly
qualified in education and character. The permissive right conferred on the lawyers is an
individual and limited privilege subject to withdrawal if he fails to maintain proper
standards of moral and professional conduct. The purpose is to protect the public, the
court, the client and the bar from the incompetence or dishonesty of those unlicensed to
practice law and not subject to the disciplinary control of the court. 24

The same rule is observed in the american jurisdiction wherefrom respondent would wish
to draw support for his thesis. The doctrines there also stress that the practice of law is
limited to those who meet the requirements for, and have been admitted to, the bar, and
various statutes or rules specifically so provide. 25 The practice of law is not a lawful
business except for members of the bar who have complied with all the conditions
required by statute and the rules of court. Only those persons are allowed to practice law
who, by reason of attainments previously acquired through education and study, have
been recognized by the courts as possessing profound knowledge of legal science
entitling them to advise, counsel with, protect, or defend the rights claims, or liabilities of
their clients, with respect to the construction, interpretation, operation and effect of
law. 26 The justification for excluding from the practice of law those not admitted to the bar
is found, not in the protection of the bar from competition, but in the protection of the
public from being advised and represented in legal matters by incompetent and unreliable
persons over whom the judicial department can exercise little control.27

We have to necessarily and definitely reject respondent's position that the concept in the
United States of paralegals as an occupation separate from the law profession be
adopted in this jurisdiction. Whatever may be its merits, respondent cannot but be aware
that this should first be a matter for judicial rules or legislative action, and not of unilateral
adoption as it has done.

Paralegals in the United States are trained professionals. As admitted by respondent,

there are schools and universities there which offer studies and degrees in paralegal
education, while there are none in the Philippines. 28As the concept of the "paralegals" or
"legal assistant" evolved in the United States, standards and guidelines also evolved to
protect the general public. One of the major standards or guidelines was developed by
the American Bar Association which set up Guidelines for the Approval of Legal Assistant
Education Programs (1973). Legislation has even been proposed to certify legal
assistants. There are also associations of paralegals in the United States with their own
code of professional ethics, such as the National Association of Legal Assistants, Inc. and
the American Paralegal Association. 29

In the Philippines, we still have a restricted concept and limited acceptance of what may
be considered as paralegal service. As pointed out by FIDA, some persons not duly
licensed to practice law are or have been allowed limited representation in behalf of
another or to render legal services, but such allowable services are limited in scope and
extent by the law, rules or regulations granting permission therefor. 30

Accordingly, we have adopted the American judicial policy that, in the absence of
constitutional or statutory authority, a person who has not been admitted as an attorney
cannot practice law for the proper administration of justice cannot be hindered by the
unwarranted intrusion of an unauthorized and unskilled person into the practice of
law. 31 That policy should continue to be one of encouraging persons who are unsure of
their legal rights and remedies to seek legal assistance only from persons licensed to
practice law in the state. 32

Anent the issue on the validity of the questioned advertisements, the Code of Professional
Responsibility provides that a lawyer in making known his legal services shall use only
true, honest, fair, dignified and objective information or statement of facts. 33 He is not
supposed to use or permit the use of any false, fraudulent, misleading, deceptive,
undignified, self-laudatory or unfair statement or claim regarding his qualifications or legal
services. 34 Nor shall he pay or give something of value to representatives of the mass
media in anticipation of, or in return for, publicity to attract legal business. 35 Prior to the
adoption of the code of Professional Responsibility, the Canons of Professional Ethics
had also warned that lawyers should not resort to indirect advertisements for professional
employment, such as furnishing or inspiring newspaper comments, or procuring his
photograph to be published in connection with causes in which the lawyer has been or is
engaged or concerning the manner of their conduct, the magnitude of the interest
involved, the importance of the lawyer's position, and all other like self-laudation. 36

The standards of the legal profession condemn the lawyer's advertisement of his talents.
A lawyer cannot, without violating the ethics of his profession. advertise his talents or skill
as in a manner similar to a merchant advertising his goods. 37 The prescription against
advertising of legal services or solicitation of legal business rests on the fundamental
postulate that the that the practice of law is a profession. Thus, in the case of The Director
of Religious Affairs. vs. Estanislao R. Bayot 38 an advertisement, similar to those of
respondent which are involved in the present proceeding, 39 was held to constitute
improper advertising or solicitation.

The pertinent part of the decision therein reads:

It is undeniable that the advertisement in question was a flagrant violation

by the respondent of the ethics of his profession, it being a brazen
solicitation of business from the public. Section 25 of Rule 127 expressly
provides among other things that "the practice of soliciting cases at law for
the purpose of gain, either personally or thru paid agents or brokers,
constitutes malpractice." It is highly unethical for an attorney to advertise his
talents or skill as a merchant advertises his wares. Law is a profession and
not a trade. The lawyer degrades himself and his profession who stoops to
and adopts the practices of mercantilism by advertising his services or
offering them to the public. As a member of the bar, he defiles the temple
of justice with mercenary activities as the money-changers of old defiled the
temple of Jehovah. "The most worthy and effective advertisement possible,
even for a young lawyer, . . . . is the establishment of a well-merited
reputation for professional capacity and fidelity to trust. This cannot be
forced but must be the outcome of character and conduct." (Canon 27,
Code of Ethics.).
We repeat, the canon of the profession tell us that the best advertising possible for a
lawyer is a well-merited reputation for professional capacity and fidelity to trust, which
must be earned as the outcome of character and conduct. Good and efficient service to
a client as well as to the community has a way of publicizing itself and catching public
attention. That publicity is a normal by-product of effective service which is right and
proper. A good and reputable lawyer needs no artificial stimulus to generate it and to
magnify his success. He easily sees the difference between a normal by-product of able
service and the unwholesome result of propaganda. 40

Of course, not all types of advertising or solicitation are prohibited. The canons of the
profession enumerate exceptions to the rule against advertising or solicitation and define
the extent to which they may be undertaken. The exceptions are of two broad categories,
namely, those which are expressly allowed and those which are necessarily implied from
the restrictions. 41

The first of such exceptions is the publication in reputable law lists, in a manner consistent
with the standards of conduct imposed by the canons, of brief biographical and
informative data. "Such data must not be misleading and may include only a statement of
the lawyer's name and the names of his professional associates; addresses, telephone
numbers, cable addresses; branches of law practiced; date and place of birth and
admission to the bar; schools attended with dates of graduation, degrees and other
educational distinction; public or quasi-public offices; posts of honor; legal authorships;
legal teaching positions; membership and offices in bar associations and committees
thereof, in legal and scientific societies and legal fraternities; the fact of listings in other
reputable law lists; the names and addresses of references; and, with their written
consent, the names of clients regularly represented." 42

The law list must be a reputable law list published primarily for that purpose; it cannot be
a mere supplemental feature of a paper, magazine, trade journal or periodical which is
published principally for other purposes. For that reason, a lawyer may not properly
publish his brief biographical and informative data in a daily paper, magazine, trade
journal or society program. Nor may a lawyer permit his name to be published in a law list
the conduct, management or contents of which are calculated or likely to deceive or injure
the public or the bar, or to lower the dignity or standing of the profession. 43

The use of an ordinary simple professional card is also permitted. The card may contain
only a statement of his name, the name of the law firm which he is connected with,
address, telephone number and special branch of law practiced. The publication of a
simple announcement of the opening of a law firm or of changes in the partnership,
associates, firm name or office address, being for the convenience of the profession, is
not objectionable. He may likewise have his name listed in a telephone directory but not
under a designation of special branch of law. 44

Verily, taking into consideration the nature and contents of the advertisements for which
respondent is being taken to task, which even includes a quotation of the fees charged
by said respondent corporation for services rendered, we find and so hold that the same
definitely do not and conclusively cannot fall under any of the above-mentioned
exceptions.

The ruling in the case of Bates, et al. vs. State Bar of Arizona, 45 which is repeatedly
invoked and constitutes the justification relied upon by respondent, is obviously not
applicable to the case at bar. Foremost is the fact that the disciplinary rule involved in
said case explicitly allows a lawyer, as an exception to the prohibition against
advertisements by lawyers, to publish a statement of legal fees for an initial consultation
or the availability upon request of a written schedule of fees or an estimate of the fee to
be charged for the specific services. No such exception is provided for, expressly or
impliedly, whether in our former Canons of Professional Ethics or the present Code of
Professional Responsibility. Besides, even the disciplinary rule in the Bates case contains
a proviso that the exceptions stated therein are "not applicable in any state unless and
until it is implemented by such authority in that state." 46 This goes to show that an
exception to the general rule, such as that being invoked by herein respondent, can be
made only if and when the canons expressly provide for such an exception. Otherwise,
the prohibition stands, as in the case at bar.

It bears mention that in a survey conducted by the American Bar Association after the
decision in Bates, on the attitude of the public about lawyers after viewing television
commercials, it was found that public opinion dropped significantly 47 with respect to these
characteristics of lawyers:

Trustworthy from 71% to 14%

Professional from 71% to 14%
Honest from 65% to 14%
Dignified from 45% to 14%

Secondly, it is our firm belief that with the present situation of our legal and judicial
systems, to allow the publication of advertisements of the kind used by respondent would
only serve to aggravate what is already a deteriorating public opinion of the legal
profession whose integrity has consistently been under attack lately by media and the
community in general. At this point in time, it is of utmost importance in the face of such
negative, even if unfair, criticisms at times, to adopt and maintain that level of professional
conduct which is beyond reproach, and to exert all efforts to regain the high esteem
formerly accorded to the legal profession.

In sum, it is undoubtedly a misbehavior on the part of the lawyer, subject to disciplinary

action, to advertise his services except in allowable instances 48 or to aid a layman in the
unauthorized practice of law. 49 Considering that Atty. Rogelio P. Nogales, who is the
prime incorporator, major stockholder and proprietor of The Legal Clinic, Inc. is a member
of the Philippine Bar, he is hereby reprimanded, with a warning that a repetition of the
same or similar acts which are involved in this proceeding will be dealt with more severely.

While we deem it necessary that the question as to the legality or illegality of the purpose/s
for which the Legal Clinic, Inc. was created should be passed upon and determined, we
are constrained to refrain from lapsing into an obiter on that aspect since it is clearly not
within the adjudicative parameters of the present proceeding which is merely
administrative in nature. It is, of course, imperative that this matter be promptly
determined, albeit in a different proceeding and forum, since, under the present state of
our law and jurisprudence, a corporation cannot be organized for or engage in the practice
of law in this country. This interdiction, just like the rule against unethical advertising,
cannot be subverted by employing some so-called paralegals supposedly rendering the
alleged support services.

The remedy for the apparent breach of this prohibition by respondent is the concern and
province of the Solicitor General who can institute the corresponding quo
warranto action, 50 after due ascertainment of the factual background and basis for the
grant of respondent's corporate charter, in light of the putative misuse thereof. That spin-
off from the instant bar matter is referred to the Solicitor General for such action as may
be necessary under the circumstances.

ACCORDINGLY, the Court Resolved to RESTRAIN and ENJOIN herein respondent, The
Legal Clinic, Inc., from issuing or causing the publication or dissemination of any
advertisement in any form which is of the same or similar tenor and purpose as Annexes
"A" and "B" of this petition, and from conducting, directly or indirectly, any activity,
operation or transaction proscribed by law or the Code of Professional Ethics as indicated
herein. Let copies of this resolution be furnished the Integrated Bar of the Philippines, the
Office of the Bar Confidant and the Office of the Solicitor General for appropriate action
in accordance herewith.

2. SAMAHAN NG OPTOMETRISTS SA PILIPINAS, ILOCOS SUR-ABRA

CHAPTER, EDUARDO MA. GUIRNALDA, DANTE G. PACQUING and
OCTAVIO A. DE PERALTA, petitioners, vs. ACEBEDO INTERNATIONAL
CORPORATION and the HON. COURT OF APPEALS, respondents.

DECISION
HERMOSISIMA, JR., J.:

Before us is a petition seeking the review and ultimately the reversal of the
decision[1] of the Court of Appeals[2] which rejected what petitioners vehemently claim to
be a prohibition, under Republic Act (RA.) No. 1998, popularly known as the old
Optometry Law, against the employment by corporations, usually optical shops and
eyeware stores, of optometrists, such practice, according to petitioners, being an indirect
violation of the rule against corporations exercising professions reserved only to natural
persons. Petitioners understandably did not welcome the herein assailed decision
because they have, earlier, obtained a decision [3] favorable to them from the Regional
Trial Court of Candon, Ilocos Sur, Branch 23, presided over by Judge Gabino Balbin, Jr.
The said judge had, in the main, ruled that the operations of private respondent Acebedo
International Corporation involves the practice of optometry which is precluded by RA.
No. 1998.
The undisputed facts of the case, as found by the respondent Court of Appeals and
quoted by petitioners, are as follows:

"On February 22, 1991, x x x [private respondent] filed an application with the Office of the Mayor
of Candon, Ilocos Sur, for the issuance of a permit for the opening and operation of a branch of
the Acebedo Optical in that municipality.

The application was opposed by the x x x [petitioner] Samahan ng Optometrists sa Pilipinas (SOP)
which contended that x x x [private respondent] is a juridical entity not qualified to practice
optometry.

On March 6, 1991, x x x [private respondent] filed its answer, arguing it is not the corporation, but
the optometrists employed by it, who would be practicing optometry.

On April 17, 1991, the Mayor of Candon created a committee, composed of "public respondents
Eduardo Ma. Guirnalda, Dante G. Pacquing and Octavio de Peralta, to pass on [private
respondent's] application.

On September 26, 1991 the committee rendered a decision denying [private respondent's]
application for a mayor's permit to operate a branch in Candon and ordering x x x [private
respondent] to close its establishment within fifteen (15) days from receipt of the decision.
Acebedo moved for a reconsideration but its motion was denied on November 14, 1991. x x x
[Private respondent] was ordered to close its establishment within ten (10) days from receipt of
the order.

On December 9, 1991, x x x [private respondent] filed with the Court of Appeals a petition
for certiorari (CA G.R SP No. 26782), questioning the decision of respondent committee. Its
petition, however, was referred to the court a quo, which on December 16, 1992, dismissed
Acebedo's petition. Hence, x x x [the] appeal [to the respondent Court of Appeals]."[4]

The singular issue, admittedly extensively debated and intensely contested not only
by the members of the optometry profession and the players in the business of selling
optical ware, supplies, substances and instruments but also by the members of the
Senate during the deliberations respecting R A. 8050, otherwise known as Revised New
Optometry Law, is this: May corporations, engaged in the business of selling optical
wares, supplies, substances and instruments which, as an incident to and in the ordinary
course of the business hire optometrists, be said to be practicing the profession of
optometry which, by legal mandate, may only be engaged in by natural persons
possessed of specific legal qualifications?
The trial court resolved this issue in the affirmative. In so finding, it explained, thus:
"The denial of the application of Acebedo rested on the grounds that it is operating an optical shop
and it is practicing optometry where its charter does not grant to it authority to practice the former.
Acebedo submits that the findings of the Commission have no basis both in law and in fact. It
argues that the hiring of optometrists by the petitioner is merely incidental to its main business
which is the sale of optical products. Acebedo contends further that its employees have a
personality separate and distinct from that of Acebedo which is a juridical entity, and it cannot
therefore be considered as engaged in optometry.

The Court disagrees.

Quoted for the enlightenment of both parties is a portion of the contested Decision, to wit:

'The visit revealed the following:

1. The establishment was manned by three personnel: Dr. Salvador Pagarigan, optometrist; Miss
Lilibeth Begonia, receptionist; and a laboratory technician, who refused to give his name;

2. There were several shelves containing eyeglasses;

3. There were benches where, according to Miss Begonia, would-be clients can sit while waiting
for their turn to be examined;

4. An examination room complete with an optical chair and optical charts; and,

5. An optical laboratory.'

The Court is very much aware of the existence of several shops owned by Acebedo. They are
operating up to the present. But the Court has to rely in this case on the findings of the Commission
created by the Mayor of Candon in the absence of proof that the same was arrived at hastily and
without regard for the rights of the parties. In fact, the contested Decision was issued only after an
ocular inspection was conducted and the parties have submitted their respective memorandum.

The findings of the Commission reveal that the operation of Acebedo's local shop involves the
practice of optometry. If indeed Acebedo is engaged in the sale of optical products, the absence of
sales clerks more than demonstrate its real business. In the contested Decision, the floor plan of
the shop was even commented on as that of an optical shop. As noted by the members of the
Commission, there was also a banner in front of the shop prominently display advertising free
consultations (libreng consulta sa mata). These facts, taken together, denote that Acebedo was
operating in Candon an optical shop contrary to law.

While it is also true that a corporation has a personality separate and distinct from that of its
personnel, the veil of corporate fiction cannot be used for the purpose of some illegal activity. The
veil of corporate fiction can be pierced, as in this case, and the acts of the personnel of the
corporation will be considered as those of the corporation. Acebedo then is engaged in the practice
of optometry."[5]
 Disagreeing with the foregoing decision of the trial court, private respondent appealed
therefrom and asked the respondent Court of Appeals to reverse the same on the ground
that the court a quo erred in concluding that private respondent was engaged in the
practice of optometry by operating an optical shop.
Respondent appellate court found that private respondent's contentions merited the
reversal of the court a quo's decision. The respondent court, speaking through Court of
Appeals Presiding Justice, now Supreme Court Associate Justice Vicente V. Mendoza,
ratiocinated in this wise:

"First. x x x [Private respondent] maintains that it is not practicing optometry nor is it operating an
optical clinic. The contention has merit. The amended Articles of Incorporation of x x x [private
respondent] in part states:

PRIMARY PURPOSES

1. To own, maintain, conduct, operate and carry on the business of dispensing opticians and optical
establishments, and in the course of the business, to buy, sell, ship, store and otherwise use, deal
in, acquire and dispose of every kind of optical, ophthalmic and scientific instrument, glass, lens,
optical solutions or equipment necessary or convenient to the operation and conduct of the general
business of dispensing opticians.

SECONDARY PURPOSES

....

3. To do all and everything necessary, suitable or proper for the accomplishment of any of the
purposes, the attainment of any of the objects, or in the exercise of any of the powers herein set
forth, either alone or in conjunction with other corporations, firms or individuals and either as
principal or agents and to do every other act or acts, thing or things, incidental or appurtenant to
or growing out of or connected with the abovementioned objects, purposes or powers.

Clearly, the corporation is not an optical clinic. Nor is it but rather the optometrists employed by
it who are engaged in the practice of optometry. Petitioner-appellant simply dispenses optical and
ophthalmic instruments and supplies.

Indeed, the Optometry Law (Rep. Act No. 1998), which x x x [petitioners] cite, does not prohibit
corporations, like x x x [private respondent; from employing licensed optometrists.

What it prohibits is the practice of the profession without license by those engaged in it. This is
clear from Sec. 2 of the law which provides:

No person shall practice or attempt to practice optometry as defined in this Act, without holding a
valid certificate of registration as optometrist issued to him by the Board of Examiners in
Optometry herein created and in accordance with the provisions hereof: Provided, that valid
certificates of registration as optometrists shall be issued to optometrists of good moral character
now registered in accordance with the provisions of chapter thirty-three of the Revised
Administrative Code, who shall, by application within a period of one year from the effectivity of
this Act, be exempt from the provisions of sections eleven, twelve and twenty-three of this Act. . .
.

The prohibition is thus addressed to natural persons who are required to have a valid certificate of
registration as optometrist' and who must be of 'good moral character'. The prohibition can have
no application to x x x [private respondent] which is not itself engaged in the practice of optometry.
As the Professional Regulation Commission said, "Acebedo Optical, Acebedo Optical Clinic,
Acebedo Optical Co., Inc. and Acebedo International, Inc. are not natural persons who can take
the Optometrist licensure examinations. They are not, and cannot be registered as Optometrist
under RA 1998 [The Optometry Law].'"[6]

Petitioners filed a Motion for Reconsideration of the aforegoing decision. It was,

however, denied by respondent appellate court. Hence, this petition anchored on the
following sole ground:

"ISSUE

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING

THAT PRIVATE RESPONDENT ACEBEDO INTERNATIONAL CORPORATION DOES
NOT VIOLATE THE OPTOMETRY LAW (R. A. NO. 1998) WHEN IT EMPLOYS
OPTOMETRISTS TO ENGAGE IN THE PRACTICE OF OPTOMETRY UNDER ITS NAME
AND FOR ITS BEHALF

The herein petitioner most respectfully submits that the private respondent Acebedo International
Corporation flagrantly violates R. A. No. 1998 and the Corporation Code of the Philippines when
it employs optometrists to engage in the practice of optometry under its name and for its behalf."[7]

We hold that the petition lacks merit.

Private respondent does not deny that it employs optometrists whose role in the
operations of its optical shops is to administer the proper eye examination in order to
determine the correct type and grade of lenses to prescribe to persons purchasing the
same from private respondent's optical shops. Petitioners vehemently insist that in so
employing said optometrists, private respondent is in effect itself practicing optometry.
Such practice, petitioners conclude, is in violation of RA. No. 1998, which, it must be noted
at this juncture, has been repealed and superseded by RA. 8050.
Petitioners' contentions are, however, untenable. The fact that private respondent
hires optometrists who practice their profession in the course of their employment in
private respondent's optical shops, does not translate into a practice of optometry by
private respondent itself. Private respondent is a corporation created and organized for
the purpose of conducting the business of selling optical lenses or eyeglasses, among
others. The clientele of private respondent understably, would largely be composed of
persons with defective vision and thus need the proper lenses to correct the same and
enable them to gain normal vision. The determination of the proper lenses to sell to private
respondent's clientele entails the employment of optometrists who have been precisely
trained for that purpose. Private respondent's business is not the determination itself of
the proper lenses needed by persons with defective vision. Private respondent's
business, rather, is the buying and importing of eyeglasses and lenses and other similar
or allied instruments from suppliers thereof and selling the same to consumers.
For petitioners' argument to hold water, there need be clear showing that RA. No.
1998 prohibits a corporation from hiring optometrists, for only then would it be undeniably
evident that the intention of the legislature is to preclude the formation of the so-called
optometry corporations because such is tantamount to the practice of the profession of
optometry which is legally exercisable only by natural persons and professional
partnerships. We have carefully reviewed RA. No. 1998 however, and we find nothing
therein that supports petitioner's insistent claims.[8]
It is significant to note that even under RA. No. 8050, known as the Revised
Optometry Law,[9] we find no prohibition against the hiring by corporations of optometrists.
The pertinent provisions of RA. No. 8050, regarding the practice of optometry, are
reproduced below for ready reference:

"THE PRACTICE OF OPTOMETRY

SEC. 4. Acts Constituting the practice of Optometry. Any of the following acts constitute the
practice of optometry:

a) The examination of the human eye through the employment of subjective and objective
procedures, including the use of specific topical diagnostic pharmaceutical agents or drugs and
instruments, tools, equipment, implements, visual aids, apparatuses, machines, ocular exercises
and related devices, for the purpose of determining the condition and acuity of human vision to
correct and improve the same in accordance with subsections (b), (c) and (d) hereof; vision to
correct and improve the same in accordance with subsections (b), (c) and (d) hereof;

b) The prescription and dispensing of ophthalmic lenses, prisms, contact lenses and their
accessories and solutions, frames and their accessories, and supplies for the purpose of correcting
and treating defects, deficiencies and abnormalities of vision.

c) The conduct of ocular exercises and vision training, the provision of orthoptics and other devices
and procedures to aid and correct abnormalities of human vision, and the installation of prosthetic
devices;

d) The counseling of patients with regard to vision and eye care and hygiene;

e) The establishment of offices, clinics, and similar places where optometric services are offered;
and

f) The collection of professional fees for the performance of any of the acts mentioned in
paragraphs (a), (b), (c) and (d) of this section.
SEC. 5. Prohibition Against the Unauthorized Practice of Optometry. - No person shall practice
optometry as defined in Section 3 of this Act nor perform any of the acts, constituting the practice
of optometry as setforth in Section 4 hereof, without having been first admitted to the practice of
this profession under the provisions of this Act and its implementing rules and regulations:
Provided, That this prohibition shall not apply to regularly licensed and duly registered physicians
who have received post-graduate training in the diagnosis and treatment of eye diseases: Provided,
however, That the examination of the human eye by duly registered physicians in connection with
the physical examination of patients shall not be considered as practice of optometry: Provided,
further, That public health workers trained and involved in the government's blindness prevention
program may conduct only visual acuity test and visual screening.

SEC. 6 Disclosure of Authority to Practice. An optometrist shall be required to indicate his

professional license number and the date of its expiration in the documents he issues or signs in
connection with the practice of his profession. He shall also display his certificate of registration
in a conspicuous area of his clinic or office."

All told, there is no law that prohibits the hiring by corporations of optometrists or
considers the hiring by corporations of optometrists as a practice by the corporation itself
of the profession of optometry.
WHEREFORE, the instant petition is hereby DISMISSED.

Costs against the petitioners.

SO ORDERED.

3. ACEBEDO OPTICAL COMPANY, INC., petitioner, vs. THE HONORABLE

COURT OF APPEALS, Hon. MAMINDIARA MANGOTARA, in his capacity as
Presiding Judge of the RTC, 12th Judicial Region, Br. 1, Iligan City;
SAMAHANG OPTOMETRIST Sa PILIPINAS - Iligan City Chapter, LEO T.
CAHANAP, City Legal Officer, and Hon. CAMILO P. CABILI, City Mayor of
Iligan, respondents.

DECISION

PURISIMA, J.:

At bar is a petition for review under Rule 45 of the Rules of Court seeking to nullify the
dismissal by the Court of Appeals of the original petition for certiorari, prohibition and
mandamus filed by the herein petitioner against the City Mayor and City Legal Officer of
Iligan and the Samahang Optometrist sa Pilipinas - Iligan Chapter (SOPI, for brevity).

The antecedent facts leading to the filing of the instant petition are as follows:
Petitioner applied with the Office of the City Mayor of Iligan for a business permit. After
consideration of petitioners application and the opposition interposed thereto by local
optometrists, respondent City Mayor issued Business Permit No. 5342 subject to the
following conditions:

1. Since it is a corporation, Acebedo cannot put up an optical clinic but only

a commercial store;

2. Acebedo cannot examine and/or prescribe reading and similar optical

glasses for patients, because these are functions of optical clinics;

3. Acebedo cannot sell reading and similar eyeglasses without a

prescription having first been made by an independent optometrist (not its
employee) or independent optical clinic. Acebedo can only sell directly to
the public, without need of a prescription, Ray-Ban and similar eyeglasses;

4. Acebedo cannot advertise optical lenses and eyeglasses, but can

advertise Ray-Ban and similar glasses and frames;

5. Acebedo is allowed to grind lenses but only upon the prescription of an

independent optometrist.[1]

On December 5, 1988, private respondent Samahan ng Optometrist Sa Pilipinas (SOPI),

Iligan Chapter, through its Acting President, Dr. Frances B. Apostol, lodged a complaint
against the petitioner before the Office of the City Mayor, alleging that Acebedo had
violated the conditions set forth in its business permit and requesting the cancellation
and/or revocation of such permit.

Acting on such complaint, then City Mayor Camilo P. Cabili designated City Legal Officer
Leo T. Cahanap to conduct an investigation on the matter. On July 12, 1989, respondent
City Legal Officer submitted a report to the City Mayor finding the herein petitioner guilty
of violating all the conditions of its business permit and recommending the disqualification
of petitioner from operating its business in Iligan City. The report further advised that no
new permit shall be granted to petitioner for the year 1989 and should only be given time
to wind up its affairs.

On July 19, 1989, the City Mayor sent petitioner a Notice of Resolution and Cancellation
of Business Permit effective as of said date and giving petitioner three (3) months to wind
up its affairs.

On October 17, 1989, petitioner brought a petition for certiorari, prohibition and
mandamus with prayer for restraining order/preliminary injunction against the
respondents, City Mayor, City Legal Officer and Samahan ng Optometrists sa Pilipinas-
Iligan City Chapter (SOPI), docketed as Civil Case No. 1497 before the Regional Trial
Court of Iligan City, Branch I. Petitioner alleged that (1) it was denied due process
because it was not given an opportunity to present its evidence during the investigation
conducted by the City Legal Officer; (2) it was denied equal protection of the laws as the
limitations imposed on its business permit were not imposed on similar businesses in
Iligan City; (3) the City Mayor had no authority to impose the special conditions on its
business permit; and (4) the City Legal Officer had no authority to conduct the
investigation as the matter falls within the exclusive jurisdiction of the Professional
Regulation Commission and the Board of Optometry.

Respondent SOPI interposed a Motion to Dismiss the Petition on the ground of non-
exhaustion of administrative remedies but on November 24, 1989, Presiding Judge
Mamindiara P. Mangotara deferred resolution of such Motion to Dismiss until after trial of
the case on the merits. However, the prayer for a writ of preliminary injunction was
granted. Thereafter, respondent SOPI filed its answer.

On May 30, 1990, the trial court dismissed the petition for failure to exhaust administrative
remedies, and dissolved the writ of preliminary injunction it earlier issued. Petitioners
motion for reconsideration met the same fate. It was denied by an Order dated June 28,
1990.

On October 3, 1990, instead of taking an appeal, petitioner filed a petition for certiorari,
prohibition and mandamus with the Court of Appeals seeking to set aside the questioned
Order of Dismissal, branding the same as tainted with grave abuse of discretion on the
part of the trial court.

On January 24, 1991, the Ninth Division[2] of the Court of Appeals dismissed the petition
for lack of merit. Petitioners motion reconsideration was also denied in the Resolution
dated May 15, 1991.

Undaunted, petitioner has come before this court via the present petition, theorizing that:

A.

THE RESPONDENT COURT, WHILE CORRECTLY HOLDING THAT THE

RESPONDENT CITY MAYOR ACTED BEYOND HIS AUTHORITY IN
IMPOSING THE SPECIAL CONDITIONS IN THE PERMIT AS THEY HAD
NO BASIS IN ANY LAW OR ORDINANCE, ERRED IN HOLDING THAT
THE SAID SPECIAL CONDITIONS NEVERTHELESS BECAME BINDING
ON PETITIONER UPON ITS ACCEPTANCE THEREOF AS A PRIVATE
AGREEMENT OR CONTRACT.

B.

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT

THE CONTRACT BETWEEN PETITIONER AND THE CITY OF ILIGAN
WAS ENTERED INTO BY THE LATTER IN THE PERFORMANCE OF ITS
PROPRIETARY FUNCTIONS.
The petition is impressed with merit.

Although petitioner agrees with the finding of the Court of Appeals that respondent City
Mayor acted beyond the scope of his authority in imposing the assailed conditions in
subject business permit, it has excepted to the ruling of the Court of Appeals that the said
conditions nonetheless became binding on petitioner, once accepted, as a private
agreement or contract. Petitioner maintains that the said special conditions are null and
void for being ultra vires and cannot be given effect; and therefore, the principle of
estoppel cannot apply against it.

On the other hand, the public respondents, City Mayor and City Legal Officer, private
respondent SOPI and the Office of the Solicitor General contend that as a valid exercise
of police power, respondent City Mayor has the authority to impose, as he did, special
conditions in the grant of business permits.

Police power as an inherent attribute of sovereignty is the power to prescribe regulations

to promote the health, morals, peace, education, good order or safety and general welfare
of the people.[3] The State, through the legislature, has delegated the exercise of police
power to local government units, as agencies of the State, in order to effectively
accomplish and carry out the declared objects of their creation.[4] This delegation of police
power is embodied in the general welfare clause of the Local Government Code which
provides:

Sec. 16. General Welfare. - Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government
units shall ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve
public morals, enhance economic prosperity and social justice, promote full
employment among their residents, maintain peace and order, and
preserve the comfort and convenience of their inhabitants.

The scope of police power has been held to be so comprehensive as to encompass

almost all matters affecting the health, safety, peace, order, morals, comfort and
convenience of the community. Police power is essentially regulatory in nature and the
power to issue licenses or grant business permits, if exercised for a regulatory and not
revenue-raising purpose, is within the ambit of this power.[5]

The authority of city mayors to issue or grant licenses and business permits is beyond
cavil. It is provided for by law.
Section 171, paragraph 2 (n) of Batas Pambansa Bilang 337 otherwise known as the
Local Government Code of 1983, reads:

Sec. 171. The City Mayor shall:

xxx

n) Grant or refuse to grant, pursuant to law, city licenses or permits, and

revoke the same for violation of law or ordinance or the conditions upon
which they are granted.

However, the power to grant or issue licenses or business permits must always be
exercised in accordance with law, with utmost observance of the rights of all concerned
to due process and equal protection of the law.

Succinct and in point is the ruling of this Court, that:

"x x x While a business may be regulated, such regulation must, however,

be within the bounds of reason, i. e., the regulatory ordinance must be
reasonable, and its provision cannot be oppressive amounting to an
arbitrary interference with the business or calling subject of regulation. A
lawful business or calling may not, under the guise of regulation, be
unreasonably interfered with even by the exercise of police power. xxx

xxx xxx xxx

xxx The exercise of police power by the local government is valid unless it
contravenes the fundamental law of the land or an act of the legislature, or
unless it is against public policy or is unreasonable, oppressive, partial,
discriminating or in derogation of a common right."[6]

In the case under consideration, the business permit granted by respondent City Mayor
to petitioner was burdened with several conditions. Petitioner agrees with the holding by
the Court of Appeals that respondent City Mayor acted beyond his authority in imposing
such special conditions in its permit as the same have no basis in the law or ordinance.
Public respondents and private respondent SOPI, on the other hand, are one in saying
that the imposition of said special conditions on petitioners business permit is well within
the authority of the City Mayor as a valid exercise of police power.

As aptly discussed by the Solicitor General in his Comment, the power to issue licenses
and permits necessarily includes the corollary power to revoke, withdraw or cancel the
same. And the power to revoke or cancel, likewise includes the power to restrict through
the imposition of certain conditions. In the case of Austin-Hardware, Inc. vs. Court of
Appeals,[7] it was held that the power to license carries with it the authority to provide
reasonable terms and conditions under which the licensed business shall be conducted.
As the Solicitor General puts it:
 "If the City Mayor is empowered to grant or refuse to grant a license, which
is a broader power, it stands to reason that he can also exercise a lesser
power that is reasonably incidental to his express power, i. e. to restrict a
license through the imposition of certain conditions, especially so that there
is no positive prohibition to the exercise of such prerogative by the City
Mayor, nor is there any particular official or body vested with such
authority"[8]

However, the present inquiry does not stop there, as the Solicitor General believes. The
power or authority of the City Mayor to impose conditions or restrictions in the business
permit is indisputable. What petitioner assails are the conditions imposed in its particular
case which, it complains, amount to a confiscation of the business in which petitioner is
engaged.

Distinction must be made between the grant of a license or permit to do business and the
issuance of a license to engage in the practice of a particular profession. The first is
usually granted by the local authorities and the second is issued by the Board or
Commission tasked to regulate the particular profession. A business permit authorizes
the person, natural or otherwise, to engage in business or some form of commercial
activity. A professional license, on the other hand, is the grant of authority to a natural
person to engage in the practice or exercise of his or her profession.

In the case at bar, what is sought by petitioner from respondent City Mayor is a permit to
engage in the business of running an optical shop. It does not purport to seek a license
to engage in the practice of optometry as a corporate body or entity, although it does have
in its employ, persons who are duly licensed to practice optometry by the Board of
Examiners in Optometry.

The case of Samahan ng Optometrists sa Pilipinas vs. Acebedo International

Corporation, G.R. No. 117097,[9] promulgated by this Court on March 21, 1997, is in point.
The factual antecedents of that case are similar to those of the case under consideration
and the issue ultimately resolved therein is exactly the same issue posed for resolution
by this Court en banc.

In the said case, the Acebedo International Corporation filed with the Office of the
Municipal Mayor an application for a business permit for the operation of a branch of
Acebedo Optical in Candon, Ilocos Sur. The application was opposed by the Samahan
ng Optometrists sa Pilipinas-Ilocos Sur Chapter, theorizing that Acebedo is a juridical
entity not qualified to practice optometry. A committee was created by the Office of the
Mayor to study private respondents application. Upon recommendation of the said
committee, Acebedos application for a business permit was denied. Acebedo filed a
petition with the Regional Trial Court but the same was dismissed. On appeal, however,
the Court of Appeals reversed the trial courts disposition, prompting the Samahan ng
Optometrists to elevate the matter to this Court.
The First Division of this Court, then composed of Honorable Justice Teodoro Padilla,
Josue Bellosillo, Jose Vitug and Santiago Kapunan, with Honorable Justice Regino
Hermosisima, Jr. as ponente, denied the petition and ruled in favor of respondent
Acebedo International Corporation, holding that "the fact that private respondent hires
optometrists who practice their profession in the course of their employment in private
respondents optical shops, does not translate into a practice of optometry by private
respondent itself."[10] The Court further elucidated that in both the old and new Optometry
Law, R.A. No. 1998, superseded by R.A. No. 8050, it is significant to note that there is no
prohibition against the hiring by corporations of optometrists. The Court concluded thus:

"All told, there is no law that prohibits the hiring by corporations of

optometrists or considers the hiring by corporations of optometrists as a
practice by the corporation itself of the profession of optometry."

In the present case, the objective of the imposition of subject conditions on petitioners
business permit could be attained by requiring the optometrists in petitioners employ to
produce a valid certificate of registration as optometrist, from the Board of Examiners in
Optometry. A business permit is issued primarily to regulate the conduct of business and
the City Mayor cannot, through the issuance of such permit, regulate the practice of a
profession, like that of optometry. Such a function is within the exclusive domain of the
administrative agency specifically empowered by law to supervise the profession, in this
case the Professional Regulations Commission and the Board of Examiners in
Optometry.

It is significant to note that during the deliberations of the bicameral conference committee
of the Senate and the House of Representatives on R.A. 8050 (Senate Bill No. 1998 and
House Bill No. 14100), the committee failed to reach a consensus as to the prohibition on
indirect practice of optometry by corporations. The proponent of the bill, former Senator
Freddie Webb, admitted thus:

"Senator Webb: xxx xxx xxx

The focus of contention remains to be the proposal of prohibiting the indirect practice of
optometry by corporations. We took a second look and even a third look at the issue in
the bicameral conference, but a compromise remained elusive." [11]

Former Senator Leticia Ramos-Shahani likewise voted her reservation in casting her vote:

"Senator Shahani: Mr. President

The optometry bills have evoked controversial views from the members of
the panel. While we realize the need to uplift the standards of optometry as
a profession, the consensus of both Houses was to avoid touching sensitive
issues which properly belong to judicial determination. Thus, the bicameral
conference committee decided to leave the issue of indirect practice of
 optometry and the use of trade names open to the wisdom of the Courts
which are vested with the prerogative of interpreting the laws." [12]

From the foregoing, it is thus evident that Congress has not adopted a unanimous position
on the matter of prohibition of indirect practice of optometry by corporations, specifically
on the hiring and employment of licensed optometrists by optical corporations. It is clear
that Congress left the resolution of such issue for judicial determination, and it is therefore
proper for this Court to resolve the issue.

Even in the United States, jurisprudence varies and there is a conflict of opinions among
the federal courts as to the right of a corporation or individual not himself licensed, to hire
and employ licensed optometrists.[13]

Courts have distinguished between optometry as a learned profession in the category of

law and medicine, and optometry as a mechanical art. And, insofar as the courts regard
optometry as merely a mechanical art, they have tended to find nothing objectionable in
the making and selling of eyeglasses, spectacles and lenses by corporations so long as
the patient is actually examined and prescribed for by a qualified practitioner.[14]

The primary purpose of the statute regulating the practice of optometry is to insure that
optometrical services are to be rendered by competent and licensed persons in order to
protect the health and physical welfare of the people from the dangers engendered by
unlicensed practice. Such purpose may be fully accomplished although the person
rendering the service is employed by a corporation.[15]

Furthermore, it was ruled that the employment of a qualified optometrist by a corporation

is not against public policy.[16] Unless prohibited by statutes, a corporation has all the
contractual rights that an individual has[17] and it does not become the practice of
medicine or optometry because of the presence of a physician or optometrist. [18] The
manufacturing, selling, trading and bartering of eyeglasses and spectacles as articles of
merchandise do not constitute the practice of optometry. [19]

In the case of Dvorine vs. Castelberg Jewelry Corporation,[20] defendant corporation

conducted as part of its business, a department for the sale of eyeglasses and the
furnishing of optometrical services to its clients. It employed a registered optometrist who
was compensated at a regular salary and commission and who was furnished instruments
and appliances needed for the work, as well as an office. In holding that the corporation
was not engaged in the practice of optometry, the court ruled that there is no public policy
forbidding the commercialization of optometry, as in law and medicine, and recognized
the general practice of making it a commercial business by advertising and selling
eyeglasses.

To accomplish the objective of the regulation, a state may provide by statute that
corporations cannot sell eyeglasses, spectacles, and lenses unless a duly licensed
physician or a duly qualified optometrist is in charge of, and in personal attendance at the
place where such articles are sold.[21] In such a case, the patients primary and essential
safeguard lies in the optometrists control of the "treatment" by means of prescription and
preliminary and final examination.[22]

In analogy, it is noteworthy that private hospitals are maintained by corporations

incorporated for the purpose of furnishing medical and surgical treatment. In the course
of providing such treatments, these corporations employ physicians, surgeons and
medical practitioners, in the same way that in the course of manufacturing and selling
eyeglasses, eye frames and optical lenses, optical shops hire licensed optometrists to
examine, prescribe and dispense ophthalmic lenses. No one has ever charged that these
corporations are engaged in the practice of medicine. There is indeed no valid basis for
treating corporations engaged in the business of running optical shops differently.

It also bears stressing, as petitioner has pointed out, that the public and private
respondents did not appeal from the ruling of the Court of Appeals. Consequently, the
holding by the Court of Appeals that the act of respondent City Mayor in imposing the
questioned special conditions on petitioners business permit is ultra vires cannot be put
into issue here by the respondents. It is well-settled that:

"A party who has not appealed from the decision may not obtain any
affirmative relief from the appellate court other than what he had obtain from
the lower court, if any, whose decision is brought up on appeal.[23]

xxx an appellee who is not an appellant may assign errors in his brief where
his purpose is to maintain the judgment on other grounds, but he cannot
seek modification or reversal of the judgment or affirmative relief unless he
has also appealed."[24]

Thus, respondents submission that the imposition of subject special conditions on

petitioners business permit is not ultra vires cannot prevail over the finding and ruling by
the Court of Appeals from which they (respondents) did not appeal.

Anent the second assigned error, petitioner maintains that its business permit issued by
the City Mayor is not a contract entered into by Iligan City in the exercise of its proprietary
functions, such that although petitioner agreed to such conditions, it cannot be held in
estoppel since ultra vires acts cannot be given effect.

Respondents, on the other hand, agree with the ruling of the Court of Appeals that the
business permit in question is in the nature of a contract between Iligan City and the
herein petitioner, the terms and conditions of which are binding upon agreement, and that
petitioner is estopped from questioning the same. Moreover, in the Resolution denying
petitioners motion for reconsideration, the Court of Appeals held that the contract between
the petitioner and the City of Iligan was entered into by the latter in the performance of its
proprietary functions.

This Court holds otherwise. It had occasion to rule that a license or permit is not in the
nature of a contract but a special privilege.
 "xxx a license or a permit is not a contract between the sovereignty and the
licensee or permitee, and is not a property in the constitutional sense, as to
which the constitutional proscription against impairment of the obligation of
contracts may extend. A license is rather in the nature of a special privilege,
of a permission or authority to do what is within its terms. It is not in any way
vested, permanent or absolute."[25]

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 ones 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.

The Court of Appeals erred in adjudging subject business permit as having been issued
by respondent City Mayor in the performance of proprietary functions of Iligan City. As
hereinabove elaborated upon, the issuance of business licenses and permits by a
municipality or city is essentially regulatory in nature. The authority, which devolved upon
local government units to issue or grant such licenses or permits, is essentially in the
exercise of the police power of the State within the contemplation of the general welfare
clause of the Local Government Code.

WHEREFORE, the petition is GRANTED; the Decision of the Court of Appeals in CA-GR
SP No. 22995 REVERSED; and the respondent City Mayor is hereby ordered to reissue
petitioners business permit in accordance with law and with this disposition. No
pronouncement as to costs.

SO ORDERED.