1
THIRD DIVISION construction of scaffoldings inside his (respondent’s)
G.R. No. 188715 April 6, 2011
Petitioner,
vs.
FEDERICO P. CARIN, Respondent.
DECISION
CARPIO MORALES, J.:
Assailed via this petition for review of petitioner Rodolfo N.
Regala is the May 26, 2009 Decision1 of the Court of
Appeals which affirmed with modification the May 29, 2006
Decision2 of the Regional Trial Court (RTC) of Las Piñas
City, Br. 255 in Civil Case No. LP-99-0058, ordering
petitioner to pay respondent Federico P. Carin moral and
exemplary damages and attorney’s fees.
Petitioner and respondent are adjacent neighbors at Spirig
Street, BF Resort Village, Las Piñas City. When petitioner
decided to renovate his one storey residence by constructing
a second floor, he under the guise of merely building an
extension to his residence, approached respondent
sometime in May 1998 for permission to bore a hole
through a perimeter wall shared by both their respective
properties, to which respondent verbally consented on
condition that petitioner would clean the area affected by
the work.
As earlier indicated, petitioner’s real intention was to build a
second floor, in fact with a terrace atop the dividing wall. In
the course of the construction of the second floor,
respondent and his wife Marietta suffered from the dust and
dirt which fell on their property. As petitioner failed to
address the problem to respondent’s satisfaction,
respondent filed a letter-complaint3 with the Office of the
City Engineer and Building Official of Las Piñas City on
June 9, 1998.
In his letter-complaint, respondent related that, despite the
lack of a building permit for the construction of a second
floor, petitioner had demolished the dividing wall, failed to
clean the debris falling therefrom, allowed his laborers to
come in and out of his (respondent’s) property without
permission by simply jumping over the wall, and trampled
on his vegetable garden; and that despite his protestations,
petitioner persisted in proceeding with the construction, he
claiming to be the owner of the perimeter wall.
Several "sumbongs"4 (complaints) were soon lodged by
respondent before the Office of Barangay Talon Dos against
petitioner for encroachment, rampant invasion of privacy
and damages arising from the construction, and for illegal
At the trial, after respondent and his wife confirmed the
property.
As no satisfactory agreement was reached at the last
barangay conciliation proceedings in December 1998, and
petitioner having continued the construction work despite
issuance of several stop-work notices from the City
Engineer’s Office for lack of building permit, respondent
filed on March 1999 a complaint5 for damages against
petitioner before the RTC of Las Piñas City.
In his complaint, respondent alleged in the main that,
instead of boring just one hole as agreed upon, petitioner
demolished the whole length of the wall from top to bottom
into five parts for the purpose of constructing a second floor
with terrace; and that debris and dust piled up on
respondent’s property ruining his garden and forcing him
to, among other things, shut some of the windows of his
house. Respondent thus prayed for the award of moral and
exemplary damages.
Petitioner, denying respondent’s allegations, claimed in his
Answer6 that he was the sole and exclusive owner of the wall
referred to as a perimeter wall, the same having been built
within the confines of his property and being part and
parcel of the house and lot package he purchased from the
developer, BF Homes, Inc., in 1981; that the issue of its
ownership has never been raised by respondent or his
predecessor; and that securing the consent of respondent
and his neighbors was a mere formality in compliance with
the requirements of the Building Official to facilitate the
issuance of a building permit, hence, it should not be taken
to mean that he (petitioner) acknowledges respondent to be
a co-owner of the wall. He added that he eventually secured
the requisite building permit7 in March 1999 and had duly
paid the administrative fine.8
Further, petitioner, denying that a demolition of the whole
length of the wall took place, claimed that he and his
contractor’s laborers had been diligently cleaning
respondent’s area after every day’s work until respondent
arrogantly demanded the dismantling of the scaffoldings,
and barred the workforce from, and threatening to shoot
anyone entering the premises; and that the complaint was
instituted by respondent as leverage to force him to
withdraw the criminal case for slander and light
threats9 which he had earlier filed against respondent for
uttering threats and obscenities against him in connection
with the construction work.
material allegations of the complaint, petitioner took the
witness stand and presented his witnesses.
Architect Antonio Punzalan III10 testified that he installed
GI sheets to prevent debris from falling onto respondent’s
property and had instructed his workers to clean the
affected area after every work day at 5:00 p.m., but they
were later barred by respondent from entering his property.
Engineer Crisostomo Chan11 from the Office of the Building
Official of Las Piñas City testified, among other things, on
the circumstances surrounding the complaint for illegal
construction filed by respondent and that a building permit
was eventually issued to petitioner on March 15, 1999.
Engineer Sonia Haduca12 declared that upon a joint survey
conducted on the properties of both petitioner and
respondent in December 1998 to determine their exact
boundaries, she found an encroachment by petitioner of six
centimeters at the lower portion of the existing wall
negligible, since the Land Survey Law permits an
encroachment of up to ten centimeters.
By Decision of May 29, 2006, Branch 255 of the Las Piñas
City RTC rendered judgment in favor of respondent whom it
awarded moral damages in the sum of ₱100,000, exemplary
damages of ₱100,000 and attorney’s fees of ₱50,000 plus
costs of suit.13
In finding for respondent, the trial court declared that, apart
from the fact that petitioner knowingly commenced the
renovation of his house without the requisite building
permit from the City Engineer’s Office, he misrepresented to
respondent his true intent of introducing renovations. For,
it found that instead of just boring a hole in the perimeter
wall as originally proposed, petitioner divided the wall into
several sections to serve as a foundation for his firewall
(which ended up higher than the perimeter wall) and the
second storey of his house.
The trial court further declared that respondent and his
family had thus to contend with the noise, dust and debris
occasioned by the construction, which petitioner and his
work crew failed to address despite respondent’s
protestations, by refusing to clean the mess or install the
necessary safety devices.
Applying Article 2176 of the Civil Code on quasi-delicts, the
trial court ruled that petitioner was at fault and negligent for

failing to undertake sufficient safety measures to prevent
inconvenience and damage to respondent to thus entitle
respondent to moral and exemplary damages.
On appeal by petitioner, the Court of Appeals affirmed the
trial court’s decision with modification by reducing the
award of moral and exemplary damages to ₱50,000 and
₱25,000, respectively. The appellate court anchored its
affirmance on Article 19 of the New Civil Code which directs
every person to, in the exercise of his rights and in the
performance of his duties, act with justice, and observe
honesty and good faith.
By Resolution14 of July 10, 2009, the appellate court denied
petitioner’s motion for reconsideration as well as
respondent’s prayer in his Comment that the original
awards made by the trial court be restored.
Hence, petitioner’s present petition faulting the appellate
court in
Affirming with modification the decision of the trial
court….considering the absence of any competent proof to
warrant the grant of moral and exemplary damages as well
as attorney’s fees.15 (underscoring supplied)
Petitioner maintains that since moral and exemplary
damages are compensatory in nature, being meant neither
to punish nor enrich, the claimant must establish that not
only did he sustain injury but also that the other party had
acted in bad faith or was motivated by ill will. To petitioner,
respondents failed to discharge this burden. He adds that
the trial court did not delve into whether petitioner’s
renovations were the primary cause of respondent’s claimed
injuries, viz violation of privacy, sleepless nights and mental
anguish, among other things, as it instead focused on the
lack of a building permit as basis for the awards.
Rebutting the testimony of respondent’s wife as to the
alleged unauthorized intrusion of petitioner’s workers into
respondent’s property in order to erect scaffoldings,
petitioner points out that such an undertaking would take a
considerable length of time and could not have gone
unnoticed had consent not been given by respondent.
Moreover, petitioner posits, if consent had truly been
withheld, there was nothing to prevent respondent from
dismantling or immediately removing the offending
structures – a course of action he did not even attempt.
In his Comment16 to the petition, respondent quotes heavily
from the appellate and trial court’s findings that fault and
negligence attended petitioner’s renovation, thus justifying
the award of damages. He goes on to reiterate his plea that
the awards given by the trial court in its decision of May 29,
2006 should be reinstated.
The petition is partly impressed with merit.
The trial court’s award of moral and exemplary damages, as
affirmed by the appellate court, was premised on the
damage and suffering sustained by respondent arising from
quasi-delict under Article 217617 of the Civil Code. Thus the
trial court explained:
Indeed, there was fault or negligence on the part of the
defendant when he did not provide sufficient safety
measures to prevent causing a lot of inconvenience and
disturbance to the plaintiff and his family. The evidence
presented by the plaintiff regarding the dirt or debris, as
well as the absence of devices or safety measures to prevent
the same from falling inside plaintiff’s property, were duly
established. It did not help the cause of the defendant that
he made a lot of misrepresentations regarding the
renovations on his house and he did not initially have a
building permit for the same. In fact, it was only after the
construction works were completed that the said permit was
issued and upon payment of an administrative fine by the
defendant.18
In prayers for moral damages, however, recovery is more an
exception rather than the rule. Moral damages are not
meant to be punitive but are designed to compensate and
alleviate the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar harm unjustly
caused to a person. To be entitled to such an award, the
claimant must satisfactorily prove that he has suffered
damages and that the injury causing it has sprung from any
of the cases listed in Articles 221919 and 222020 of the Civil
Code. Moreover, the damages must be shown to be the
proximate result of a wrongful act or omission. The claimant
must thus establish the factual basis of the damages and its
causal tie with the acts of the defendant.
In fine, an award of moral damages calls for the
presentation of 1) evidence of besmirched reputation or
physical, mental or psychological suffering sustained by the
claimant; 2) a culpable act or omission factually established;
3) proof that the wrongful act or omission of the defendant
2
is the proximate cause of the damages sustained by the
claimant; and 4) the proof that the act is predicated on any
of the instances expressed or envisioned by Article 2219 and
Article 2220 of the Civil Code.21
In the present case, respondent failed to establish by clear
and convincing evidence that the injuries he sustained were
the proximate effect of petitioner’s act or omission. It thus
becomes necessary to instead look into the manner by which
petitioner carried out his renovations to determine whether
this was directly responsible for any distress respondent
may have suffered since the law requires that a wrongful or
illegal act or omission must have preceded the damages
sustained by the claimant.
It bears noting that petitioner was engaged in the lawful
exercise of his property rights to introduce renovations to
his abode. While he initially did not have a building permit
and may have misrepresented his real intent when he
initially sought respondent’s consent, the lack of the permit
was inconsequential since it only rendered petitioner liable
to administrative sanctions or penalties.1avvphi1
The testimony of petitioner and his witnesses, specifically
Architect Punzalan, demonstrates that they had actually
taken measures to prevent, or at the very least, minimize the
damage to respondent’s property occasioned by the
construction work. Architect Punzalan details how upon
reaching an agreement with petitioner for the construction
of the second floor, he (Punzalan) surveyed petitioner’s
property based on the Transfer Certificate of Title (TCT) and
Tax Declarations22 and found that the perimeter wall was
within the confines of petitioner’s property; that he,
together with petitioner, secured the consent of the
neighbors (including respondent) prior to the start of the
renovation as reflected in a Neighbor’s Consent23 dated
June 12, 1998; before the construction began, he undertook
measures to prevent debris from falling into respondent’s
property such as the installation of GI sheet strainers, the
construction of scaffoldings24 on respondent’s property, the
instructions to his workers to clean the area before leaving
at 5:00 p.m;25 and that the workers conducted daily clean-
up of respondent’s property with his consent, until
animosity developed between the parties.26
Malice or bad faith implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral
obliquity; it is different from the negative idea of negligence
in that malice or bad faith contemplates a state of mind
affirmatively operating with furtive design or ill will.27 While
the Court harbors no doubt that the incidents which gave

rise to this dispute have brought anxiety and anguish to
respondent, it is unconvinced that the damage inflicted
upon respondent’s property was malicious or willful, an
element crucial to merit an award of moral damages under
Article 2220 of the Civil Code.
Necessarily, the Court is not inclined to award exemplary
damages.28
Petitioner, however, cannot steer clear from any liability
whatsoever. Respondent and his family’s rights to the
peaceful enjoyment of their property have, at the very least,
been inconvenienced from the incident borne of petitioner’s
construction work. Any pecuniary loss or damage suffered
by respondent cannot be established as the records are
bereft of any factual evidence to establish the same.
Nominal damages may thus be adjudicated in order that a
right of the plaintiff, respondent herein, which has been
violated or invaded by the defendant, petitioner herein, may
be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.29
WHEREFORE, the petition is GRANTED. The May 26,
2009 Decision of the Court of Appeals is VACATED. The
Court orders petitioner to pay respondent the sum of
₱25,000 as nominal damages.
No costs.
SO ORDERED.
FIRST DIVISION
G.R. No. 141968 February 12, 2001
THE INTERNATIONAL CORPORATE BANK (now
UNION BANK OF THE PHILIPPINES), petitioner,
vs.
SPS. FRANCIS S. GUECO and MA. LUZ E.
GUECO, respondents.
KAPUNAN, J.:
The respondent Gueco Spouses obtained a loan from
petitioner International Corporate Bank (now Union Bank
of the Philippines) to purchase a car - a Nissan Sentra 1600
4DR, 1989 Model. In consideration thereof, the Spouses
executed promissory notes which were payable in monthly
installments and chattel mortgage over the car to serve as
security for the notes.
The Spouses defaulted in payment of installments.
Consequently, the Bank filed on August 7, 1995 a civil action
docketed as Civil Case No. 658-95 for "Sum of Money with
Prayer for a Writ of Replevin"1 before the Metropolitan Trial
Court of Pasay City, Branch 45.2 On August 25, 1995, Dr.
Francis Gueco was served summons and was fetched by the
sheriff and representative of the bank for a meeting in the
bank premises. Desi Tomas, the Bank's Assistant Vice
President demanded payment of the amount of
P184,000.00 which represents the unpaid balance for the
car loan. After some negotiations and computation, the
amount was lowered to P154,000.00, However, as a result
of the non-payment of the reduced amount on that date, the
car was detained inside the bank's compound.
On August 28, 1995, Dr. Gueco went to the bank and talked
with its Administrative Support, Auto Loans/Credit Card
Collection Head, Jefferson Rivera. The negotiations resulted
in the further reduction of the outstanding loan to
P150,000.00.
On August 29, 1995, Dr. Gueco delivered a manager's check
in amount of P150,000.00 but the car was not released
because of his refusal to sign the Joint Motion to Dismiss. It
is the contention of the Gueco spouses and their counsel
that Dr. Gueco need not sign the motion for joint dismissal
considering that they had not yet filed their Answer.
Petitioner, however, insisted that the joint motion to
dismiss is standard operating procedure in their bank to
effect a compromise and to preclude future filing of claims,
counterclaims or suits for damages.
After several demand letters and meetings with bank
representatives, the respondents Gueco spouses initiated a
civil action for damages before the Metropolitan Trial Court
of Quezon City, Branch 33. The Metropolitan Trial Court
dismissed the complaint for lack of merit.3
On appeal to the Regional Trial Court, Branch 227 of
Quezon City, the decision of the Metropolitan Trial Court
was reversed. In its decision, the RTC held that there was a
meeting of the minds between the parties as to the
reduction of the amount of indebtedness and the release of
the car but said agreement did not include the signing of the
joint motion to dismiss as a condition sine qua non for the
effectivity of the compromise. The court further ordered the
bank:
1. to return immediately the subject car to the appellants in
good working condition; Appellee may deposit the
Manager's check - the proceeds of which have long been
under the control of the issuing bank in favor of the appellee
since its issuance, whereas the funds have long been paid by
appellants to .secure said Manager's Check, over which
appellants have no control;
3
2. to pay the appellants the sum of P50,000.00 as moral
damages; P25,000.00 as exemplary damages, and
P25,000.00 as attorney's fees, and
3. to pay the cost of suit.
In other respect, the decision of the Metropolitan Trial
Court Branch 33 is hereby AFFIRMED.4
The case was elevated to the Court of Appeals, which on
February 17, 2000, issued the assailed decision, the decretal
portion of which reads:
WHEREFORE, premises considered, the petition for review
on certiorari is hereby DENIED and the Decision of the
Regional Trial Court of Quezon City, Branch 227, in Civil
Case No. Q-97-31176, for lack of any reversible error, is
AFFIRMED in toto. Costs against petitioner.
SO ORDERED.5
The Court of Appeals essentially relied on the respect
accorded to the finality of the findings of facts by the lower
court and on the latter's finding of the existence of fraud
which constitutes the basis for the award of damages.
The petitioner comes to this Court by way of petition for
review on certiorari under Rule 45 of the Rules of Court,
raising the following assigned errors:
I THE COURT OF APPEALS ERRED IN HOLDING THAT
THERE WAS NO AGREEMENT WITH RESPECT TO THE
EXECUTION OF THE JOINT MOTION TO DISMISS AS A
CONDITION FOR THE COMPROMISE AGREEMENT.
II THE COURT OF APPEALS ERRED IN GRANTING
MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S
FEES IN FAVOR OF THE RESPONDENTS.
III THE COURT OF APPEALS ERRED IN HOLDING THAT
THE PETITIONER RETURN THE SUBJECT CAR TO THE
RESPONDENTS, WITHOUT MAKING ANY PROVISION
FOR THE ISSUANCE OF THE NEW
MANAGER'S/CASHIER'S CHECK BY THE
RESPONDENTS IN FAVOR OF THE PETITIONER IN
LIEU OF THE ORIGINAL CASHIER'S CHECK THAT
ALREADY BECAME STALE.6

As to the first issue, we find for the respondents. The issue
as to what constitutes the terms of the oral compromise or
any subsequent novation is a question of fact that was
resolved by the Regional Trial Court and the Court of
Appeals in favor of respondents. It is well settled that the
findings of fact of the lower court, especially when affirmed
by the Court of Appeals, are binding upon this Court.7 While
there are exceptions to this rule,8 the present case does not
fall under anyone of them, the petitioner's claim to the
contrary, notwithstanding.
Being an affirmative allegation, petitioner has the burden of
evidence to prove his claim that the oral compromise
entered into by the parties on August 28, 1995 included the
stipulation that the parties would jointly file a motion to
dismiss. This petitioner failed to do. Notably, even the
Metropolitan Trial Court, while ruling in favor of the
petitioner and thereby dismissing the complaint, did not
make a factual finding that the compromise agreement
included the condition of the signing of a joint motion to
dismiss.
The Court of Appeals made the factual findings in this wise:
In support of its claim, petitioner presented the testimony of
Mr. Jefferson Rivera who related that respondent Dr. Gueco
was aware that the signing of the draft of the Joint Motion
to Dismiss was one of the conditions set by the bank for the
acceptance of the reduced amount of indebtedness and the
release of the car. (TSN, October 23, 1996, pp. 17-21, Rollo,
pp. 18, 5). Respondents, however, maintained that no such
condition was ever discussed during their meeting of August
28, 1995 (Rollo, p. 32).
The trial court, whose factual findings are entitled to respect
since it has the 'opportunity to directly observe the
witnesses and to determine by their demeanor on the stand
the probative value of their testimonies' (People vs. Yadao,
et al. 216 SCRA 1, 7 [1992]), failed to make a categorical
finding on the issue. In dismissing the claim of damages of
the respondents, it merely observed that respondents are
not entitled to indemnity since it was their unjustified
reluctance to sign of the Joint Motion to Dismiss that
delayed the release of the car. The trial court opined, thus:
'As regards the third issue, plaintiffs' claim for damages is
unavailing. First, the plaintiffs could have avoided the
renting of another car and could have avoided this litigation
had he signed the Joint Motion to Dismiss. While it is true
that herein defendant can unilaterally dismiss the case for
collection of sum of money with replevin, it is equally true
that there is nothing wrong for the plaintiff to affix his
signature in the Joint Motion to Dismiss, for after all, the
dismissal of the case against him is for his own good and
benefit. In fact, the signing of the Joint Motion to Dismiss
gives the plaintiff three (3) advantages. First, he will recover
his car. Second, he will pay his obligation to the bank on its
reduced amount of P150,000.00 instead of its original claim
of P184,985.09. And third, the case against him will be
dismissed. Plaintiffs, likewise, are not entitled to the award
of moral damages and exemplary damages as there is no
showing that the defendant bank acted fraudulently or in
bad faith.' (Rollo, p. 15)
The Court has noted, however, that the trial court, in its
findings of facts, clearly indicated that the agreement of the
parties on August 28, 1995 was merely for the lowering of
the price, hence -
'xxx On August 28, 1995, bank representative Jefferson
Rivera and plaintiff entered into an oral compromise
agreement, whereby the original claim of the bank of
P184,985.09 was reduced to P150,000.00 and that upon
payment of which, plaintiff was informed that the subject
motor vehicle would be released to him.' (Rollo, p. 12)
The lower court, on the other hand, expressly made a
finding that petitioner failed to include the aforesaid signing
of the Joint Motion to Dismiss as part of the agreement. In
dismissing petitioner's claim, the lower court declared, thus:
'If it is true, as the appellees allege, that the signing of the
joint motion was a condition sine qua non for the reduction
of the appellants' obligation, it is only reasonable and logical
to assume that the joint motion should have been shown to
Dr. Gueco in the August 28, 1995 meeting. Why Dr. Gueco
was not given a copy of the joint motion that day of August
28, 1995, for his family or legal counsel to see to be brought
signed, together with the P150,000.00 in manager's check
form to be submitted on the following day on August 29,
1995? (sic) [I]s a question whereby the answer up to now
eludes this Court's comprehension. The appellees would like
this Court to believe that Dr Gueco was informed by Mr.
Rivera Rivera of the bank requirement of signing the joint
motion on August 28, 1995 but he did not bother to show a
copy thereof to his family or legal counsel that day August
28, 1995. This part of the theory of appellee is too
complicated for any simple oral agreement. The idea of a
Joint Motion to Dismiss being signed as a condition to the
pushing through a deal surfaced only on August 29, 1995.
4
'This Court is not convinced by the appellees' posturing.
Such claim rests on too slender a frame, being inconsistent
with human experience. Considering the effect of the
signing of the Joint Motion to Dismiss on the appellants'
substantive right, it is more in accord with human
experience to expect Dr. Gueco, upon being shown the Joint
Motion to Dismiss, to refuse to pay the Manager's Check
and for the bank to refuse to accept the manager's check.
The only logical explanation for this inaction is that Dr.
Gueco was not shown the Joint Motion to Dismiss in the
meeting of August 28, 1995, bolstering his claim that its
signing was never put into consideration in reaching a
compromise.' xxx.9
We see no reason to reverse.
Anent the issue of award of damages, we find the claim of
petitioner meritorious. In finding the petitioner liable for
damages, both .the Regional Trial Court and the Court of
Appeals ruled that there was fraud on the part of the
petitioner . The CA thus declared:
The lower court's finding of fraud which became the basis of
the award of damages was likewise sufficiently proven.
Fraud under Article 1170 of the Civil Code of the
Philippines, as amended is the 'deliberate and intentional
evasion of the normal fulfillment of obligation' When
petitioner refused to release the car despite respondent's
tender of payment in the form of a manager's check, the
former intentionally evaded its obligation and thereby
became liable for moral and exemplary damages, as well as
attorney's fees.10
We disagree.
Fraud has been defined as the deliberate intention to cause
damage or prejudice. It is the voluntary execution of a
wrongful act, or a willful omission, knowing and intending
the effects which naturally and necessarily arise from such
act or omission; the fraud referred to in Article 1170 of the
Civil Code is the deliberate and intentional evasion of the
normal fulfillment of obligation.11 We fail to see how the act
of the petitioner bank in requiring the respondent to sign
the joint motion to dismiss could constitute as fraud. True,
petitioner may have been remiss in informing Dr. Gueco
that the signing of a joint motion to dismiss is a standard
operating procedure of petitioner bank. However, this can
not in anyway have prejudiced Dr. Gueco. The motion to
dismiss was in fact also for the benefit of Dr. Gueco, as the
case filed by petitioner against it before the lower court

would be dismissed with prejudice. The whole point of the
parties entering into the compromise agreement was in
order that Dr. Gueco would pay his outstanding account and
in return petitioner would return the car and drop the case
for money and replevin before the Metropolitan Trial Court.
The joint motion to dismiss was but a natural consequence
of the compromise agreement and simply stated that Dr.
Gueco had fully settled his obligation, hence, the dismissal
of the case. Petitioner's act of requiring Dr. Gueco to sign
the joint motion to dismiss can not be said to be a deliberate
attempt on the part of petitioner to renege on the
compromise agreement of the parties. It should, likewise, be
noted that in cases of breach of contract, moral damages
may only be awarded when the breach was attended by
fraud or bad faith.12 The law presumes good faith. Dr. Gueco
failed to present an iota of evidence to overcome this
presumption. In fact, the act of petitioner bank in lowering
the debt of Dr. Gueco from P184,000.00 to P150,000.00 is
indicative of its good faith and sincere desire to settle the
case. If respondent did suffer any damage, as a result of the
withholding of his car by petitioner, he has only himself to
blame. Necessarily, the claim for exemplary damages must
fait. In no way, may the conduct of petitioner be
characterized as "wanton, fraudulent, reckless, oppressive
or malevolent."13
We, likewise, find for the petitioner with respect to the third
assigned error. In the meeting of August 29, 1995,
respondent Dr. Gueco delivered a manager's check
representing the reduced amount of P150,000.00. Said
check was given to Mr. Rivera, a representative of
respondent bank. However, since Dr. Gueco refused to sign
the joint motion to dismiss, he was made to execute a
statement to the effect that he was withholding the payment
of the check.14 Subsequently, in a letter addressed to Ms.
Desi Tomas, vice president of the bank, dated September 4,
1995, Dr. Gueco instructed the bank to disregard the 'hold
order" letter and demanded the immediate release of his
car,15 to which the former replied that the condition of
signing the joint motion to dismiss must be satisfied and
that they had kept the check which could be claimed by Dr.
Gueco anytime.16 While there is controversy as to whether
the document evidencing the order to hold payment of the
check was formally offered as evidence by petitioners,17it
appears from the pleadings that said check has not been
encashed.
The decision of the Regional Trial Court, which was
affirmed in toto by the Court of Appeals, orders the
petitioner:
1. to return immediately the subject car to the appellants in
good working condition. Appellee may deposit the
Manager's Check - the proceeds of which have long been
under the control of the issuing bank in favor of the appellee
since its issuance, whereas the funds have long been paid by
appellants to secure said Manager's Check over which
appellants have no control.18
Respondents would make us hold that petitioner should
return the car or its value and that the latter, because of its
own negligence, should suffer the loss occasioned by the fact
that the check had become stale.19 It is their position that
delivery of the manager's check produced the effect of
payment20 and, thus, petitioner was negligent in opting not
to deposit or use said check. Rudimentary sense of justice
and fair play would not countenance respondents' position.
A stale check is one which has not been presented for
payment within a reasonable time after its issue. It is
valueless and, therefore, should not be paid. Under the
negotiable instruments law, an instrument not payable on
demand must be presented for payment on the day it falls
due. When the instrument is payable on demand,
presentment must be made within a reasonable time after
its issue. In the case of a bill of exchange, presentment is
sufficient if made within a reasonable time after the last
negotiation thereof.21
A check must be presented for payment within a reasonable
time after its issue,22 and in determining what is a
"reasonable time," regard is to be had to the nature of the
instrument, the usage of trade or business with respect to
such instruments, and the facts of the particular case.23 The
test is whether the payee employed such diligence as a
prudent man exercises in his own affairs.24 This is because
the nature and theory behind the use of a check points to its
immediate use and payability. In a case, a check payable on
demand which was long overdue by about two and a half (2-
1/2) years was considered a stale check.25 Failure of a payee
to encash a check for more than ten (10) years undoubtedly
resulted in the check becoming stale.26 Thus, even a delay of
one (1) week27 or two (2) days,28 under the specific
circumstances of the cited cases constituted unreasonable
time as a matter of law.
In the case at bar, however, the check involved is not an
ordinary bill of exchange but a manager's check. A
manager's check is one drawn by the bank's manager upon
the bank itself. It is similar to a cashier's check both as to
effect and use. A cashier's check is a check of the bank's
cashier on his own or another check. In effect, it is a bill of
5
exchange drawn by the cashier of a bank upon the bank
itself, and accepted in advance by the act of its issuance.29 It
is really the bank's own check and may be treated as a
promissory note with the bank as a maker.30The check
becomes the primary obligation of the bank which issues it
and constitutes its written promise to pay upon demand.
The mere issuance of it is considered an acceptance thereof.
If treated as promissory note, the drawer would be the
maker and in which case the holder need not prove
presentment for payment or present the bill to the drawee
for acceptance.31
Even assuming that presentment is needed, failure to
present for payment within a reasonable time will result to
the discharge of the drawer only to the extent of the loss
caused by the delay.32 Failure to present on time, thus, does
not totally wipe out all liability. In fact, the legal situation
amounts to an acknowledgment of liability in the sum stated
in the check. In this case, the Gueco spouses have not
alleged, much less shown that they or the bank which issued
the manager's check has suffered damage or loss caused by
the delay or non-presentment. Definitely, the original
obligation to pay certainly has not been erased.
It has been held that, if the check had become stale, it
becomes imperative that the circumstances that caused its
non-presentment be determined.33 In the case at bar, there
is no doubt that the petitioner bank held on the check and
refused to encash the same because of the controversy
surrounding the signing of the joint motion to dismiss. We
see no bad faith or negligence in this position taken by the
Bank.
WHEREFORE, premises considered, the petition for
review is given due course. The decision of the Court of
Appeals affirming the decision of the Regional Trial Court
is SET ASIDE. Respondents are further ordered to pay the
original obligation amounting to P150,000.00 to the
petitioner upon surrender or cancellation of the manager's
check in the latter's possession, afterwhich, petitioner is to
return the subject motor vehicle in good working condition.
SO ORDERED.
THIRD DIVISION
G.R. No. 139050 October 2, 2001
REPUBLIC OF THE PHILIPPINES, represented by
the COMMISSIONER OF CUSTOMS, petitioner,
vs.
THE COURT OF TAX APPEALS and AGFHA,
INCORPORATED, respondents.
VITUG, J.:
On 12 December 1992, a shipment of bales of textile gray
cloth, under Bill of Lading No. HKT-138899, arrived at the
Manila International Container Port (MICP) aboard the

vessel "S/S ACX Daisy." The shipment's Inward Foreign
Manifest stated that the bales of cloth were consigned to GQ
GARMENTS, Inc., of 244 Escolta Street, Binondo, Manila.
The Clean Report of Findings (CRF) issued by the Societe
Generale de Surveilance (SGS), however, mentioned
AGFHA, Incorporated, to be the consignee of the shipment.
Forthwith, the shipping agent, FIL-JAPAN, requested for an
amendment of the Inward Foreign Manifest so as to correct
the name of the consignee from that of GQ GARMENTS,
Inc., to that of AGFHA, Inc.
On 22 January 1993, FIL-JAPAN forwarded to AGFHA,
Inc., the amended Inward Foreign Manifest which the latter,
in turn, submitted to the MICP Law Division. The MICP
indorsed the document to the Customs Intelligence
Investigation Services (CIIS). The CIIS placed the subject
shipment under Hold Order No. H/CI/01/2293/01, dated
22 January 1993, on the ground that GQ GARMENTS, Inc.,
could not be located in its given address at 244 Escolta
Street, Binondo, Manila, and was thus suspected to be a
fictitious firm. Forfeiture proceedings under Section 2530(f)
and (l) (3-5) of the Tariff and Customs Code were initiated.
AGFHA, Inc., through its president Wilson Kho, filed a
motion for intervention contending that AGFHA, Inc., is the
lawful owner and actual consignee of the subject shipment.
The motion for intervention was granted on 2 March 1993.
Following a hearing, the Collector of Customs came up with
a draft decision ordering the lifting of the warrant of seizure
and detention on the basis of its findings that GQ
GARMENTS, Inc., was not a fictitious corporation and that
there was a valid waiver of rights over the bales of cloth by
GQ GARMENTS, Inc., in favor of AGFHA, Inc. The draft
decision was submitted to the Deputy Commissioner for
clearance and approval, who, in turn, transmitted it to the
CIIS for comment. The CIIS opposed the draft decision,
insisting that GQ GARMENTS, Inc., was a fictitious
corporation and that even if it did exist, its president, John
Barlin, had no authority to waive the right over the subject
shipment in favor of AGFHA, Inc.
The Deputy Commissioner, relying on the comment of the
CIIS, rejected the draft decision of the Collector of Customs.
GQ GARMENTS, Inc., and AGFHA, Inc., filed a joint motion
for reconsideration, which was given due course. Convinced
that the evidence presented established the legal existence
of GQ GARMENTS, Inc., and finding that a resolution
passed by the Board of Directors of GQ GARMENTS, Inc.,
ratified the waiver of its president, the Collector of Customs
in another draft decision granted the joint motion. The
Office of the Commissioner of Customs, however,
disapproved the new draft decision and denied the release
of the goods; it ruled:
"1. x x x [I]t is quite suspicious that it took more than one
month before the alleged error in the consignee was
discovered by the shipper and by AGFHA, Inc., and by GQ
Garments especially considering the fact that there is a CRF
naming therein AGFHA as consignee of the subject
shipment which means that the shipper was contracted by
SGS so that the latter can inspect the subject shipment to be
imported by consignee; that Mr. Wilson Kho admitted it was
AGFHA who ordered the shipment by telephone call; that
prior to this shipment there was no order placed in the
name of GQ Garments from Indonesia; and that this is
already the second of four shipments ordered by AGFHA,
Inc., from Jakarta, Indonesia.
"2. Mr. Wilson Kho's explanation that the shipper
committed an error in naming GQ GARMENTS as the
consignee of the subject shipment because his business card
contains the name of both GQ GARMENTS and AGFHA,
Inc. appears to be an afterthought and self-serving.
Moreover, he admitted that he is not an officer nor even a
stockholder of GQ GARMENTS so why should his business
card indicate his name as President/General Manager of GQ
GARMENTS and AGFHA, Inc. That is clearly a
misrepresentation.
"3. During the hearing on April 15, 1994, Mr. John John
Barlin of GQ GARMENTS admitted that the letter dated
February 11, 1993 purportedly signed by him (in which he
allegedly informed the Collector of Customs that AGFHA,
Inc., is the rightful owner of the subject shipment and that
GQ GARMENTS is waiving its right over the same) actually
came from Wilson Kho. In other words, the said letter is
spurious.
"4. From the admissions of both Mr. Wilson Kho and Mr.
John John Barlin, it is clear that GQ GARMENTS is actually
owned by Mr. Wilson Kho and its corporate franchise
appears to be being used to perpetrate fraud and other
scheme to confuse authorities (pp. 1-4, Decision of
Commissioner of Customs, Custom Case No. 94-017)"1
In deference to the directive of the Commissioner, the
District Collector of Customs ordered the forfeiture of the
shipment. On 14 October 1994, AGFHA, Inc., interposed an
appeal to the Office of the Commissioner of Customs. The
appeal was dismissed consistently with the Commissioner's
6
earlier stand that disapproved the Collector of Customs'
draft decision.
On 5 October 1995, AGFHA, Inc., filed a petition for review
with the Court of Tax Appeals questioning the forfeiture of
the bales of textile cloth. Finding merit in the plea of
appellants, the Court of Tax Appeals granted the petition
and ordered the release of the goods to AGFHA, Inc.
On 27 December 1996, the Commissioner of Customs then
challenged before the Court of Appeals the decision of the
tax court.
In its decision, dated 31 May 1999, the Court of Appeals
dismissed the appeal for lack of merit. Quoting extensively
from the assailed decision of the tax court, the appellate
court ruled that the Bureau of Customs has failed to satisfy
its burden of proving fraud on the part of the importer or
consignee. It expounded thusly:
"Section 2530 (f) and (1) 3-5 of the Tariff and Customs
Code, provide that in order that a shipment be liable to
forfeiture, it must be proved that fraud has been committed
by the importer/consignee to evade payment of the duties
due. To establish the existence of fraud, the onus probandi
is on the part of the Bureau of Customs who ordered the
forfeiture of the subject shipments. The BOC, however,
failed. "x x x xxx xxx
"'x x x This Court could not fathom any individual or
collective importance of the x x x findings [of the BOC] as
indicative of the actual commission of fraud or any attempt
or frustration thereof. As defined, actual or intentional fraud
consists of deception willfully and deliberately done or
resorted to in order to induce another to give up some right.
It must amount to intentional wrong-doing with the sole
object of avoiding the tax.
`The circumstances or findings presented by the [BOC] do
not reveal x x x any kind of deception that could have been
played upon [the] Bureau to give up some of its right, e.g.,
to collect correct taxes on properly declared shipment of
goods. `x x x xxx xxx
`[BOC] is saying that the shipper knew all along that
AGFHA, Inc., was the real consignee due to the pre-
inspection done by SGS and the corresponding issuance of
the CRF naming AGFHA, Inc. as the consignee. So that in
naming GQ GARMENTS Inc. as the consignee in the Bill of
Lading and Inward Foreign Manifest, the same was

intentional and deliberately done and not a case of error or
inadvertence x x x.
`[The Court] could not believe that [BOC] assumed the
above circumstance as a fact in his attempt to forfeit the
subject shipment in favor of the government. The
respondent is trying to second guess the act of the shipper
that the latter had prior knowledge of AGFHA Inc., as the
true consignee before the shipment. [The Court] deem[s]
such conclusion as pure hearsay. Obviously, it is only the
shipper and/or the SGS who could personally vouch for
events that transpired prior to the shipment of the goods
subject matter of this case.
`x x x [AGFHA Inc.] has offered the following controverting
and convincing evidence x x x:
`1. Telex message from the shipping agent of shipper P.T.
Mandala Subur Textile Industry to FIL-JAPAN Shipping
Company Manila, requesting amendment of the Bill of
Lading and other shipping records, to change consignee
from GQ Garments, Inc. to Agfha, Inc.;
`2. Application for Amendment of the Inward Foreign
Manifest filed by the shipper's agent, FIL-JAPAN Shipping
Company, for approval with the Customs Law Division,
Manila International Container Port (MICP), to change the
name of the consignee from GQ Garments, Inc. to Agfha,
Inc.
`3. Letter dated February 10, 1993 by Wilson Kho, president
of Agfha, Inc. addressed to Atty. Buenaventura Maniego,
District Collector of Customs, MICP, North Harbor, Manila
manifesting the former's intention and willingness to pay
the corresponding duties and taxes on the subject shipment
based on a higher valuation indicated in the Clean Report of
Findings (CRF) as recommended by the SGS, as against the
lower valuation indicated in the invoice.
`4. Bill of Lading covering the subject shipment showing the
shipper as P.T. Mandala Subur Textile Industry and the
consignee as GQ Garments, Inc.
`5. The Clean Report of Findings (CRF) dated December 9,
1992 showing the consignee of the subject shipment as
Agfha, Inc. and the shipper as P.T. Mandala Subur Textile
Industry.
`6. Import Authority No. (IAN) 18.012.37679, assigned by
the Central Bank of the Philippines appearing on the right
hand portion of the CRF.
`The above evidence speak for themselves. If any deception
is intended by petitioner Agfha, Inc., why would it apply for
an Import Authority Number under its name? It knew for
certain that the subject goods will be pre-inspected by SGS
under its name. "x x x xxx xxx
`x x x [AGFHA Inc.] expressed its willingness to pay the
higher duties and taxes imposed on the subject shipment as
indicated in the CRF. x x x From the very start up to the end,
petitioner had been consistent in its actuations. It applied
for an Import Authority with the Central Bank of the
Philippines which authority was used by the SGS in making
the necessary pre-inspection and issuing the CRF. It
undertook remedial measures to amend the consignee in the
Bill of Lading and Inward Foreign Manifest when the
shipper made a mistake. It then manifested to pay the
correct taxes and duties. The government stands to lose
nothing.'"2
The Court of Appeals attributed the error in indicating GQ
GARMENTS, Inc., instead of AGFHA, Inc., in the Inward
Foreign Manifest as being the consignee of the subject
shipment to the shipping agent. It also noted the finding of
the tax court that GQ GARMENTS, Inc., was, in fact, a
registered importer with Registration No. 91-5624 per the
Customs Intelligence and Investigation Service List of
Registered Importers contained in Customs Memorandum
Order No. 149-88 for the year 1991.
The BOC instituted the instant petition for review under
Rule 45 of the Revised Rules of Court assailing the
affirmance by the Court of Appeals of the tax court's
decision of 04 November 1996.
The appeal is not meritorious.
Section 2530 (f) and (1) (3-5) provides:
"Section 2530. Property Subject to Forfeiture Under Tariff
and Customs Law. - Any vehicle, vessel or aircraft, cargo,
article and other objects shall, under the following
conditions be subjected to forfeiture;
"x x x xxx x x x"f. Any article the importation or
exportation of which is effected or attempted contrary to
7
law, or any article of prohibited importation or exportation,
and all other articles which, in the opinion of the Collector,
have been used, are or were entered to be used as
instruments in the importation or exportation of the former.
"x x x xxx x x x "1. Any article sought to be
imported or exported:
"x x x xxx x x x "(3) On the strength of a false
declaration or affidavit executed by the owner, importer,
exporter or consignee concerning the importation of such
article;
"(4) On the strength of a false invoice or other document
executed by the owner, importer, exporter or consignee
concerning the importation or exportation of such article;
and
"(5) Through any other practice or device contrary to law by
means of which such articles was entered through a
customhouse to the prejudice of the government."
The requisites for the forfeiture of goods under Section
2530(f), in relation to (1) (3-5), of the Tariff and Customs
Code are: (a) the wrongful making by the owner, importer,
exporter or consignee of any declaration or affidavit, or the
wrongful making or delivery by the same person of any
invoice, letter or paper - all touching on the importation or
exportation of merchandise; (b) the falsity of such
declaration, affidavit, invoice, letter or paper; and (c) an
intention on the part of the importer/consignee to evade the
payment of the duties due.3
Petitioner asserts that all of these requisites are present in
this case. It contends that it did not presume fraud, rather
the events positively point to the existence of fraud. Private
respondent AGFHA, Inc., on the other hand, maintains that
there has only been an inadvertent error and not an
intentional wrongful declaration by the shipper to evade
payment of any tax due. The resolution of this issue would
entail a reevaluation of the attendant circumstances, a
matter that cannot be freely undertaken by this Tribunal. It
has been a settled rule that the Supreme Court is not a trier
of facts.4 Findings of the appellate court are generally
binding and cannot be disturbed by this Court unless it is
sufficiently shown that there has been no evidence on record
to support such findings.5 The assessment made by the
appellate court carry even more weight when it is consistent
with that of the trial court.6 Consonantly, the factual
determination of the Court of Tax Appeals, when supported

by substantial evidence, will not be reversed on appeal
unless it is clear that the said court has committed gross
error in the process.7 The Collector of Customs, Court of Tax
Appeals and the Court of Appeals are unanimous in
concluding that no fraud has been committed by private
respondent in the importation of the bales of cloth. The
records do appear to sustain this conclusion.
Fraud must be proved to justify forfeiture.8 It must be
actual, amounting to intentional wrong-doing with the clear
purpose of avoiding the tax.9 Forfeiture is not favored in law
nor in equity.10 Mere negligence is not equivalent to the
fraud contemplated by law.11 What is here involved is an
honest mistake, not even directly attributable to private
respondent, which will not deprive the government of its
right to collect the proper tax. The conclusion of the
appellate court, being consistent with the evidence on
record and not contrary to law and jurisprudence, hardly
can be overturned by this Court.
WHEREFORE, the petition is hereby DENIED and the
assailed decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
THIRD DIVISION
G.R. No. 160959 April 3, 2007
ANTONIO DIAZ, Petitioner,
vs.
DAVAO LIGHT AND POWER CO., INC., MANUEL
M. ORIG and ELISEO R. BRAGANZA,
JR., Respondents.
DECISION
CALLEJO, SR., J.:
This is a Petition for Review on Certiorari of the Decision1 of
the Court of Appeals (CA) in CA-G.R. CV No. 68709, which
affirmed the Decision2 of the Regional Trial Court (RTC) of
Davao City, Branch 11, in Civil Case No. 21,655-92.
Antecedents
Antonio G. Diaz was the president of Diaz and Co., Inc. He
was also vice-president of Diaz Realty Inc. which, in turn,
owned the Doña Segunda Hotel,3 formerly known as the
Davao Imperial Hotel (Imperial Hotel Building),4located
along C.M. Recto Avenue, Davao City. Davao Light and
Power Co., Inc. (DLPC), on the other hand, is a public utility
duly franchised to provide light, heat and power to its
customers in Davao City and the municipalities of Panabo,
Santo Tomas and Carmen, in Davao del Norte.5 Manuel Orig
was the resident manager/vice-president for Administration
of DLPC,6 while Eliseo R. Braganza was its in-house
lawyer.7 DLPC supplied the Doña Segunda Building
(Imperial Hotel Building) with electricity service8 under
Account No. 087-10669 and with Meter No. 36510.9
On July 25, 1983, DLPC sent a Notice of Disconnection10 to
Diaz and Co., Inc. informing it that, as of June 13, 1983, the
hotel’s unpaid electric consumption bill amounted to
₱190,111.02.11 It also warned that if the amount was not
paid, DLPC would be impelled to discontinue its service.
Since Diaz and Co., Inc. ignored the letter, Meter No. 36510
was disconnected on July 29, 1983.12
DLPC then filed a complaint for collection before the RTC,
Cebu City, which case was docketed as Civil Case No. CEB-
1049.
Meanwhile, in 1984, the National Food Authority (NFA)
established its KADIWA13 store at C.M. Recto Avenue,
Davao City.14 It leased a portion of the ground floor of the
Imperial Hotel Building from Diaz and Co.,
Inc.15NFA/KADIWA also applied for electricity service with
DLPC, and a contract16 was later executed between the
parties. On March 15, 1984, DLPC connected the area leased
by NFA/KADIWA to its electric grid17 under Account No.
091-12643,18 and installed Meter No. 8473819 to measure
NFA/KADIWA’s monthly electric consumption.
In August 1986, the Kadiwa Center IV closed, and
NFA/KADIWA vacated the Doña Segunda Building.20 In a
letter21dated August 11, 1986, NFA/KADIWA Provincial
Manager, Roberta R. Melendres, informed DLPC that the
light and power connection of NFA/KADIWA would be left
behind; its right to the connection would be transferred to
Diaz.22She also informed DLPC that the ₱1,020.00 deposit
of NFA/KADIWA for the power connection had been
refunded to it by Diaz.23
In a letter24 dated September 2, 1986, Diaz informed
respondent Manuel Orig that he had leased the untenanted
portions of the Doña Segunda Building from Diaz and Co.,
Inc., and requested that a new electrical connection for the
building in his name be installed, separate from the one
assigned to him by NFA.25
On September 15, 1986, DLPC denied the request on the
ground that since Diaz and Co., Inc. is a closed family
corporation whose stockholders are the immediate
members of the Diaz family, the lease in favor of Diaz could
be simulated.26 DLPC, however, reminded Diaz that it would
be too happy to grant his request "if he and/or Diaz and Co.,
Inc. would pay what is due and owing to it."27
Diaz and Co., Inc. sent a letter28 to DLPC dated September
17, 1986 declaring that it had assumed the electrical bills of
8
NFA/KADIWA under Account No. 091-12643, and
requested that the monthly bills/statements be sent to it. In
its reply, DLPC rejected the request and declared that it was
not aware that Diaz and Co., Inc. had refunded the
NFA/KADIWA its ₱1,020.00 deposit.29
On September 26, 1986, Diaz filed a petition for
mandamus30 before the RTC, Davao City. He alleged that as
a holder of a certificate of public convenience, DLPC is
mandated by law to provide him with electric service; the
grounds relied upon by respondent Orig in denying his
application are anchored on bias and prejudice, since he
(Diaz) is one of the stockholders of Diaz and Co. Inc., the
owner of the Davao Imperial Hotel; and the civil case filed
by DLPC is against Diaz and Co., Inc. and not personally
against him.31 The complaint was docketed as Civil Case No.
18,288.
Meanwhile, on September 23, 1986, the portion of the
building formerly leased by NFA/KADIWA was leased to
Matias Mendiola.32 Because he needed more electricity than
what could be provided by the existing electrical wirings,
Mendiola opted to change the electrical installation from a
one-phase meter to a three-phase meter
connection.33 Mendiola’s application was approved by
DLPC. On December 19, 1986, DLPC and Mendiola
executed a service Contract34 for electricity service.
On January 7, 1987, Diaz filed an application for
preliminary injunction in Sp. Civil Case No. 18,28835 to
enjoin DLPC from disconnecting the electric connections to
Meter No. 84738 under Account No. 091-12643. Also, an
Inter-Office Memo36 dated January 7, 1987, signed by
Officer-in-Charge, Rebecca Madrid, was issued to all
security guards of the Doña Segunda Building who were
ordered to prevent anyone from disturbing Meter No.
84738.37Because of this, DLPC failed to substitute its single-
phase meter with a three-phase meter. DLPC’s linemen thus
installed the three-phase meter without removing the
single-phase meter.381a\^/phi1.net
On March 12, 1987, the RTC in Sp. Civil Case No. 18,288,
denied the motion for issuance of a writ of preliminary
injunction39 filed by Diaz. He moved for a reconsideration,
which was, however, denied in the Order40 dated August 20,
1987. DLPC then removed its single-phase meter on
November 20, 1987, which rendered almost half of the
building without power.41 That same day, Diaz went to the
DLPC building and threw stones at it, breaking four glass
windows in the process.42 He then bought his own electric
meter, Meter No. 86673509,43 had it calibrated by the Board

of Energy, and unilaterally replaced Meter No. 84738. The
electricity in the building was then restored.44
On November 24, 1987, Diaz filed a Complaint for Damages
with Prayer for Preliminary Prohibitory and Mandatory
Injunction and Restraining Order45 before the RTC, Davao
City, docketed as Civil Case No. 18,855-87. In the said
complaint, Diaz claimed that DLPC arbitrarily and illegally
removed Meter No. 84738 in violation of their business
franchise and Article 19 of the New Civil Code, and had
threatened to remove Meter No. 86673509.46
DLPC, for its part, filed a counter-application for
preliminary mandatory injunction47 in the same case to
compel the removal of Meter No. 86673509 which Diaz had
installed without DLPC’s consent and authority.48 The RTC
issued an Order49 dated March 30, 1988 denying Diaz’s
application for prohibitory and mandatory injunction, and
granting DLPC’s counter-application for preliminary
mandatory injunction. The RTC ordered Diaz to
immediately remove Meter No. 86673509 and disconnect
the electrical wirings he had unilaterally connected to the
upper floor rooms. Diaz filed a motion for reconsideration
but was denied.1a\^/phi1.net On June 13, 1998, the sheriff,
with the aid of DLPC personnel, caused the removal of
Meter No. 86673509.50
Aggrieved, Diaz assailed the orders via petition for certiorari
before the CA. The petition was docketed as CA-G.R. SP No.
14909. On October 19, 1988, the CA rendered a
Decision51 granting Diaz’s petition, to wit:
Wherefore, in view of the foregoing, the petition is hereby
granted and the orders of the lower court dated March 30,
1988 and June 1, 1988 are set aside. Private respondents are
thus ordered to maintain the status quo ante which existed
before the issuance of the orders complained against, or else
to connect its own electric meter to the premises, on the
understanding, of course, that petitioner pays his electric
bills and without prejudice to the continuance of the
collection case against Diaz and Company.52
DLPC elevated the decision before this Court, via petition
for review on certiorari. The petition was docketed as G.R.
No. 85445.53
Meanwhile, on December 19, 1998, the parties in Civil Case
No. CEB-104954 executed a Compromise
Agreement,55 wherein they stipulated the following:
1. Plaintiff-appellee hereby reduces its total claims in the
complaint to only ₱385,000.00 and further waives any
claim in excess of said amount in the same case, and the
defendant-appellant shall pay said amount in full
immediately upon the execution of this agreement. The
latter also waives its counterclaims against the former in the
above-entitled case.
2. Upon receipt of the payment of the aforesaid sum,
plaintiff-appellee shall immediately grant and install in
favor of defendant-appellant or Antonio G. Diaz electric
service for the Doña Segunda Building, popularly known as
Imperial Hotel Building, or for portions thereof designated
by either including the tenants or lessees occupying the
same, upon proper application therefor and the
presentation of the requisite electrical permit.
3. the parties agree to the dismissal of Civil Case No. 18,288
of the Regional Trial Court of Davao City, pending in Branch
XVI thereof, entitled "Diaz vs. Davao Light & Power Co., Inc.
and Manuel Orig." for Mandamus inclusive of the counter-
claim therein, the same having become moot and academic.
WHEREFORE, it is most respectfully prayed that this
Honorable Court approves the foregoing compromise
agreement and render judgment based thereon, and enjoin
the parties to comply strictly with the terms thereof.
The RTC, in Civil Case No. CEB-1049, rendered a
Decision56 approving the compromise on January 5, 1989.
In Sp. Civil Case No. 18,288, the parties also filed a Joint
Motion to Dismiss57 based on the Compromise Agreement,
and the RTC thereafter ordered the dismissal of the case.58
On April 17, 1989, this Court in G.R. No. 85445, issued a
Resolution,59 denying the petition for review on certiorari
questioning the CA decision in CA-G.R. SP No. 14909 for
being moot and academic. The resolution reads:
After deliberating on the allegations made, the issues raised,
and the arguments advanced in the Petition, the Comment
and the Reply, and it appearing that petitioner is now
providing electrical service to private respondent’s entire
building, the Court RESOLVED to DENY the petition for
having become moot and academic. The Court makes the
admonition, however, that connections of electrical service
and installations of electric meters should always be upon
mutual contract of the parties, and that payments for
electrical consumption should also be made promptly
9
whenever due. Contracts lay down the law between the
parties and obligations arising therefrom should be
complied with.
Meanwhile, on June 30, 1997, the RTC rendered a
Decision60 in Civil Case No. 18,855-87 dismissing the case
filed by Diaz.61
Diaz appealed the decision with the CA in CA-G.R. CV No.
63236,62 which appeal is still pending before the appellate
court.
Based on the aforestated facts, on July 11, 1988, DLPC filed
a complaint for theft of electricity against Diaz with the City
Prosecutor’s Office, Davao City; respondent Braganza
submitted an Affidavit63 to support the charge. In defense,
Diaz alleged the following: (1) that the complaint was
intended to harass him; (2) he was entitled to electric
service by virtue of his subrogation to the right of
NFA/KADIWA; (3) the installation of Meter No. 86673509
was made with the knowledge and consent of DLPC; (4)
there is a pending case between the parties regarding Meter
Nos. 84738 and 86673509; and (5) the filing of the action is
premature. The complaint was docketed as I.S. No. 593.
On March 21, 1989, Lolito O. Evangelino, 4th Asst. City
Prosecutor, City Prosecutor’s Office of Davao City, issued a
Resolution64 recommending the dismissal of the charge. He
opined that the correspondence to DLPC Manager Orig
negated DLPC’s claim of lack of consent and knowledge, and
since the issue is still pending litigation in court, the
determination of whether there is theft of electricity is
premature (Sp. Civil Case No. 18288 and Civil Case No.
18,855-87).
DLPC filed a Motion for Reconsideration65 which the City
Prosecutor denied on the ground that DLPC failed to
establish the elements of unlawful taking and intent to gain.
DLPC appealed the dismissal to the Secretary of
Justice,66 who, however, dismissed the appeal in a
letter67 dated August 2, 1990. The Motion for
Reconsideration68filed by DLPC was likewise denied in the
letter69 dated September 6, 1990.
Undaunted, DLPC filed a criminal complaint70 against Diaz
for Violation of P.D. 401,71 as amended by B.P. Blg.
87672 with the City Prosecutor’s Office, Davao City.73 The
complaint was docketed as I.S. No. 92-4590. In his counter-
affidavit dated September 19, 1992, Diaz alleged that a
similar complaint (I.S. No. 593) had been filed by DLPC

against him.74 In a Resolution75 dated October 23, 1992,
Calixto A. Esparagoza, 2nd Asst. City Prosecutor, dismissed
the case. The Public Prosecutor likewise denied the motion
for reconsideration of DLPC on November 26, 1992.
Meanwhile Diaz, Ramos, and Arguellas, as complainants,
filed a criminal complaint with the Office of the Provincial
Fiscal of Davao del Norte charging the officers of DLPC with
estafa through falsification of public documents. They also
alleged that the officers of DLPC exacted additional and
illegal profits from its consumers by devising a deceptive
Varying Discount Formula; based on the alleged
misrepresentation of said officers, the Board of Energy
(BOE) granted DLPC provisional authority to apply the
formula, thereby resulting in losses of more or less
₱300,000.00 to Diaz, Ramos, and Arguelles.76 As regards
the charge of falsification, the complainants alleged that
DLPC had its properties appraised by the Technical
Management Services, Philippines, Inc. (TAMSPHIL), and
included non-existent properties that did not belong to it; it
also recorded the TAMSPHIL appraisal in its books of
account even before it had been approved by the BOE; and
submitted financial statements containing the appraisal to
the Securities and Exchange Commission and the BOE.77
The Investigating Prosecutor found probable cause against
the respondents. An Information was filed before the then
Court of First Instance (CFI) of Tagum, Davao del Norte,
docketed as Crim. Case No. 5800. Respondents appealed
the resolution of the public prosecutor finding probable
cause against them. The appeal was granted. On motion of
the Prosecutor, the RTC dismissed the case in an Order
dated July 13, 1983.78
On August 9, 1983, the officers of DLPC, Eduardo J. Aboitiz,
Luis Aboitiz, Jr., Roberto E. Aboitiz, Jon R. Aboitiz, and
Edson H. Canova, as plaintiffs, filed a Complaint against
Diaz, Isagani T. Fuentes (Provincial Fiscal of Davao del
Norte), Petronilo D. Ramos (Municipal Mayor of Carmen,
Davao del Norte), Gabriel Arguelles (Municipal Attorney of
Panabo, Davao del Norte) before the RTC, Cebu City, for
damages and attorney’s fees against the defendants for
malicious prosecution.79
The case was docketed as CEB Case No. 1055. After trial on
the merits, the RTC rendered a Decision80 on April 30, 1992,
dismissing the complaint. The fallo of the decision reads:
WHEREFORE, premises considered, plaintiffs’ complaint
and defendants’ counterclaim are hereby DISMISSED for
lack of cause of action with costs de oficio.
SO ORDERED.81
Both parties appealed the decision before the CA, docketed
as CA-G.R. CV No. 41399.1ªvvphi1.nét
Diaz, et al. relied on the following grounds:
I TRIAL COURT ERRED IN IGNORING PLAINTIFF-
APPELLANT’S (SIC) EVIDENCE OF CONSPIRACY
AMONG ALL DEFENDANT-APPELLANTS (SIC) AND IN
MAKING NO FINDING THAT THERE WAS A
CONSPIRACY TO PROSECUTE PLAINTIFF-APPELLANTS
(SIC) CRIMINALLY FOR USE AS LEVERAGE IN ORDER
TO OBTAIN CONCESSIONS FROM DAVAO LIGHT &
POWER CO.
II TRIAL COURT ERRED IN HOLDING THAT
PLAINTIFF-APPELLANTS (SIC) HAVE NO CAUSE OF
ACTION BY COMMITTING THE FOLLOWING ERRORS:
(a) IN FINDING THAT THERE WAS NO PROSECUTION
AND NO ACQUITTAL;
(b) IN FINDING THAT THERE WAS PROBABLE CAUSE
FOR DEFENDANT-APPELLANT’S (SIC) CHARGE OF
ESTAFA THROUGH FALSIFICATION;
(c) BY IGNORING THE FACT THAT THERE WAS NO
EVIDENCE LINKING PLAINTIFF-APPELLANTS (SIC) TO
THE CRIME CHARGED;
(d) BY IGNORING THE CIRCUMSTANCES THAT MANY
ALLEGATIONS IN THE JOINT AFFIDAVIT OF
DEFENDANT-APPELLANTS (SIC) ARE INADMISSIBLE;
(e) BY IGNORING THE FACT THAT DAVAO LIGHT’S USE
OF THE VARYING DISCOUNT FORMULA WAS
ADMITTEDLY PROVISIONALLY AUTHORIZED BY THE
BOE WHICH AUTHORITY WAS IN FORCE DURING THE
FILING AND PENDENCY OF THE CHARGE;
(f) BY IGNORING THE FACT THAT THE VARYING
DISCOUNT FORMULA WAS A FORMULA TO
DETERMINE THE AMOUNT OF DISCOUNT
10
DEDUCTIBLE FROM THE RATES EARLIER FIXED BY
THE BOE RESULTING FROM THE COST SAVINGS
REALIZABLE FROM THE CHEAPER COST OF ELECTRIC
POWER SOLD BY NPC TO DAVAO LIGHT, AND ITS
NEGATIVE ASPECT WAS MERELY AN INCORPORATION
INTO SAID FORMULA OF THE FUEL CLAUSE
ADJUSTMENT ALREADY AUTHORIZED IN THE
DECISION OF SAID BOARD IN CASE NO. 73-146;
(g) BY BEING OBLIVIOUS OF THE CIRCUMSTANCE
THAT THERE WAS NO FRAUD OR DECEIT IN
SECURING SAID PROVISIONAL AUTHORITY, AND THE
BOARD MADE NO SUCH FINDING;
(h) BY IGNORING THE UNREBUTTED EVIDENCE THAT
APPELLANT FUENTES DISOBEYED THE DIRECTIVE OF
HIS SUPERIOR, THE CHIEF STATE PROSECUTOR TO
HOLD IN ABEYANCE FURTHER PROCEEDINGS IN I.S.
NO. 82-115, AND THAT HE FILED AN INFORMATION
CHARGING PLAINTIFF-APPELLANTS (SIC) WITH AN
OFFENSE DIFFERENT FROM THAT SUBJECT OF HIS
PRELIMINARY INVESTIGATION;
(i) IN FINDING THAT DEFENDANT-APPELLANTS (SIC)
DID NOT ACT WITH MALICE AND HAD ACTED IN
GOOD FAITH IN FILING SAID CHARGE.
III TRIAL COURT ERRED IN NOT AWARDING DAMAGES
TO PLAINTIFF-APPELLANTS (SIC).82
For their part, DLPC, et al. alleged the following:
I THAT THE TRIAL COURT ERRED IN HOLDING THAT
DEFENDANTS APPELLANTS’ COUNTERCLAIMS HAVE
NO CAUSE OF ACTION.
II THAT THE TRIAL COURT ERRED IN NOT AWARDING
DAMAGES AND ATTORNEY’S FEES.83
On October 30, 2001, the CA rendered a
Decision84 affirming the decision of the RTC.
Diaz, et al. appealed the decision before this Court, docketed
as G.R. No. 154378. On November 13, 2002, this Court
resolved to dismiss the petition for lack of merit.85 On April
15, 2003, as per Entry of Judgment,86 the resolution of this
Court became final and executory.

On June 10, 1992, DLPC instituted a civil action for
Damages,87 before the RTC, Cebu City, against Diaz for
defamatory and libelous remarks and for abuse of rights.
The plaintiff alleged that Diaz, motivated by malice and ill-
will, had taken it upon himself to find fault in DLPC’s acts
and oppose all its application with the BOE, using the media
to assault its good name by circulating or publishing
libelous and false statements in the newspapers. The case
was docketed as Civil Case No. CEB-11843.
DLPC further alleged that Diaz published and disseminated
a handbill claiming that there was something irregular and
anomalous regarding the Energy Regulation Board’s
approval of the appraisal of the properties and equipment of
DLPC, because of which the customers of DLPC could
expect a ₱5.00 per kilowatt charge in the future. Diaz
allegedly gave identical interviews with the Mindanao Daily
Mirror and the Ang Peryodiko Dabaw reiterating what he
said in the handbill.88 In addition, Diaz, in an interview with
the People’s Daily Forum, claimed that the National Power
Corporation sold two (2) generating sets to DLPC for only
₱1.00 each.89
Consequently, DLPC suffered besmirched reputation and
public humiliation, and damage to its business standing.
The complaint contained the following prayer:
1) Immediately issue a temporary restraining order ex-parte
precluding defendant from committing further acts of tort
or libel against plaintiff, and after the hearing of plaintiff’s
application for preliminary injunction, issue such writ after
posting of the required injunction bond;
2) After trial, render judgment in favor of plaintiff and
against defendant Antonio Diaz making the injunction
permanent, and ordering the latter to pay the former –
a) The sum of ₱10,000,000.00 as moral damages
anddamages to its business standing;
b) The sum of ₱300,000.00 as exemplary damages;
c) The sum of ₱500,000.00 as attorney’s fees and expenses
of litigation;
d) The cost of suit.90
After trial, the RTC in Civil Case No. CEB-11843 rendered a
Decision91 in favor of DLPC and against Diaz, awarding
more than ₱1,500,000.00 in damages to DLPC and
dismissing the counterclaim of Diaz. The decretal portion
reads:
WHEREFORE, premises above set-forth, the Court hereby
renders judgment in favor of plaintiff Davao Light & Power
Co., Inc. and against defendant Antonio Diaz ordering said
defendant:
1. To pay plaintiff the amount of ₱1,500,000.00 by way of
moral damages for besmirched reputation, loss of business
standing and goodwill;
2. To pay plaintiff the amount of ₱300,000.00 in exemplary
damages by way of example or correction for the public
good; and
3. To pay plaintiff the amount of ₱500,000.00 in attorney’s
fees and litigation expenses and to pay the costs.
Defendant takes nothing from his counterclaim.
SO ORDERED.92
Both parties appealed the decision to the CA in CA-G.R. CV
No. 65082, which appeal is still pending.
On October 30, 1992, Diaz, as plaintiff, filed a complaint for
Damages, Injunction with Writ of Preliminary Injunction
and Temporary Restraining Order, Plus Attorney’s
Fee93 against DLPC before the RTC, Davao City; the case
was docketed as Civil Case No. 21,655-92. Diaz alleged that
DLPC’s filing of criminal cases, I. S. No. 593 for theft of
electricity and I.S. No. 92-4590 for violation of P.D. 401, as
amended by B.P. Blg. 876), were intended to harass and
humiliate him before the public and government authorities
and ruin his image;94 he was seriously prejudiced by the
filing of an ₱11.6 Million damage suit in Civil Case No. CEB-
1055 and a ₱10.8 Million damage suit in Civil Case No. CEB-
11843;95 defendants, by their common and joint acts, were
motivated by evident bad faith and intentionally caused
injustice to his person in violation of Article 19 of the New
Civil Code.96 Diaz thus prayed:
WHEREFORE, and in view of the foregoing, it is most
respectfully prayed of the Honorable Court:
a) Before notice and hearing to issue a temporary
restraining order enjoining defendants from committing
any unlawful, illegal, tortiuous (sic) and inequitable act
which may affect the individual rights of plaintiff, and after
hearing to issue writ of preliminary injunction for the same
purpose upon posting of the bond;
11
b) After trial on the merits, to make the writ of injunction as
permanent;
c) To order defendants to pay plaintiff, jointly and severally,
moral damages in the amount of ₱10,000,000.00,
attorney’s fee in the amount of ₱500,000.00, litigation
expenses in the amount of ₱100,000.00 and exemplary
damage in the amount of ₱100,000.00; and,
d) To grant to plaintiff such other relief proper and
equitable under the premises.97
On November 4, 1992, the RTC issued a TRO98 in favor of
Diaz, directing DLPC or any person acting for and in its
behalf, to desist and refrain from committing any unlawful,
tortuous and inequitable conduct which may affect the
former for a period of twenty (20) days.
During the pre-trial, the parties limited the issue to
"whether or not the plaintiff is entitled to damages by virtue
of the filing of the criminal cases against him for theft of
electricity and violation of P.D. 401, both of which were
already dismissed." Due to the pendency of various actions
before several courts, the trial court opted to segregate the
issues. It focused only on the alleged malicious prosecution
with regard to the filing of the criminal action for theft, I. S.
No. 593, and for Violation of P.D. 401, as amended by B.P.
Blg. 876, I.S. No. 92-4590. The RTC reasoned in this wise:
The records show that plaintiff’s first cause of action, which
is damages for defendant’s refusal to grant him electric
service, has become moot and academic by virtue of the
compromise agreement executed by the plaintiff and the
defendant in the mandamus case docketed as Civil Case No.
18288 of this Court. The parties filed a Joint Motion to
Dismiss based on the Compromise Agreement which was
granted by this Court and which led to the eventual
dismissal of the case with prejudice.
In summary, plaintiff asks for damages for defendant’s
alleged malicious prosecution of a criminal case of theft of
electricity against him, for plaintiff’s filing of a charge of
violation of P.D. 401 as amended after dismissal of the theft
case, the filing of a damage suit against him before the RTC
of Cebu City which was dismissed and the filing of another
damage suit before the same Cebu RTC which is still
pending. Damages are also being sought for defendant’s
removal of Electric Meter No. 847328 (sic). But this is a
subject matter of a case pending before Branch 13 of this

Court and therefore said court retains jurisdiction over the
said cause of action. x x x99
On May 22, 2000, the RTC rendered a
Decision100 dismissing the complaint. The fallo reads:
In view of all the foregoing, finding no merit in plaintiff’s
complaint, judgment is hereby rendered dismissing said
complaint with costs de oficio.
SO ORDERED.101
The RTC held that while the City Prosecutor, and later the
Secretary of Justice, concluded that there was no probable
cause for the crime of theft, this did not change the fact that
plaintiff made an illegal connection for electricity.102 A
person’s right to litigate should not be penalized by holding
him liable for damages.
Diaz appealed the decision to the CA, alleging that:
I ― THE TRIAL COURT ERRED IN HOLDING THAT
“WHEN THE DEFENDANTS FILED THE CASES OF
THEFT, THEY DID SO IN HONEST BELIEF THAT
PLAINTIFF IS CRIMINALLY LIABLE”.
II ― THE TRIAL COURT ERRED IN DISMISSING THE
CASE AT BAR AND WITHOUT GRANTING THE AWARD
OF DAMAGES.103
On October 1, 2003, the CA affirmed the decision of the
RTC.104 It concluded that the evidence on hand showed
good faith on the part of DLPC in filing the subject
complaints. It pointed out that Diaz had been using the
electrical services of DLPC without its consent. As to the
effect of the compromise agreement, the CA ruled that it did
not bar the filing of the criminal action. Thus, under the
principle of damnum absque injuria, the legitimate exercise
of a person’s right, even if it causes loss to another, does not
automatically result in an actionable injury.105
Diaz, now petitioner, comes before this Court in this
petition for review on certiorari, raising the following errors:
a) "Proof of moral suffering must be introduced, otherwise
the award of moral damage is not proper. In this case, the
evidence presented by the appellant is insufficient to
overcome the presumption of good faith." (Decision, p. 10)
b) "In view of the foregoing, it is clear that the subject
complaints were filed so as to protect appellee DLPC’s
interest. In this regard, it must be borne in mind that no
person should be penalized for the exercise of the right to
litigate." (Decision, p. 12)106
The issues raised in the present action can be summarized
as follows: (1) whether or not the compromise agreement
entered into between DLPC and Diaz barred the former
from instituting further actions involving electric Meter No.
84736 or 86673509; (2) whether or not DLPC acted in bad
faith in instituting the criminal cases against Diaz; and (3)
whether or not Diaz is entitled to damages.
The petition is without merit.
Petitioner insists that the compromise agreement as well as
the decision of the CA in CA-G.R. SP No. 14909 already
settled the controversies between them; yet, DLPC
instituted the theft case against Diaz, and worse, instituted
another action for violation of P.D. 401, as amended by B.P.
Blg. 876. Thus, the only conclusion that can be inferred
from the acts of DLPC is that they were designed to harass,
embarrass, prejudice, and ruin him. He further avers that
the compromise agreement in Civil Case No. CEB-1049
completely erased litigious matters that could necessarily
arise out of either Electric Meter No. 84736 or
86673509.107 Moreover, Diaz asserts that the evidence he
presented is sufficient to prove the damages he suffered by
reason of the malicious institution of the criminal cases.
We do not agree.
Article 2028 of the Civil Code defines a compromise as a
contract whereby the parties, by making reciprocal
concessions, avoid litigation or put an end to one already
commenced. The purpose of compromise is to settle the
claims of the parties and bar all future disputes and
controversies. However, criminal liability is not affected by
compromise for it is a public offense which must be
prosecuted and punished by the Government on its own
motion, though complete reparation should have been made
of the damages suffered by the offended party. A criminal
case is committed against the People, and the offended
party may not waive or extinguish the criminal liability that
the law imposes for the commission of the
offense.108 Moreover, a compromise is not one of the
grounds prescribed by the Revised Penal Code for the
extinction of criminal liability.109
12
As can be inferred from the compromise agreement, Diaz
and DLPC merely agreed to (1) reduce the latter’s total
claims to only ₱385,000.00; (2) for DLPC to waive its
counterclaims against Diaz; and (3) upon receipt of the
amount, for DLPC to immediately install the necessary
electric service to the building. The parties likewise agreed
to the dismissal of Sp. Civil Case No. 18,288 for being moot
and academic. Nowhere in said agreement did the parties
agree that DLPC was barred from instituting any further
action involving electric Meter No. 84736 or 86673509.
We find that petitioner is not entitled to damages under
Articles 19,110 20[111 and 21,112 and Articles 2217113 and
2219(8)114 of the New Civil Code.
The elements of abuse of rights are the following: (a) the
existence of a legal right or duty; (b) which is exercised in
bad faith; and (c) for the sole intent of prejudicing or
injuring another.115 Thus, malice or bad faith is at the core of
the above provisions.116 Good faith refers to the state of the
mind which is manifested by the acts of the individual
concerned. It consists of the intention to abstain from taking
an unconscionable and unscrupulous advantage of
another.117 Good faith is presumed and he who alleges bad
faith has the duty to prove the same.118 Bad faith, on the
other hand, does not simply connote bad judgment to
simple negligence, dishonest purpose or some moral
obloquy and conscious doing of a wrong, a breach of known
duty due to some motives or interest or ill-will that partakes
of the nature of fraud. Malice connotes ill-will or spite and
speaks not in response to duty. It implies an intention to do
ulterior and unjustifiable harm. Malice is bad faith or bad
motive. 119
The evidence presented by respondents negates malice or
bad faith. Petitioner himself alleged in his complaint that he
unilaterally installed Meter No. 86673509 to replace Meter
No. 84738 after it was removed by DLPC. No less than this
Court, in G.R. No. 85445, admonished petitioner and
reminded him that connections of electrical service and
installations of electric meters should always be upon
mutual contract of the parties, and that payments for
electrical consumption should also be made promptly
whenever due.120 Based on these established facts,
petitioner has not shown that the acts of respondent were
done with the sole intent of prejudicing and injuring him.
Petitioner may have suffered damages as a result of the
filing of the complaints. However, there is a material
distinction between damages and injury. Injury is the illegal
invasion of a legal right; damage is the loss, hurt or harm

which results from the injury; and damages are the
recompense or compensation awarded for the damage
suffered. Thus, there can be damage without injury in those
instances in which the loss or harm was not the result of a
violation of a legal duty. In such cases, the consequences
must be borne by the injured person alone; the law affords
no remedy for damages resulting from an act which does not
amount to a legal injury or wrong. These situations are often
called damnum absque injuria.121 Whatever damages Diaz
may have suffered would have to be borne by him alone
since it was his acts which led to the filing of the complaints
against him.
On the other hand, malicious prosecution has been defined
as an action for damages brought by or against whom a
criminal prosecution, civil suit or other legal proceeding has
been instituted maliciously and without probable cause,
after the termination of such prosecution, suit, or other
proceeding in favor of the defendant therein.122 It is an
established rule that in order for malicious prosecution to
prosper, the following requisites must be proven by
petitioner: (1) the fact of prosecution and the further fact
that the defendant (respondent) was himself the prosecutor,
and that the action finally terminated with an acquittal; (2)
that in bringing the action, the prosecutor acted without
probable cause; and (3) that the prosecutor was actuated or
impelled by legal malice, that is, by improper or sinister
motive.123 The foregoing are necessary to preserve a
person’s right to litigate which may be emasculated by the
undue filing of malicious prosecution cases.124 From the
foregoing requirements, it can be inferred that malice and
want of probable cause must both be clearly established to
justify an award of damages based on malicious
prosecution.125
The Court notes that respondents initiated two separate
criminal actions, one for theft of electricity, Inv. Sheet No.
593 July/1988, and the other, for Violation of P.D. 401, as
amended by B.P. Blg. 876, I.S. No. 92-4590. It must be
stressed that theft of electricity is a felony defined and
penalized under the Revised Penal Code, while Violation of
P.D. 401, as amended by B.P. Blg. 876, is an offense
punished by a special law. What generally makes the former
a felony is criminal intent (dolo) or negligence (culpa); what
makes the latter a crime is the special law enacting it.126In
addition, the elements of the two (2) offenses are different
from one another. In theft, the elements are: (1) intent to
gain; (2) unlawful taking; (3) personal property belonging to
another; (4) and absence of violence or intimidation against
persons or force upon things.127 On the other hand, the
crime of Violation of P.D. 401, as amended by B.P. Blg. 876,
is mala prohibita. The criminal act is not inherently
immoral but becomes punishable only because the law says
it is forbidden. With these crimes, the sole issue is whether
the law has been violated. Criminal intent is not
necessary.128
While the institution of separate criminal actions under the
provisions of P.D. 401, as amended by B.P. Blg. 876, and
under the provisions of the Revised Penal Code on theft may
refer to identical acts committed by petitioner, the
prosecution thereof cannot be limited to one offense
because a single criminal act may give rise to a multiplicity
of offenses; and where there is variance or difference
between the elements of an offense in one law and another
law, as in the case at bar, there will be no double jeopardy
because what the rule on double jeopardy prohibits refers to
identity of elements in the two (2) offenses. Otherwise
stated, prosecution for the same act is not prohibited; what
is forbidden is prosecution for the same offense.129 Hence,
no fault could be attributed to respondent DLPC when it
instituted the two separate actions.
As earlier stated, a claim for damages based on malicious
prosecution will prosper only if the three elements
aforecited are shown to exist. We find that none of the
requisites are attendant here.
First. Although respondent DLPC initiated before the
prosecutor’s office Inv. Sheet No. 593 July/1988 for theft of
electricity, and I.S. No. 92-4590 for Violation of P.D. 401, as
amended by B.P. Blg. 876, no information was ever filed in
court. The cases were eventually dropped or dismissed
before they could be filed in court. Ultimately, both actions
could not end in an acquittal.
Second. It cannot be concluded that respondent DLPC acted
without probable cause when it instituted the actions. The
events which led to the filing of the complaints are
undisputed, and respondent DLPC cannot be faulted for
filing them. In the early case of Buchanan v. Esteban,130 this
Court had already stressed that "one cannot be held liable in
damages for maliciously instituting a prosecution where he
acted with probable cause." As Justice Moreland explained
in that case:
Probable cause is the existence of such facts and
circumstances as would excite the belief, in a reasonable
mind, acting on the facts within the knowledge of the
prosecutor, that the person charged was guilty of the crime
for which he was prosecuted. The general rule is well settled
that one cannot be held liable in damages for maliciously
13
instituting a prosecution where he acted with probable
cause. In other words, a suit will lie only in cases where a
legal prosecution has been carried on without probable
cause. And the reason for the rule as stated by Blackstone, is
that it would be a very great discouragement to public
justice if prosecutors, who had a tolerable ground of
suspicion, were liable to be sued at law when their
indictments miscarried.
Thus, the element of malice and the absence of probable
cause must be proved.131 There must be proof that the
prosecution was prompted by a sinister design to vex and
humiliate a person, and that it was initiated deliberately
knowing that the charge was false and baseless to entitle the
victims to damages.132 The two elements must
simultaneously exist; otherwise, the presence of probable
cause signifies, as a legal consequence, the absence of
malice.133 In the instant case, it is evident that respondent
DLPC was not motivated by malicious intent or by a sinister
design to unduly harass petitioner, but only by a well-
founded anxiety to protect its rights. Respondent DLPC
cannot therefore be faulted in availing of the remedies
provided for by law.
In a free society, controversies are heard and settled under
the rule of law in the forum of the courts of justice. It is one
of the virtues of our system of government that a person
who feels aggrieved does not have to take the law into his or
her hands or resort to the use of force for the vindication of
injury. The courts are there to hear and act on the
complaint. The right to litigate is an escape valve to relieve
the pressures of personal disagreements that might
otherwise explode in physical confrontation. It is necessary
not only for upholding one’s claims when they are unjustly
denied but also for the maintenance of peace, if not
goodwill, among incipient antagonists. Without the right to
litigate, conflicting claims cannot be examined and resolved
in accordance with one of the primary purposes of
government, which is to provide for a just and orderly
society.134 Hence, the mere act of submitting a case to the
authorities for prosecution does not render a person liable
for malicious prosecution should he or she be unsuccessful,
for the law could not have meant to impose a penalty on the
right to litigate.135
IN LIGHT OF THE FOREGOING, the petition is DENIED.
The Decision of the Court of Appeals in CA-G.R. CV No.
68709 is AFFIRMED.
SO ORDERED.
THIRD DIVISION
G.R. No. 156339 October 6, 2004
MS. VIOLETA YASOÑA, personally and as heir of
deceased sister defendant PELAGIA YASOÑA and

as attorney–in–fact of her brothers ALEJANDRO
and EUSTAQUIO, both YASOÑA and sisters:
TERESITA YASOÑA BALLESTERO and ERLINDA
YASOÑA TUGADI, and mother AUREA VDA. DE
YASOÑA, petitioners,
vs.
RODENCIO and JOVENCIO, both surnamed DE
RAMOS, respondents.
DECISION
CORONA, J.:
Before this Court is a petition for review
on certiorari seeking the reversal of the decision1 of the
Court of Appeals dated June 14, 2002 and its resolution
dated December 12, 2002 in CA-G.R. SP No. 69300.
The records disclose that in November 1971, Aurea Yasoña
and her son, Saturnino, went to the house of Jovencio de
Ramos to ask for financial assistance in paying their loans to
Philippine National Bank (PNB), otherwise their residential
house and lot, covered by TCT No. T-32810, would be
foreclosed. Inasmuch as Aurea was his aunt, Jovencio
acceded to the request. They agreed that, upon payment by
Jovencio of the loan to PNB, half of Yasoñas’ subject
property would be sold to him.
On December 29, 1971, Jovencio paid Aurea’s bank loan. As
agreed upon, Aurea executed a deed of absolute sale in favor
of Jovencio over half of the lot consisting of 123 square
meters. Thereafter, the lot was surveyed and separate titles
were issued by the Register of Deeds of Sta. Cruz, Laguna in
the names of Aurea (TCT No. 73252) and Jovencio (TCT No.
73251).
Twenty-two years later, in August 1993, Aurea filed an
estafa complaint against brothers Jovencio and Rodencio de
Ramos on the ground that she was deceived by them when
she asked for their assistance in 1971 concerning her
mortgaged property. In her complaint, Aurea alleged that
Rodencio asked her to sign a blank paper on the pretext that
it would be used in the redemption of the mortgaged
property. Aurea signed the blank paper without further
inquiry because she trusted her nephew, Rodencio.
Thereafter, they heard nothing from Rodencio and this
prompted Nimpha Yasoña Bondoc to confront Rodencio but
she was told that the title was still with the Register of
Deeds. However, when Nimpha inquired from the Register
of Deeds, she was shocked to find out that the lot had been
divided into two, pursuant to a deed of sale apparently
executed by Aurea in favor of Jovencio. Aurea averred that
she never sold any portion of her property to Jovencio and
never executed a deed of sale. Aurea was thus forced to seek
the advice of Judge Enrique Almario, another relative, who
suggested filing a complaint for estafa.
On February 21, 1994, Assistant Provincial Prosecutor
Rodrigo B. Zayenis dismissed the criminal complaint for
estafa for lack of evidence. On account of this dismissal,
Jovencio and Rodencio filed a complaint for damages on the
ground of malicious prosecution with the Regional Trial
Court of Sta. Cruz, Laguna, Branch 91,2 which was docketed
as Civil Case No. SC-3230. They alleged that the filing of the
estafa complaint against them was done with malice and it
caused irreparable injury to their reputation, as Aurea knew
fully well that she had already sold half of the property to
Jovencio.
On October 5, 2000, the trial court rendered a decision in
favor of Jovencio and Rodencio. The dispositive portion
stated:
WHEREFORE, premises considered, finding that plaintiffs
have established their case by preponderance of evidence,
judgment is hereby rendered in their favor and against the
defendants ordering the latter to pay the former as follows:
A) ₱150,000.00 by way of moral damages;
B) ₱30,000.00 as exemplary damages;
C) ₱10,000.00 as attorney’s fees incurred in defending
themselves from the criminal complaint for estafa;
D) ₱10,000.00 as attorney’s fees and cost of litigation, and
to pay the costs.
There being no sufficient evidence established to prove the
claim for actual damages the same is hereby dismissed.
SO ORDERED.3
Petitioner Violeta Yasoña, personally and on behalf of her
brothers and sisters and mother Aurea, filed a petition
for certiorari under Rule 65 with the Court of Appeals
which dismissed the same on June 14, 2002 on the ground
that petitioners availed of the wrong remedy. Their
subsequent motion for reconsideration was likewise denied
on December 12, 2000.
Hence, the instant petition.
We agree with the appellate court that the remedy availed of
by petitioners was inappropriate as Rule 65 of the Rules of
Court cannot be a substitute for a lost appeal,4 and that, in
any event, petitioners are liable for malicious prosecution.
14
The principal question to be resolved is whether the filing of
the criminal complaint for estafa by petitioners against
respondents constituted malicious prosecution.
In this jurisdiction, the term "malicious prosecution" has
been defined as "an action for damages brought by one
against whom a criminal prosecution, civil suit, or other
legal proceeding has been instituted maliciously and
without probable cause, after the termination of such
prosecution, suit, or other proceeding in favor of the
defendant therein." To constitute "malicious prosecution,"
there must be proof that the prosecution was prompted by a
sinister design to vex or humiliate a person, and that it was
initiated deliberately by the defendant knowing that his
charges were false and groundless.5 Concededly, the mere
act of submitting a case to the authorities for prosecution
does not make one liable for malicious prosecution.6
In this case, however, there is reason to believe that a
malicious intent was behind the filing of the complaint for
estafa against respondents. The records show that the sale
of the property was evidenced by a deed of sale duly
notarized and registered with the local Register of Deeds.
After the execution of the deed of sale, the property was
surveyed and divided into two portions. Separate titles were
then issued in the names of Aurea Yasoña (TCT No. 73252)
and Jovencio de Ramos (TCT No. 73251). Since 1973,
Jovencio had been paying the realty taxes of the portion
registered in his name. In 1974, Aurea even requested
Jovencio to use his portion as bond for the temporary
release of her son who was charged with malicious mischief.
Also, when Aurea borrowed money from the Rural Bank of
Lumban in 1973 and the PNB in 1979, only her portion
covered by TCT No. 73252 was mortgaged.
All these pieces of evidence indicate that Aurea had long
acknowledged Jovencio’s ownership of half of the property.
Furthermore, it was only in 1993 when petitioners decided
to file the estafa complaint against respondents. If
petitioners had honestly believed that they still owned
the entire property, it would not have taken them 22 years
to question Jovencio’s ownership of half of the property.
The only conclusion that can be drawn from the
circumstances is that Aurea knew all along that she was no
longer the owner of Jovencio’s portion after having sold it to
him way back in 1971. Likewise, other than petitioners’ bare
allegations, no other evidence was presented by them to
substantiate their claim.
Malicious prosecution, both in criminal and civil cases,
requires the elements of (1) malice and (2) absence of
 15

probable cause.7 These two elements are present in the

present controversy. Petitioners were completely aware that
Jovencio was the rightful owner of the lot covered by TCT
No. 73251, clearly signifying that they were impelled by
malice and avarice in bringing the unfounded action. That
there was no probable cause at all for the filing of the estafa
case against respondents led to the dismissal of the charges
filed by petitioners with the Provincial Prosecutor’s Office in
Siniloan, Laguna.

Petitioners’ reliance on Drilon vs. Court of Appeals8 is

misplaced. It must be noted that in Drilon, the investigating
panel found that there was probable cause to hold private
respondent Homobono Adaza for trial for the crime of
rebellion with murder and frustrated murder. Thus,
petitioner (now Senate President) Franklin Drilon could not
be held liable for malicious prosecution as there existed
probable cause for the criminal case. Here, the complaint
for estafa was dismissed outright as the prosecutor did not
find any probable cause against respondents. A suit for
malicious prosecution will prosper where legal prosecution
is carried out without probable cause.

In sum, we find no reversible error on the part of the

appellate court in dismissing the petition and in effect
affirming the trial court’s decision holding petitioners liable
for damages for the malicious prosecution of respondents.

WHEREFORE, the decision declaring petitioners liable for

malicious prosecution is hereby AFFIRMED in toto.

SO ORDERED.